Perhaps in response to criticism of unit-linked insurance policies having high front-ended charges and high surrender costs, two recently launched policies offer new cost structures
Although old is considered gold, often novelty, too, attracts people. And who knows it better than insurance companies. Every month we see plans hitting the markets, trying to lure customers by introducing something new. The last two months were no different with two unit-linked insurance plans (Ulips) being launched ? Bajaj Allianz?s Fortune Plus and IDBI?s Wealthsurance.
While both the plans have tweaked charges a bit, the basic structure is still that of a Ulip. Baits like more than 100 per cent allocation after 10 years in Bajaj Allianz?s policy and lower entry charges in case of IDBI?s Wealthsurance will work only for those who intend to stay with the plan till maturity. ?Both the companies have done smart marketing exercises but there is nothing new in these plans,? says Jaideep Lunial, a Chandigarh-based financial planner.

Fortune Plus
Touted as a wealth-creating Ulip, Fortune Plus is a typical type I Ulip that offers the higher of fund value or sum assured to the nominee in case of death of the insured. This plan is open to anyone in the age group of zero to 65 years. It offers a choice of six riders and is available for three policy terms ? 10, 15 and 20 years. The minimum sum assured is five times the annual premium, which is the general industry practice.
Fortune Plus offers investors a choice of seven funds. For the investor who doesn?t know much about investing, there is the asset allocation fund, wherein fund managers will take care of your money and allocate it among different funds options, depending on market conditions. For savvy investors, there are six funds options ? liquid fund, bond fund, equity fund, equity index fund, accelerator mid-cap fund, and pure stock fund. Although the last option (pure stock fund) is not being promoted as a Shariah-compliant fund, it follows the laws of Islamic investing closely. The fund will not invest in companies engaged in gambling, contests, liquor, entertainment (films, TV), hotels, banks and financial institutions.
Flexibility. The policy scores on the flexibility front. One of its best features is zero surrender charge. After paying premium regularly for three years, you have the choice to surrender the policy and take away the accumulated fund value, without paying any surrender charge. Although the insurer is giving this facility, one should resort to it only as the last option. Always do the numbers and check if your investment has broken even (i.e., whether the surrender value you will get will equal the sum of all the premiums paid by you so far) before taking such a decision.

Moreover, this policy allows partial withdrawals (a minimum of Rs 5,000) after three years, without deducting any charges. You also get the flexibility to increase or decrease regular premium, according to your changing needs and ability, every policy year. Says Akshay Mehrotra, marketing head, Bajaj Allianz Life Insurance: ?In other plans, certain options are available only to big investors and not to the small ones. In this plan, we have tried to bridge that gap and provided small investors benefits like unlimited top-up facility, and flexibility to withdraw anytime.?
Charges. The policy scores less highly on charges. The premium allocation charge (PAC) is 20 per cent of first-year premium, which is high. For year two and three, it is six per cent; from year four to ten it is two per cent; and it tapers off to nil after the tenth policy year.

IDBI Wealthsurance
Again a type I Ulip, it pays the higher of sum assured or fund value upon the insured?s demise. The plan is available to anybody in the age bracket of one month to 65 years. As the plan is more inclined towards investment and wealth creation, it has kept every type of investor in mind and offers a gamut of choices. It has fixed-return fund options ? monthly interest account and guaranteed return fund ? for low risk investors; a capital-guaranteed fund for medium risk investors; and market-linked funds for high-risk investor. Besides, for investors who would not like the fund manager to manage their funds, the company offers the asset allocation fund.
Additional feature. The plan not only offers life insurance but has bundled in a terminal illness rider as well. Should you contract any of the 17 listed illnesses, the policy will give you a lump sum amount, subject to a maximum of Rs 25 lakh, to take care of hospitalisation and other needs. However, your risk cover will get decreased by the same amount.
The basic idea of a life cover is to secure one?s family and dependants, if any. If such riders are invoked, they can defeat the purpose of having a high sum assured for meeting family needs (after the insured?s demise). However, says G.V. Nageswara Rao, managing director and chief executive officer, IDBI Fortis Life Insurance, ?Wealth creation needs a plan and the terminal illness benefit primarily is meant to take care of the monetary needs that may arise due to such illnesses. This benefit will help the insured monetarily and ensure that his plans are not derailed due to any such calamity.?
Flexibility and charges. The plan scores well on both these counts. While it offers flexibility to investors, the charges are also distributed over the policy tenure. The premium allocation charge is low compared with other plans available in the market. The policy will charge a flat policy administration fee of Rs 60 a month. The plan allows unlimited free switches and also offers liquidity by allowing partial withdrawals after three years, without any charges. At Rs 10,000, the minimum withdrawal allowed should have been lower. However, the surrender charge is on the higher side.

On the flexibility front, depending upon needs, you can choose your risk cover, premium payment term, and also the policy term.
Says Mumbai-based financial planner Amar Pandit: ?While zero surrender value is the only attractive feature of Fortune Plus, Wealthsurance offers a better cost structure that is spread across the entire tenure.? Owing to higher flexibility and better cost structure, IDBI Fortis appears to be a better bet between the two plans.

Finally, before investing in any of the two plans, the customer should pay a thought to buying a term cover plus mutual fund option, instead of buying either of these Ulips. As financial planner Pandit says, ?One of major pitfalls of such plans is that an investor has to rely on a single fund management for 15-20 years.? With a term plan plus diversified equity fund combination, if the fund doesn?t perform well, you have the option to move out at zero cost (after six months). Here, you don?t, at least not in the initial years.