Birla Sun Life Classic Endowment Plan offers a choice to enhance the sum assured and to secure a better life cover. The higher cover can be a maximum of up to 100% of the basic sum assured and comes at an additional cost
BIRLA Sun Life Classic Endowment Plan is a Type II unit-linked insurance plan (Ulip), which gives both fund value and sum assured on unfortunate eventuality. The scheme is a low-ticket size product that offers an option of enhanced sum assured above the basic sum assured for better risk coverage of policyholders. The plan offers an exhaustive basket of investment options (funds) with various asset allocation compositions that cater to all segments of investors.
COST STRUCTURE:
Although the cost structure of Classic Endowment seems expensive, this is only due to the premium allocation charges which are 7.5% and 6.5% for the initial two years and then 5% for the rest of the term. Effectively, 45% of the annual premium gets invested every year. However, other charges, such as policy administration charges, fund management charges, are comparatively low. The mortality charge of the product is higher than LIC Mortality tables in the early years of the policyholder. However, as the age increases, the mortality charge of Classic Endowment decreases unlike other similar schemes in the category.
BENEFITS:
Classic Endowment Plan offers investors the choice to enhance the sum assured and a secure a better life cover. However, investors need to bear in mind that this increased cover can be a maximum of up to100% of the basic sum assured and it comes at an additional cost. Apart from that, the product also offers a couple of riders, including three health related riders that cover individual from other uncertainties as well. There is a cost to these too.
PERFORMANCE:
Though the Classic Endowment Plan is only a few months old, the funds are in place for more than a year now. A look at its performance suggests that most funds have outperformed their respective benchmarks. The debt and debtoriented funds such as income advantage builder, enhancer and assure have performed exceptionally well. Creator fund have the highest limit of 50% in the equity market. This fund has marginally outperformed the benchmark. Further, the fund basket has four equity funds namely Magnifier, Maximiser, Multiplier and Super 20 fund. The one-year track record shows that the Mulitplier fund a midcap-oriented fund failed to outperform its benchmark. Super 20, an aggressive large-cap fund, has clocked returns of 16.2% as against 12% return by the Sensex. A high risk appetite investor can park his money in Super 20 or the Maximiser fund.
PORTFOLIO REVIEW:
Birla Sun Life has an equity-oriented basket of funds, which suggest high risk with high returns. Equity funds are mainly large-cap bias with the mid-cap exposure restricted to just about 10-15%.
On sectoral composition, Birla Sun Life funds have a high exposure to the financial and oil and gas sectors. The fund manager has recently increased exposure to the banking sector along with metal and automobiles. Interestingly, the fund manager seems to be losing interest in utilities, signalling a drastic reduction in exposure to the power sector.
The fund manager is positive on the growth story of sectors like healthcare and FMCG. These sectors have always formed a considerable part of Birla Sun Life's equity portfolio. The fund manager has also confirmed frequent churning of the portfolio, largely due to the lowasset base of the equity funds that has helped the company generate better returns.
DEATH/ MATURITY BENEFIT
Upon maturity, the policyholder receives the amount accumulated in the fund, whereas in the case of death, the sum of both fund value and sum assured will be received. For instance, say a 35-year-old healthy male invests 50,000 annually in the Maximiser fund for 20 years. Assuming sum assured equivalent to 10 times the annual premium, and an enhanced sum assured of 5 lakh the total sum assured receivable, in case of any eventuality, would be 10 lakh. By the end of 20 years, assuming a rate of return of 6% and 10%, the fund value will be 15,90,000 and 25,38,000, respectively, receivable on maturity along with the maturity bonus. However, in case of demise of the policyholder, the nominee receives the sum assured of 10 lakh along with the prevailing fund value.
OUR VIEW:
Those seriously interested in insuring themselves should opt for Type II policies. Classic Endowment's enhanced sum assured option further allows policyholder to insure themselves well by paying a little extra. It provides a whole gamut of funds, with a few like Super 20, Maximiser, Enhancer and Income Advantage Fund being good investments. For a high risk-return investor, the Maximiser Fund may be a better option owing to its portfolio diversification.
