Listen to this article
Could the ABSLI Fixed Maturity Plan be the perfect solution to help you create wealth?
Can the ABSLI Fixed Maturity Plan guarantee a predictable return on your investment?
Could investing in the ABSLI Fixed Maturity Plan be the key to achieving your goals?
In this review, we’ll explore the features, advantages, disadvantages, and returns of the ABSLI Fixed Maturity Plan through an IRR analysis. Let’s dive in and determine if this plan is the right fit for you.
Table of Contents:
What is the ABSLI Fixed Maturity Plan?
What are the features of the ABSLI Fixed Maturity Plan?
Who is eligible for the ABSLI Fixed Maturity Plan?
What are the benefits of the ABSLI Fixed Maturity Plan?
Free Look Period of ABSLI Fixed Maturity Plan
Surrendering ABSLI Fixed Maturity Plan
What are the advantages of the ABSLI Fixed Maturity Plan?
What are the disadvantages of the ABSLI Fixed Maturity Plan?
Research Methodology of ABSLI Fixed Maturity Plan
Benefit illustration – IRR Analysis of ABSLI Fixed Maturity Plan
ABSLI Fixed Maturity Plan Vs. Other Investments
ABSLI Fixed Maturity Plan Vs. Pure Term + ELSS
Final Verdict on ABSLI Fixed Maturity Plan
What is the ABSLI Fixed Maturity Plan?
ABSLI Fixed Maturity Plan is a savings plan that provides life insurance cover and savings benefits to safeguard your family members from financial crisis in case of an unfortunate event. Additionally, the ABSLI Fixed Maturity Plan helps you accumulate lumpsum benefits to achieve all your dreams.
What are the features of the ABSLI Fixed Maturity Plan?
- Choice of various Policy Terms & Sum Assured Multiples to suit your needs.
- Get comprehensive risk cover in case of death of life insured.
- Get guaranteed lumpsum benefits at maturity irrespective of market conditions.
- Enhanced maturity benefit for higher premiums
Who is eligible for the ABSLI Fixed Maturity Plan?
| Minimum | Maximum | |
| Age at Entry | 8 years | Option A: 60 years Option B: 50 years |
| Maturity Age | 18 years | Option A: 70 years Option B: 60 years |
| Premium Paying Term | Single Pay | |
| Policy Term | 5 – 10 years | |
| Annualised Premium | ₹ 12,000 | No Limit |
| Sum Assured Multiple | Option A: 1.25 to 1.77 times the single premium Option B: 10 to 10.42 times the single premium |
|
What are the benefits of the ABSLI Fixed Maturity Plan?
i.) Death benefit
In the event of death of the Life Insured anytime during the ABSLI Fixed Maturity Plan Policy Term, the Death Benefit payable shall be higher of
- Sum Assured on Death
- Surrender Benefit
Sum Assured on Death is defined as a multiple of the Single Premium Paid chosen (option A or B) depending upon the Life Insured’s age at inception.
ii.) Maturity benefit
At the end of the ABSLI Fixed Maturity Plan Policy Term, you will receive a Guaranteed Maturity Benefit as a Lumpsum which is defined as a percentage of the Single Premium paid excluding the taxes & underwriting extra premiums if any.
The percentage depends on the plan option chosen, the policy term, and the premium band.
Free Look Period of ABSLI Fixed Maturity Plan
You will have the right to return Your ABSLI Fixed Maturity Plan policy within 15 days (30 days in the case of electronic policies and the policies issued under Distance Marketing) from the date of receipt of the policy, in case You are not satisfied with the terms & conditions of Your policy.
Surrendering ABSLI Fixed Maturity Plan
You can surrender your ABSLI Fixed Maturity Plan policy anytime during the Policy Term once the Policy has been issued. ABSLI Fixed Maturity Plan policy will terminate after payment of the Surrender Value and thereafter no other benefits under this Policy shall be payable.
The surrender value payable will be higher than the Guaranteed Surrender Value (GSV) and the Special Surrender Value (SSV).
What are the advantages of the ABSLI Fixed Maturity Plan?
- Enjoy a hassle-free single investment plan with fixed maturity benefits.
- Benefit from tax advantages on the premium paid and the benefits received under your ABSLI Fixed Maturity Plan policy.
- Access a loan against your ABSLI Fixed Maturity Plan policy, with a maximum loan amount of 85% of the surrender value for Option A and 65% for Option B.
What are the disadvantages of the ABSLI Fixed Maturity Plan?
- This ABSLI Fixed Maturity Plan does not include any loyalty additions or other bonuses.
- Your funds are locked until the end of the ABSLI Fixed Maturity Plan policy term.
- The returns are low.
Research Methodology of ABSLI Fixed Maturity Plan
Long-term investments should help you build a substantial corpus to achieve your life goals. While the ABSLI Fixed Maturity Plan offers guaranteed maturity benefits, it’s crucial to assess its returns through proper calculation.
Let’s work out the Internal Rate of Return (IRR) for the ABSLI Fixed Maturity Plan based on the figures provided in the policy brochure. Calculating the IRR allows you to make an informed decision.
Benefit illustration – IRR Analysis of ABSLI Fixed Maturity Plan
A 30-year-old male invests a single premium of ₹5 lakhs in the ABSLI Fixed Maturity Plan, choosing Plan Option B.
The policy term is 10 years, with a sum assured of ₹51 lakhs. At the end of 10 years, he receives a maturity benefit of ₹8.85 lakhs. The IRR for this cash flow is 5.88% as per the ABSLI Fixed Maturity Plan maturity calculator
| Male | 30 years |
| Sum Assured | ₹ 51,00,000 |
| Policy Term | 10 years |
| Premium Paying Term | Single Premium |
| Single Premium | ₹ 5,00,000 |
| Age | Year | Annualised premium / Maturity benefit | Death benefit |
| 30 | 1 | -5,00,000 | 51,00,000 |
| 31 | 2 | 0 | 51,00,000 |
| 32 | 3 | 0 | 51,00,000 |
| 33 | 4 | 0 | 51,00,000 |
| 34 | 5 | 0 | 51,00,000 |
| 35 | 6 | 0 | 51,00,000 |
| 36 | 7 | 0 | 51,00,000 |
| 37 | 8 | 0 | 51,00,000 |
| 38 | 9 | 0 | 51,00,000 |
| 39 | 10 | 0 | 51,00,000 |
| 40 | 8,85,500 | ||
| IRR | 5.88% |
The ABSLI Fixed Maturity Plan is similar to a fixed instrument where the final maturity amount or returns are known at inception. However, compared to other fixed instruments (such as debt instruments), the returns of the ABSLI Fixed Maturity Plan are relatively low.
Even if you invest your lump sum in a bank fixed deposit, you can yield better returns and have access to your funds at any time. The lack of liquidity and low returns are two significant drawbacks of investing in the ABSLI Fixed Maturity Plan.
ABSLI Fixed Maturity Plan Vs. Other Investments
Given that the returns from the ABSLI Fixed Maturity Plan are not favourable for investors, let’s explore alternative options for your lump sum investment. The ABSLI Fixed Maturity Plan is a combined insurance and savings plan, so the alternative should cover both aspects.
We’ll do this by splitting the coverage and the investment into two different products.
ABSLI Fixed Maturity Plan Vs. Pure Term + ELSS
For life coverage, a pure-term life insurance policy with a sum assured of ₹50 lakhs costs ₹59,000 for a 10-year term. In the previous illustration, the premium was ₹5 lakhs. By choosing the term policy, you save ₹4.41 lakhs, which can be invested based on your risk appetite.
| Pure Term Life Insurance Policy | |
| Sum Assured | ₹ 51,00,000 |
| Policy Term | 10 years |
| Premium Paying Term | Single Premium |
| Single Premium | ₹ 59,000 |
| Investment | ₹ 4,41,000 |
Low-risk investors can opt for debt investments, while high-risk investors can choose equity investments. In this scenario, we consider an ELSS fund (equity investment) for the lump sum.
| Age | Year | Term Insurance premium + ELSS | Death benefit |
| 30 | 1 | -5,00,000 | 51,00,000 |
| 31 | 2 | 0 | 51,00,000 |
| 32 | 3 | 0 | 51,00,000 |
| 33 | 4 | 0 | 51,00,000 |
| 34 | 5 | 0 | 51,00,000 |
| 35 | 6 | 0 | 51,00,000 |
| 36 | 7 | 0 | 51,00,000 |
| 37 | 8 | 0 | 51,00,000 |
| 38 | 9 | 0 | 51,00,000 |
| 39 | 10 | 0 | 51,00,000 |
| 40 | 12,86,811 | ||
| IRR | 9.91% |
The pre-tax final maturity value in the ELSS fund is ₹13.69 lakhs. After accounting for capital gains tax, the post-tax maturity value is ₹12.86 lakhs (refer to the tax calculation below). The IRR for the ELSS investment combined with a pure-term life insurance plan is 9.91% (post-tax return).
| ELSS Tax Calculation | |
| Maturity value after 10 years | 13,69,679 |
| Purchase price | 4,41,000 |
| Long-Term Capital Gains | 9,28,679 |
| Exemption limit | 1,00,000 |
| Taxable LTCG | 8,28,679 |
| Tax paid on LTCG | 82,868 |
| Maturity value after tax | 12,86,811 |
By separating insurance and investment, the returns surpass the inflation rate in the long run, helping you achieve your dreams. Additionally, this approach offers liquidity, which is missing in the ABSLI Fixed Maturity Plan.
These two factors make the ABSLI Fixed Maturity Plan unsuitable for both your insurance and investment portfolios.
Final Verdict on ABSLI Fixed Maturity Plan
The ABSLI Fixed Maturity Plan is a traditional endowment plan that offers the appeal of parking your lump sum and retrieving it later while also providing life cover.
This combination may seem attractive for those seeking the best of both worlds. However, by combining insurance and investment, it fails to fully deliver on either front.
A long-term investment that yields lower returns than a debt instrument is not a compelling option for parking a lump sum.
Additionally, funds are locked until the end of the ABSLI Fixed Maturity Plan policy term, and the life cover aspect is also not as strong compared to other options and it has a high agent commissionThese factors make the ABSLI Fixed Maturity Plan unattractive.
Pure-term life insurance is the best option because it provides high coverage at a lower cost, allowing you to invest the savings in higher-yielding instruments that match your risk appetite.
This approach ensures focused financial protection for your loved ones without the complexities and lower returns of bundled plans.
When it comes to financial advice, are Quora, Facebook, and Twitter the final word?
For any personal finance queries or to receive a personalized financial plan, consult a Certified Financial Planner. They create tailored plans based on your personal risk tolerance, financial goals, and time frames.
Leave a Reply