Decoding Max NewYork ULIP insurance plan
Life maker ULIP is a product from famous Indian insurance company Max
New York. I am decoding the advantages and disadvantages of the same
here to help ULIP buyers to identify the feature. The scenario mentioned
in this article required your attention and contact the company to
clarify the same if you would like. You are required to understand the
fund performance for at least last 5 years and also required to compare
the same with its given bench mark to understand the performance.Age of Entry
Any age between 91 days to 65 years (maximum issue age is 50 years with Dread Disease rider and 55 years with PAB rider)
Premium Payment Term:
Regular Pay - Equal to Policy Term
Limited Pay - 5/10/15 years
Regular Pay - Pick-a-tenor (10 years to 30 years)
Limited Pay - 5 pay 10 years policy term,10 pay 20 years policy term, 15 pay 30 years policy term (Subject to maximum age at maturity of 75 years)
Sum Assured Minimum
The Sum Assured (SA) will be determined by multiplying the Annual Target Premium (ATP) to the Sum Assured Multiple.
Minimum SA Multiple - Half of the policy term, subject to minimum of 5
Maximum SA Multiple - Equal to the Policy Term
E.g.: Annual Premium of 30000 with 10 year term have a minimum SA of 30000x5=150000/- . No option to make it less but can choose more if required
It is possible to increase the Sum Assured at any policy anniversary but with some limitations.
Policy Type : Type 1
Type one provide either the Sum Assured of the Fund value whichever is high, at the event of death of policy holder.
Settlement options: Policy can continue next 5 years after the policy maturity date completes. Have to inform company 3 months prior to policy matures. Charges to administrate the policy applicable. This is not a good future comparatively. Taking back the money and outing to some good conservative or balanced mutual funds will give more benefit than this. Unless the fund performance is extra ordinary, selecting the option is not at all recommended.
Policy benefit Illustrations: A clean chard of illustration of benefit available in the policy brochure showing the possible income at the end of maturity with various interest/growth rate. A good investor should take LEAST care on this because the same might have made under the past performance of the fund.
Past and present performance is not a guarantee to the future performance. The major intention of insurance companies behind such intention is to attract customers to buy their product by giving attractive numbers showing huge benefits.
Find below what is the exact package in the sense of costs, performance and all other important information’s to decide.
Fund options: 4 funds options available to select upon the risk profile of the investor. Where, the growth super fund investing 70-100% in equities for an aggressive investors and secure fund investing 50-100% government secured instruments for a conservative investor. There are another 3 fund with various combination of above 2 funds available depends on investor and his investment intentions and risk profile.
Tax Benefit: Received under 80c for premium and 10D depends on your rider choice.
Premium Payment options: Annually, half-yearly, quarterly and monthly. Monthly payment of premium through ECS, will cost you more compare with other options.
Top-up Premium option: 25% of the annual premium. Remember, top-up premiums has 3 years lock period in order to withdraw this amount. A 2% shall be deducted as top-up premium charges.
Switching options: 6 free switches available in any year. Additional switching has a fee of Rs. 500/- per switch.
Premium Redirection: 3 in an year free to redirect premiums between combination of funds. Unless you are well aware about the fund performance and portfolio balancing mix, this practice will additionally cost you money. Additional redirection charge is Rs.1000 per redirection.
Partial withdrawal Options: 20% of surrender value at any policy year after completion of first three year. Policy holder should complete 18 years only eligible to partially withdraw money. Charges are applicable for the same. In a policy years 6 free partial withdrawal allowed and any additional, a fee of 1000 per withdrawal applicable.
Surrender options: You may by giving us a prior written request, surrender this policy at any time provided you have paid an amount equal to three ATP's (Annual Target Premium) in case of Regular Pay, 10 Pay and 15 Pay Contracts and an amount equal to two ATP's in case of a 5 Pay Contract. In accordance with Guidelines issued by the IRDA the Guaranteed Surrender Value will only be payable after completion of the third policy anniversary. The Surrender Charge will be levied as applicable.
Remember, surrender possibilities arriving because of 3 major reasons.
1. The policy holder is not able to pay the amount yearly because he cannot bear the same.
2. Policy holder understood that the fund performance is very less and will cost him in the future if continue.
3. He is not well aware about the terms and applying for the policy with out reading the documents properly or by the word of an insurance advisor.
To avoid all these, one should have be well aware about the product features, its performance and to identify the amount he can properly bear to pay as premium in each year.
Now the major part – Costs
Scenario: A person with 30 years opt a regular premium of 20000/- p.a. and term 10 years. He has a minimum sum assured of 100,000/-. His fund option is Growth Super.
Premium Allocation Charge is 25% of premium for first year, 10% second years, 5% third year, 2% from 4th year onwards. In our case the total PAC for 10 years coming to Rs.10,800/-. PAC for 10 year exceeding more than half of one year premium and cannot say it is a minimum or moderate. It is costly for a ULIP buyer.
Policy Administration Charges: 12% for first to third policy year and 5% from fourth policy year onwards. In our case it is coming to a Rs.14,200/-. Policy Administration Charges for 10 years is the 71% of single annual premium. It is too costly and not have any justification to select the policy.
Fund Management Cost: 1.35% per annual fro growth super fund. Calculation is in flat rate and the amount in this case they are deducting for 10 year is: 2,700/- compare with peers this cost is moderate and affordable.
The total charges deducting for this policy for 10 years is 10,800+14200+2700 = 27,700/-. This is itself coming to the 138.5% of single year premium. Man it is not a joke. If it is adding the mortality charge of 3847 in a minimum for 10 years (charges reduce against the Sum Assured and the fund value), Rs.31,547.52/- i.e. 158% of one year premium.
In my opinion, only one option is available to select the product is check the fund performance against its bench mark. This fund should perform more than 55 to 65% returns its benchmark providing. I.e. if Benchmark providing an annual return of 40%, this fund should give a return of 60 to 65%.
Recommendation: This ULIP is costly. There are better products available from same company. Unless you have an investment focus of 18 years or more, this ULIP is not recommended.,
Insurance: A Guide
"Remember kids, I have life insurance" - Adam Savage
This is a guest article from Tatyana Levin
These days one must be financially savvy. Money is not easy to come by and should be managed carefully. With the availability of tools that make it easy to keep track of current events, the stock market, and even your own money, it would be almost a crime to not utilize these tools to make the best and most informed financial decisions. Unfortunately, the more there is, the more there is to keep track of. This applies both to tracking tools and money (the small curse within the comfort of having money to keep track of).
The savvier ones of us dabble in investments, and the savviest make their living that way. The key is that they know what to invest in. Not magically, of course; investors do a significant amount of research to learn how to optimize their portfolios, but they have the understanding.
A grossly overlooked investment is insurance. This may be because is not typically referred to as an investment with the exception of whole life insurance that has a specific investment component within it. Webster’s defines the word “invest” as a commitment of money for a return and “insurance” as a guarantee. This makes insurance the safest type of investment, because your returns are guaranteed. But returns are not always financial in the case of insurance. They can be, if there is an unforeseen accident, but the most certain return is the feeling of security.
Now there are many different types of insurance, and what you need depends on your current situation. Obviously you only need auto insurance, found using auto insurance leads if you have a car, and you only need renter’s insurance if you rent and have possessions that you would need insured. Insurance is for those who have something to lose. With an attachment to something, either emotional of physical (or dependence, not like physically being glued to your car), comes the fear that it will be damaged or ruined in some way. For example, if your house caught on fire, you would be devastated. What would add insult to injury is not having a way to recover from this horrible disaster.
These types of examples are not unique to this article. That is the way that insurance is sold. As they say that clichés are clichés for a reason, insurance is promoted this way for a reason. The foundation of the concept of insurance is uncertainty, and it is the same uncertainty that is conjured up when investing.
The main difference between insurance and investment is that not having insurance creates a feeling of uncertainty while investments by nature are uncertain. Therefore, investing in insurance creates security and is the only secure investment that exists (and is legal). Getting insurance should be one of the easier financial tasks if you apply all the resources available with technological advances like smart phones.
About the Author: This article was written by Tatyana Levin, a copywriter for InsuranceFiles.com
