Convenience at a cost

Jeevan Saathi Plus is a ulip that covers both husband and wife. The one with the higher life value will be the principal life assured and the partner will be the spouse life assured. Both can opt for separate covers within specified limits. You can buy this policy if you and your spouse are above 18 and below 55 years. This cover is available for 10 to 20 years.

DEATH BENEFIT. The policy is designed to keep in mind the interests of both the policy holders. The principal holder of the plan should essentially be the one with the higher life value. It has an in-built waiver of premium feature that frees the spouse from paying any premium in case the principal policy holder dies first. In such a case,the company will pay the spouse the sum assured,contribute the future premiums to the fund,and keep the cover alive.

However,if the spouse passes away first,the principal holder will get the sum assured and he/she will continue to pay the premiums to keep the policy in force.

Thirdly,in case both the policy holders die together,then the legal heir or the nominee will get the sum assured as well as the fund value along with the future premiums,if any.

MATURITY BENEFIT. If both husband and wife survive the policy term,they get the fund value as the maturity benefit. You can take the maturity amount in the form of staggered payments over a period of five years.

OTHER FEATURES. The policy allows partial withdrawals after three years. You can surrender the policy anytime after three years.

FUND CHOICES. The plan offers a choice of four funds — bond,secure,balanced and growth. The first two funds invest largely in the debt space and are better suited for risk-averse investors. The balanced fund will maintain a mix of debt and equities,while the growth fund will invest up to 80 per cent in equities.

This plan defies the first law of investment — diversification. Unlike other Ulips,where you can invest in a mix of funds of your choice,this plan doesn’t allow that. You have to choose one fund and invest the entire corpus in it,thus putting all your eggs in one basket. However,you can make use of the switch option four times in a year and shift your funds from one fund to other. Thereafter,every switch will attract a charge of Rs 100.

CHARGES. The charges levied by this policy are on the higher side. Although the fund management charge is the lowest among Ulips,the plan makes up for this by charging you more on charges like premium allocation charge and policy administration charge (see table). “The premium allocation charge is too high and will eat into the returns generated,” says Harsh Roongta,chief executive officer,apnainsurance.com.

Bottomline

The plan certainly offers the convenience of insuring two lives with one plan. Another positive is the in-built waiver of premium feature that will ensure continued coverage for the spouse and also pay her the sum assured. Moreover,the nominee or the legal heir will get both the sum assured and the fund value as the death benefit. “This is a decent scheme for an investor who wants the convenience of covering two lives in one policy. But stay invested throughout the term,” says Roongta.

Convenience comes at a cost. The plan carries high charges. Moreover,the equity plan does not allow 100 per cent exposure to equities. “Even in case of an equity plan,the exposure is not more than 80 per cent. In long-term products like life insurance,returns are important. Such restrictions will not work in favour of investors,” says Ashwani Mehra,vice president,SMC Insurance Brokers. Not allowing investors to allocate their money to a mix of funds is a definite negative. Look at this plan if you are a risk-averse investor and want the convenience of covering two lives in one. But if you care about every penny you invest,there are other more cost-effective Ulips with better investment options available. •