Thanks to its large ticket size, the cost structure for SBI Life-Smart Elite is low. Its USP is its flexibility. But it has a lot of catching-up to do on the returns front
SBI Life-Smart Elite is a unit-linked life insurance plan crafted exclusively for high net worth individuals. The plan is no different from other Ulips offered by SBI Life except that it has a high premium bracket starting from 1,50,000. It offers two protection options. Under the Gold option, the plan provides a choice of higher of sum assured or fund value on unfortunate events. Under the Platinum option, the nominee of the policyholder would receive both. The scheme offers six alternative investment options (funds) with varying equity and debt exposure for the policyholder.
COST STRUCTURE:
The large ticket size has helped keep the cost of this scheme low. The insurance company charges 15% premium allocation charges for a 5-year period. This is much lower than the 20-25% charged by some other insurers. Additional premium paid towards investment purposes only (top-ups) attract a 2% allocation charge. The policy administration charge is fixed at 600 per annum for a single premium policyholder and 720 pa for the rest. This helps in keeping the cost structure low since the administration charge is defined in absolute terms and is not linked to the annual premium. It needs to be noted that the scheme's mortality charges are same as that of the LIC mortality table, unlike other insurance companies, which have higher charges.
BENEFITS:
SBI Life-Smart Elite is a flexible plan with various premium payment modes. The scheme allows the policyholder to increase or decrease the sum assured based on the needs. However, this flexibility is only allowed three times in the entire policy tenure. An increase in the sum assured is subject to underwriting and is not available at 50 years and above. The plan offers a settlement option, under which a policyholder can take away the fund value at maturity in five instalments.
PERFORMANCE:
SBI Life-Smart Elite offers a basket of six investment options of which three funds are more than five years old. These include Balanced Fund, Bond Fund and Money Market Fund, while the rest three are recently launched and are just about a year old. While most of the old funds have outperformed the benchmark with good margins, the new funds are yet to show their sheen. Equity Elite fund is nowhere close to the regular equity fund of SBI Life which is the best performing fund in the category with more than 23% annualised returns. P/E Managed and Index funds, which are equity-oriented funds, have also not put up an encouraging show.
PORTFOLIO REVIEW:
SBI Life Insurance primarily has a large-cap defined equity portfolio with just about 4-5% mid-cap stock holding. Top holdings of the portfolio include Infosys, Reliance Industries, ICICI Bank and L&T.
Similar to most other funds, SBI Life has a higher exposure to the financial services and oil and gas sectors. The healthcare sector, a more defensive one, forms a small part of the portfolio due to a complex business model, according to the fund manager. The portfolios have very significant exposure in metal stocks, which are currently underperforming.
DEATH / MATURITY BENEFIT:
On maturity, the policyholder gets the amount accumulated in the fund. In the case of demise, the nominee of the policyholder receives higher of the sum assured or the fund value or both, subject to a minimum of 105% of the basic total premium paid towards the policy over the period. For instance, say a 35-year healthy male invests 2,00,000 per annum in the equity fund for 10 years. Assuming that the sum assured is 20 times the annual premium, the total sum assured receivable, in case of any eventuality, would be 40 lakh. By the end of 20 years, assuming the rate of return of 6% and 10%, the fund value shall be 36,65,524 and 67,76,640 respectively.
OUR VIEW:
Smart Elite is one of the most competent products in terms of its cost structure. It provides flexibility to investors. Among its six funds, Balanced and Bond funds have shown a remarkable performance. But high net worth individuals generally have a high risk appetite. Since the returns from the equity-oriented funds in Smart Elite are not as good, prospective investors will be better-off by investing in other products of SBI Life.
