POS Goal Suraksha is one of the popular insurance policies from Bajaj Allianz.
One major reason for its popularity is the guaranteed benefits. Along with its life cover and tax benefits, Bajaj Allianz Goal Suraksha is easily attracting investors.
But will it benefit those investors? is a whole another question
Should you invest in the Bajaj Allianz POS Goal Suraksha plan?
We will analyse this policy in detail and find out the answers in this Bajaj Allianz Goal Suraksha review.
Table of Contents
1.)Key features of Bajaj Allianz POS Goal Suraksha
2.)Review of Bajaj Allianz Goal Suraksha Benefits
3.)Taxation of Bajaj Allianz Goal Suraksha Plan
4.)Pros of Bajaj Allianz Goal Suraksha
5.)Cons of Bajaj Allianz Goal Suraksha
6.)Comparison of Bajaj Allianz Goal Suraksha against PPF
7.)Comparison of Bajaj Allianz Goal Suraksha against ELSS Mutual Fund
9.)How to Surrender Your Bajaj Allianz Goal Suraksha
Bajaj Allianz Goal Suraksha is a non-participating, non-linked, endowment insurance plan. And here are its key features.
Key features of Bajaj Allianz POS Goal Suraksha:
Bajaj Allianz offers the POS Goal Assure policy with only 3 different policy terms. However, the policy buyer can choose from several premium payment terms.
The table below shows the features of the Bajaj Allianz Goal Suraksha plan.
Read more about the policy features in detail in the official brochure here: Bajaj Allianz POS Goal Suraksha PDF.
The Bajaj Allianz Goal Suraksha is a restrictive feature lacking policy. It is not usually a deal-breaker for policy buyers.
But what could be the deal-breaker for most investors is the benefits from the policy.
Let’s analyse the benefits of the Bajaj Allianz Goal Suraksha policy in detail.
Review of Bajaj Allianz Goal Suraksha Benefits:
Being an endowment plan, the policyholder will receive the assured benefit on policy maturity.
On the other hand, if the policyholder does not survive the policy term, the nominee will receive the assured death benefit.
Review of Bajaj Allianz Goal Suraksha Death Benefits:
The death benefit of Bajaj Allianz Goal Suraksha will be the highest of:
- 10X annualized premium.
- The Sum Assured.
- 105% of the total premiums paid.
For example, let’s say 40-year-old Akash buys Bajaj Allianz POS Goal Suraksha with a Sum Assured of ₹1 lakh. And he pays an annual premium of ₹10,000 for 7 years and a policy term of 15 years.
In case he, unfortunately, dies during the policy term, Akash’s nominee will receive the death benefit.
For his Bajaj Allianz Goal Suraksha policy, the possible death benefit options are,
- ₹1,00,000 — 10x Premium
- ₹ 1,00,000 — Sum Assured
- ₹73,500 — 105% of Premiums (assuming all premiums are paid)
The death benefit will be the highest sum of ₹1,00,000.
It is only an illustration to show that the death benefit is often the Sum Assured. And the only way to increase your risk cover is by increasing your policy premium.
Also, the death benefit is payable only if there is no lapse in the premium payment and the policy is active.
On surviving the policy term, you will receive the guaranteed maturity benefit at the end of the policy term. This maturity benefit will be the sum of Guaranteed Sum Assured and Guaranteed Additions.
Even if you are an investor with a low-risk tolerance, you still must analyse the potential risk and return from this policy. This helps you understand find better alternatives, with the same or even lesser risks.
Bajaj Allianz Goal Suraksha Policy Review of Maturity Benefits:
Let’s say 35-year-old Karan buy the Bajaj Allianz Goal Suraksha policy.
He chooses the policy term of 15 years with a premium payment term of 7 years. And the annual premium amount is ₹1,00,000.
The sum assured in this case will be 10 times the annual premium amount i.e., ₹10 lakhs.
At the time of policy maturity, Karan will get the ₹10,00,000 Sum Assured plus ₹3,30,000 as Guaranteed Additions.
The total guaranteed maturity benefit will be ₹13.3 lakhs.
The Guaranteed Addition is calculated based on the policyholder’s age, annual premium, policy term, and the premium payment term.
While it sounds good to receive the guaranteed benefits and additions, the rate of return from this policy is a mystery. And only with an annual rate of return can you compare this policy against different better options.
The illustration table below shows the calculation of IRR from the Bajaj Allianz Goal Suraksha plan.
An IRR of 5.6% after 15 long years, in any case, is a below-par investment. And it is lesser than the interest rate offered by most fixed deposits.
Moreover, a 5.6% cannot even beat the inflation rate in the long term.
Hence in terms of real return, your investments will be losing value instead of growing to help you achieve your financial goals.
Taxation of Bajaj Allianz POS Goal Suraksha Plan:
Investments in Bajaj Allianz Goal Suraksha are tax-exempt u/s 80C of the Income Tax Act.
However, section 80C has an exemption limit for investments up to ₹1.5 lakhs in a financial year.
On the other hand, the benefits from the Bajaj Allianz Goal Suraksha policy are completely tax-exempt u/s 10(10D) of the Income Tax Act.
Pros of Bajaj Allianz Goal Suraksha policy:
- Tax exemptions u/s 80C and 10(10D) of the Income Tax Act, 1961.
- You can get a loan against your Bajaj Allianz Goal Suraksha Policy from Bajaj Allianz.
- The maximum loan amount allowed under the Bajaj Allianz Goal Suraksha Policy will be 75% of the surrender value at the time of loan request.
However, your loan will carry an interest rate of 9% p.a., compounded semi-annually. Also, Bajaj Allianz reserves the right to revise this interest rate from time to time.
Cons of Bajaj Allianz Goal Suraksha Policy:
- It gives you a low rate of return.
- Your investments will be illiquid until maturity.
- In case you surrender your policy, there will be a significant capital loss.
- Insufficient risk cover for the premium paid.
These cons essentially do not serve the very purpose of investing in the Goal Suraksha plan.
So, what can you do as an investor?
For your risk cover, a term life insurance policy can give you the same or even higher life cover for a far lesser policy premium.
And to be fair, only a term insurance policy can provide the appropriate life cover. It helps you avoid hidden charges and encourages better personal finance management.
For example, the annual premium for a life cover of ₹10 Lakhs for 15 years policy term will be only around ₹3,500 with a term insurance plan. It is always better to keep your investments and insurance separate.
It will take care of your risk management, and you can focus better on managing your investments.
On the other hand, there are investment options that can deliver better returns. Some may even have relatively lesser investment risk—for example, PPF.
Let’s compare the Bajaj Allianz Goal Suraksha plan benefits against PPF followed by an even better alternative option.
Comparison Bajaj Allianz POS Goal Suraksha against PPF:
PPF—or Public Provident Fund—is an investment instrument from the Govt. of India.
It is one of the widely known investment instruments offering guaranteed returns. Since the Bajaj Allianz Goal Suraksha also offers guaranteed returns, it would be good to measure its performance against PPF.
Let’s calculate the returns from PPF by investing the same amount for the same period as we did in the Goal Suraksha illustration above.
Note: From each year’s ₹1lakh investment capital, ₹3500 is deducted to pay for the separate term life policy. From the 7th year’s ₹1lakh investment, an additional amount is deducted to provide for the term policy premiums and the PPF minimum ₹500 deposits up to year 15.
Hence, there is no compromise on any of the benefits offered by the Bajaj Allianz Goal Suraksha plan.
Yet, the calculations in the table show that PPF delivers almost ₹15 lakhs for the same investment as the Bajaj Allianz Goal Suraksha plan. It is about ₹1.7 lakhs higher than what the Goal Suraksha plan can offer.
PPF along with a term insurance plan is a better alternative than the Bajaj Allianz Goal Suraksha plan.
Not to mention that the investments, interest earned, and the maturity amount of PPF are all completely tax exempt.
If you are a conservative investor looking for guaranteed returns, PPF may be your ideal investment choice. But if you have a long-term financial goal and has the tolerance for calculated investment risk, you have an even better alternative.
Comparison of Bajaj Allianz POS Goal Suraksha against ELSS Mutual Fund:
ELSS mutual funds are mutual fund schemes that invest in the equity market.
Since this is a market-linked investment, it comes with a degree of investment risk. But since risk and return go hand-in-hand, ELSS mutual funds also bring a higher return for the investments.
And we are choosing the ELSS fund for comparison since it also offers tax exemption on investments up to ₹1.5 lakh u/s 80C. And they come with a lock-in period of 3 years.
Provided an investor has a good risk tolerance, he may consider investing in an ELSS fund instead of buying the Bajaj Allianz Goal Suraksha plan.
For example, let’s say an investor invests the same amount as seen in the Goal Suraksha plan illustration in an ELSS fund. A part of the investment capital—₹3500—is deducted to provide the life cover with a term plan.
Assuming a conservative 12% CAGR, the returns from the ELSS mutual fund scheme is shown in the table below.
Now, considering that the investment risk is high, even after assuming a conservative return rate, the ELSS Mutual Fund has delivered a far higher return.
It is more than twice the return from the Bajaj Allianz Goal Suraksha plan.
However, one can still argue that the Bajaj Allianz Goal Suraksha maturity benefits are tax-free. Even though they have 80C tax benefits, ELSS Mutual Fund returns are not tax-exempt.
Hence you will need to pay LTCG tax on the gains from your ELSS fund investment.
But how much will you need to pay?
Can the taxation make ELSS Mutual Fund an unattractive investment?
The illustration table below shows the post-tax returns from the ELSS Mutual Fund scheme.
Despite the 10% LTCG tax, the returns from the ELSS investment are still far higher than the returns offered by the Bajaj Allianz Goal Suraksha. Of course, you must have proper risk management and take caution—but it is completely worth your big financial goals.
I must highlight that your primary objective is to achieve your financial goals faster, rather than looking for tax exemption.
Bajaj Allianz Goal Suraksha may attract investors in the name of guaranteed returns.
But we have seen that PPF is also an investment option and delivers better returns than this policy. And if you have the right discipline and a bit of risk tolerance, invest in an ELSS Mutual Fund scheme for even higher returns to achieve your financial goals faster.
Whatever your investment option is, remember to keep your investments and insurances separate.
And if you have already bought this policy, you can still course-correct your investments in the right direction. Starting with surrendering your Bajaj Allianz Goal Suraksha plan.
How to Surrender Your Bajaj Allianz POS Goal Suraksha Plan?
IRDAI allows the policyholders to surrender their policy during the free-look period with zero to minimal charges.
Surrendering During the Free-look Period:
The Free-look period is 15 days from the date of purchase of the policy.
During this period, policyholders have the liberty to surrender their policy and get their policy premium back. They may levy a small charge for the processing of your surrender request.
The Free-look period is 30 days if the policy is bought online or over telemarketing.
Surrendering After the Free-look Period:
What if the free-look period is already over?
If the free-look period is complete, you can still surrender your Goal Suraksha policy.
But in this case, you will only receive the surrender value benefit.
The surrender value is calculated based on the current policy year and policy premium.
For example, your surrender value will be around 10%-20% of your annual premium in the initial years and increase as the years go by.
Hence, we recommend you consult your financial advisor before surrendering your policy. They can help you make the financially optimal decision.
Baja Allianz POS Goal Suraksha may not be the best investment—regardless of whether you are a risk-averse or risk-tolerant investor.
And you could end up compromising on your financial goals.
Keep your insurance and investments separate and truly understand the instrument before you make your investments. These two simple things will take you a long way.
But if you are ever in need of a professional to help you choose the right investments, or create a solid financial plan, we have something for you.
Register for your 30 Minute FREE Financial Planning consultation by clicking the link below.
Leave a Reply