Insurance Review: HDFC Life Sanchay Plus: Features, options and suitability

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Updated: June 27, 2019 5:01:21 PM

HDFC Life Sanchay Plus is a traditional life insurance plan with guaranteed additions in place of bonus. Let us see, whom it suits?

HDFC Life Sanchay Plus, life insurance plan, Review, guaranteed additions, sum assured, regular incomeThere are three important things while choosing – Look at the policy term, the premium paying term and the payout period in the plan.

Life insurance primarily aims to provide life protection and acts as an income replacement tool. One may also use life insurance plans to save for the long term needs. In addition to offering plain vanilla life insurance plans that provide a lump sum at the end of the policy term i.e. on maturity, life insurers have also been offering savings plan to suit other life stage needs. In such versions, one can get a regular stream of income for specific years or till lifetime. One such plan is HDFC Life Sanchay Plus, which is a traditional life insurance plan with guaranteed additions (GA) in place of bonus. Bonus depends on the profits made by the insurer while insurers are obliged to pay guaranteed additions even if there are no profits.

In HDFC Life Sanchay Plus, the first step is to decide any of the 4 plan options available. Decide as per your life stage and the long term needs. There are three important things while choosing – Look at the policy term and the premium paying term and the payout period as each option has its own parameters.

Let us look at what each option offers:

1. Guaranteed Maturity

This option offers a guaranteed maturity benefit payable as lump sum at the end of the policy term.

Policy Terms – 10, 12 and 20 years
Premium Paying Terms – 5 , 6 and 10 years

The maturity benefit is equal to the guaranteed sum assured on maturity plus accrued guaranteed additions. The guaranteed sum assured on maturity is total annualized premium payable under the policy during the premium payment term.

2. Guaranteed Income

This option offers a guaranteed regular income for a fixed term of 10 or 12 years.

Policy Terms – 11 and 13 years
Premium Paying Terms – 10 and 12 years

Maturity benefit is payable in the form of guaranteed income for a fixed term of 10 or 12 years upon payment of all due premiums and the life assured surviving the policy term. On the death of the life assured during the payout period, the nominee shall continue receiving guaranteed income as per income payout frequency and benefit option chosen till the end of the payout period.

3. Life Long Income

This option offers guaranteed regular income up to age 99 years plus the return of premium at the end of the payout period.

Policy Terms – 6 and 11 years
Premium Paying Terms – 5 and 10 years

Maturity benefit is payable in the form of a guaranteed income up to age 99 years and a return of total premiums paid at the end of payout period upon payment of all premiums and life assured surviving the policy term.

4. Long Term Income

This option offers guaranteed regular income for a long term of 25 or 30 years plus the return of premium at the end of the payout period.
Policy Terms – 6 and 11 years
Premium Paying Terms – 5 and 10 years

This option offers a benefit of guaranteed income for a fixed term of 25 or 30 years and a return of total premiums paid at the end of payout period upon payment of all premiums and life assured surviving the policy term.

Under Life-Long Income and Long Term Income, on the death of the life assured during the payout period, the nominee shall continue receiving guaranteed income as per income payout frequency and benefit option chosen till the end of Payout Period.

How to decide

Remember, guaranteed insurance plans could be costly as guarantees will always come at a cost. The internal rate of return (IRR) of traditional insurance plans such as endowments and money back plans is about 6 per cent, while that of guaranteed plans could even be lower depending on age. Also, the simple compounding of guaranteed additions or return of premium on survival in the policy doesn’t help much especially in a long term investment.

The plan may be of help to those who are in the highest tax slab and will look for tax-free regular income not immediate but from later date i.e. deferred tax-free income. Traditional insurance plans fall short of creating wealth and generating inflation-beating returns. Ultra-conservative may consider such plans for their regular income need over a long time horizon.

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