SBI Unit Plus Super's cost structure is decent, however, the plan is not suitable for those who want to make small investments on a periodic basis
THE unit-linked guidelines issued by insurance regulator Irda have come into effect from September 1, 2010. Insurers have replaced the earlier unit-linked insurance plans with new plans that comply with the new Irda guidelines. Due to this, most of the insurers are offering only one or two Ulips currently. SBI Life Insurance has launched two Ulips, one of them being Unit Plus Super. It is a standard Type I plan. The plan offers a basket of nine investment options (funds) to suit investment needs as per the risk-return appetite. For instance, equity, equity optimiser, index, P/E fund, and growth fund are equity-based, whereas money market and bond fund are debt-based. Those looking for a balanced portfolio can opt for the balanced fund. The plan offers only an annual premium payment mode. Even the premium size is high. The minimum premium band including the all premium payment option is between Rs 30,000-65,000.
COST STRUCTURE:
The cost structure of Unit Plus Super follows the new pricing norms of Irda. Thus, the cost of this product is comparatively low. The policy administration charges are nil for the first five years. Premium allocation charge is till the 11th year only. Additional premium paid towards investment purposes, earlier known as top-up, is now considered as single premium. The allocation charge towards them has increased from 2% to 3% per investment. Major reduction has come in the surrender charges, now known as discontinuance charges. This has reduced to less than 6% of the annual premium or fund value subject to maximum of Rs 6,000 (See table).
BENEFITS:
The policy provides varying premium payment options. For those looking for one-time payment, there is an option of a single premium payment, while those wanting to pay for a limited period can opt for the limited premium payment option, which includes payment of premium for 5/8/10 years. Apart from this, a regular premium option is also available. In addition to this, the policy also provides guaranteed additional units from the end of the 10th policy year and every five years hence to in-force policies. Theses additions are in multiples of five. So, on completion of the first 10 years, 5% of the annual premium is given as guaranteed addition, then on the 15th year, 10% of annual premium is given and so on.
A few other benefits are:
1) The plan offers settlement option, under which a policyholder can take away the fund value at maturity in five installments
2) Increase or decrease of sum assured anytime within the policy tenure.
3) There are additional riders like accidental death benefit, premium payor waiver benefit rider, critical health rider (Criti Care 13) and income sustainable rider on payment of additional charge
PERFORMANCE:
Though the plan has just been launched, the funds available for investment have been in place since quite a time now. Most of the funds have outperformed their respective benchmarks and the major indices like the Sensex and Nifty. The equity fund stands out as one of the top performers, having generated absolute gains of about 26.8% over the past one year and about 104% absolute gains over the past three years. This implies that Rs 100 invested in this scheme three years back would be worth Rs 204 today. The top 300 and index fund are few months old and have reasonable assets under management. The performance of these funds is passable.
The P/E fund is a new fund started by the company, in which fund allocation to equity is done on the basis of the price-earning ratio. In the fund manager's view this fund is good but the company's flagship fund remains the equity and growth fund.
PORTFOLIO REVIEW:
SBI Life Unit Plus Super has an equity-oriented portfolio. Out of nine funds available, four funds have over 90% equity exposure. This might be precarious for the company in the long run. The company has high exposure in financial services and oil and gas sectors, making it a high beta fund. It has also increased exposure in low beta sectors like FMCG and healthcare. The portfolios have high exposure in metal stocks.
DEATH/MATURITY BENEFITS:
Upon maturity, the policyholder receives the amount accumulated in the fund. In case of demise of the policyholder, the nominee receives the higher of the sum assured or the fund value, subject to a minimum of 105% of the basic total premium paid towards the policy over the period. The new guidelines have increased the minimum sum assured level as well. So, under this plan, an individual below 45 years has a minimum cover of 10 times the annual premium and the maximum cover is 20 times. For single premium, sum assured changes to a minimum/ maximum of 1.25/5 of the single premium.
For instance, say a 35-year-old healthy male has invested Rs 50,000 p a in equity fund for a period of 20 years. Assuming a sum assured equivalent to 10 times the annual premium, the total sum assured receivable, in case of any eventuality, would be Rs 5 lakh. By the end of 20 years, assuming the rate of return of 6% and 10%, the fund value shall be Rs 15,39,868 and Rs 24,32,035, respectively. So, the net yield in the hands of the investor after factoring the costs would be 4% and 7.9% (approx.), respectively per annum.
OUR VIEW:
The cost structure of the product is decent. However the plan is not suitable for people who want to make small investments on a periodic basis, since the minimum premium size is high and even premium payment mode is limited to annual payment only. However, those interested in funds having high risk and return can very well invest in this product opting for either the equity fund or growth fund. These have been the highest performing funds.
