Canara HSBC Oriental Bank of Commerce Life Insurance recently launched a unit-linked insurance plan, Insure Smart that offers an NAV-guaranteed fund option. The guarantee is calculated at the highest NAV achieved by the fund in the first seven years. Like with the other guaranteed NAV plans, in this case, too, the guarantee comes into play only if the insured sticks with the policy till its maturity.
PREMIUMS:
The Ulip comes with a premium-paying term of five years, while the policy tenure is 10 years. Weigh your options carefully if you feel the need for a longer-term protection cover. The minimum annual premium payable under the policy is . 50,000. There is no upper limit on the premiums payable.
SUM ASSURED:
For those aged under 45, the sum assured would work out to 10 times the annual premium. If the policyholder's age at entry is over 45, the sum assured will amount to seven times the annual premium. The maximum sum assured can go up to 35 times the annual premium. The Ulip allows the policyholder to increase or decrease the sum assured from the sixth policy year onwards.
CHARGES:
The initial premium allocation charge, a major component of any Ulip cost structure, for this product amounts to 8.4% in the first year, 6.4% in second and third years, and 5.4% in the fourth and fifth years. The fee is lower if the policyholder opts to pay the premium through the electronic clearing service mode. Apart from the usual fund management charge of 1.35% (except for liquid funds), those opting for the guaranteed NAV fund will have to shell out an additional guarantee charge of 0.35% per annum.
CHOICE OF FUNDS:
The product offers five fund options, in addition to the guaranteed fund option. If the policyholder wishes to switch between the funds, he/she will have to pay a switching charge of . 250 per switch. This is, however, applicable only if the policyholder exhausts the first six switches in a policy year that are allowed free of charge. Also, switching from non-guaranteed funds to the guaranteed option is not allowed.
WHY GO FOR IT:
The limited premium-paying term could work in favour of those looking to avoid getting into long-term payment commitments. Choices in the form of various fund options could also appeal to those who seek flexibility.
WHY AVOID IT:
Premium allocation charges, though conforming to the IRDA cap, are quite high. Also, since the product allows only annual premium payments, it limits the scope of spreading your investments over a period of tine during volatile market conditions, if you do not choose the guaranteed NAV option.
