If you're looking for an insurance product that will save you the time and trouble of keeping track of your investments, you could take a look at SBI Life's Horizon product.
Horizon is essentially a unit-linked insurance plan, which combines a life insurance or term policy with an investment product.
In other words, you invest your savings and, at the same time, if something happens to you, your family has something to fall back on.
In most other ULIPs, you take the investment calls: you would need to decide what proportion of your investment you want to allocate between debt and equity, initially, and throughout the life of the policy.
With Horizon, however, the allocations are decided before-hand and you are aware of where your money is being invested right from the beginning till the end.
Take a look at the insurance cover first. In the event of a death, your family will be entitled to a sum assured which is equal to ten times the annualised premium plus the market value of your investments.
So, for instance, if your annual premium for ten years is Rs 12,000, in the event of your death, your family will receive the sum assured of Rs 1,20,000 plus the market value of the investments at that point in time.
| The Big Picture |
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Plan Features: Age: 14-60 years Where your money is invested Equity Fund: Listed equity shares Charges that you pay
Total: Rs 2965 As a percentage of the premium, the charges work out to 25 per cent in the first year. In Year II, the charges come down to around 20 per cent and 15 per cent in subsequent years. |
The minimum sum assured is Rs 120,000 while the maximum sum assured is Rs 10 lakh (Rs 1 million). In some other ULIP schemes, the beneficiaries receive the higher of the two, that is, higher of either the investments or the sum assured. In this case, you get both.
Now for the investments. Like any other ULIP, you will receive units, the net asset value of which is available to you daily and which reflects the value of your investment at that point in time.
In Horizon, the investment allocation is done automatically such that the proportion of equities is higher at the beginning of the life of the policy, with the proportion of debt increasing as the term progresses.
Towards the end of the policy, the entire corpus is invested in money market and bond schemes. For instance, for a 20-year policy, in the first three years, the allocation to equities would be between 80 and 100 per cent, in the fourth year it would be between 75 and 95 per cent, while in the fifth year it would fall to between 70 and 90 per cent.
By the 11th year, the allocation to equities is down to between 40 and 60 per cent and in the 19th and 20th years, it falls further to between 0 and 20, and 0 and 15 per cent respectively.
The idea is to lower the risk as the policy matures.
It should be remembered that the allocation is made from your investments as a whole. In other words every year the value of existing investments (both debt and equity) and the premium for the year is taken into account and then freshly apportioned between debt and equity, so as to maintain the proper ratio.
The switching from equity to debt and further to money market schemes does not cost you anything. You have two options -- one which gives you a higher exposure to equities and one which gives you a lower exposure to equities, depending on your age, risk appetite and the term of the policy you can pick from either of them.
For example, an older person with a lower risk appetite and with a shorter policy life should pick the option where investments have a lower exposure to equities.
While you can definitely, top up your premium, it would be in your interest not to put in more than 20 per cent of the sum assured in any year.
That's because it would deprive you of tax benefit under section 10 (10) (d) of the IT Act which makes your investment tax free when you receive it on maturity of the policy.
Thus, for instance, if you have been putting in Rs 12,000 as premium every year, it would not be a good idea to put more than Rs 24,000 in any year.
Since stock markets can be volatile, it might be a good idea to pay your premium once a quarter. That would give you the benefit of rupee cost averaging.
In other words, the price at which you buy equity or debt schemes would get averaged out over a period of time. Remember equities entail some degree of risk.
