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ULIP Review: Aviva Sachin Extra Cover Advantage

 

Aviva Sachin Extra Cover Advantage is suitable for individuals seeking high insurance cover, but those who looking for investment may not find it attractive


   Launched in November 2010, Aviva Sachin Extra Cover Advantage (ASECA) is a Type I unit-linked insurance plan (Ulip) that offers high protection cover without the need for the buyer of the product to undergo any medical checks. Further, the product offers eight investment options (funds). Beyond the regular equity and debt funds, the AVIVA fund portfolio also comprises of some special funds such as infrastructure and PSU fund.

COST STRUCTURE

After the new pricing norms prescribed by the regulators, insurers hardly have any flexibility to play around with the cost structure of the schemes. Aviva Sachin Extra Cover Advantage has a balanced cost structure. The premium allocation charge is high but zero policy administration charges balance out the costs. Further, mortality charge is high at 1.4 times the charges which the LIC imposes.

BENEFITS

As the name suggests, the product offers a high death cover in the initial year to the policyholder that too without any medical checkup. The death cover automatically reduces to 21 times the annual premium after the first 10 years of the policy tenure. Further, the scheme offers an inbuilt accidental death benefit — the cover of which is equal to that of the policy death cover subject to 50 lakh.
   The scheme also offers loyalty additions equal to 2% of the fund value at the end of 15th policy year and 4% on maturity.

PERFORMANCE


Aviva Sachin Extra Cover Advantage is only a few months old but the funds are over a year old now. Most of the funds have outperformed their respective benchmark. Among equity oriented funds, enhancer fund stands out as the top performer, generating a return of 11.2%. However, this fund is positioned for high-risk appetite investors, due to its heightened equity exposure. The PSU fund, which is unique to Aviva Insurance, has also yielded good returns of 4.5% compared to negative 4.6% returns by its benchmark.


   Of the three debtoriented funds, the bond one has generated better returns than the rest. This is best suited for an individual with a low-risk appetite and also to those opting for a systematic transfer plan.

PORTFOLIO

The fund basket of Aviva is quite interesting with five funds being equity-oriented, out of a total of eight. However, the philosophy of all the five funds varies. A few scrips that have been common in most of the equity fund portfolio include RIL, ICICI, SBI and BHEL. As far as the sector composition is concerned, the portfolio of Aviva shows that it is bullish on banking and oil & gas sectors. Unlike most insurers, Aviva has an exposure to sensitive and volatile sectors such as power and infrastructure. These sectors have been underperforming since the past three years. A few low beta sectors like FMCG and healthcare hardly feature in the portfolio.

DEATH / MATURITY BENEFIT

On maturity, the policyholder receives the amount accumulated in the fund, whereas in case of death, higher of the fund value or sum assured will be disbursed. Also, under the joint life option, death benefit is payable on the first death and the policy terminates. For instance, if a 35-year-old healthy male invests 50,000 annually in enhancer fund of Aviva for 20 years, the total sum assured in case of any eventuality would be 20 lakh (40 times the AP) for the first 10 years. From the 11th year the sum assured will reduce to 10.5 lakh (21 times the AP). By the end of 20 years, assuming the rate of return of 6% and 10%, the fund value will be 14.8 lakh and 23.5 lakh, respectively, receivable on maturity. In case the policyholder dies in an accident, the nominee will receive an additional 20 lakh of the sum assured.

OUR VIEW

Aviva Sachin Extra Cover Advantage is a good deal for individuals seeking high insurance coverage. But those who keen on investment may not find this scheme as attractive as high coverage means high mortality and less value being transferred for investment.

 

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