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Can the ABSLI Income Assured Plan bridge the gap between savings and guaranteed income?
Can the ABSLI Income Assured Plan secure your family’s future reliable income stream?
Will the ABSLI Income Assured Plan offer a potential solution to achieve these financial goals?
This article provides a comprehensive review of the ABSLI Income Assured Plan, covering its features, advantages, disadvantages, and a returns analysis using the Internal Rate of Return (IRR) calculation. This review aims to guide you in selecting suitable investments to realize your dreams.
Table of Contents:
What is the ABSLI Income Assured Plan?
What are the features of the ABSLI Income Assured Plan?
Who is eligible for the ABSLI Income Assured Plan?
What are the benefits of the ABSLI Income Assured Plan
Grace Period, Reduced Paid-up and Revival of ABSLI Income Assured Plan
Free Look Period of ABSLI Income Assured Plan
Surrendering ABSLI Income Assured Plan
What are the advantages of the ABSLI Income Assured Plan
What are the disadvantages of the ABSLI Income Assured Plan?
Research Methodology of ABSLI Income Assured Plan
Benefit Illustration – IRR Analysis of ABSLI Income Assured Plan
ABSLI Income Assured Plan Vs. Other Investments
ABSLI Income Assured Plan Vs. Pure Term + ELSS
Final Verdict on ABSLI Income Assured Plan
What is the ABSLI Income Assured Plan?
ABSLI Income Assured Plan is a non-linked non-participating life insurance plan. ABSLI Income Assured Plan offers Assured Income Benefits payable from the end of the premium paying term till maturity and life insurance benefits.
What are the features of the ABSLI Income Assured Plan?
- Assured Income of 8% of the Sum Assured per annum payable monthly in arrears starting after the premium paying term till the maturity date.
- Comprehensive financial protection for your family with life cover.
- Tax Benefit – As per Section 80C and 10 (10D) of the Income Tax Act, 1961
Who is eligible for the ABSLI Income Assured Plan?
| Entry Age | 8 – 60 years |
| Premium Paying Term | 5 years for 15 years policy term |
| 7 years for 17, 22 years policy term | |
| 10 years for 20, 25 years policy term | |
| Minimum PPT | The attained age at the end of the Policy Term must be 18 years or more |
| Maximum PPT | The attained age at the end of the Policy term must be 75 years or less |
| Minimum Sum Assured | ₹ 1 Lakh |
| Premium Frequency | Annual, Semi-annual, Quarterly, Monthly |
What are the benefits of the ABSLI Income Assured Plan
i.) Assured Income Benefit
In the event the life insured survives to the end of the premium paying term, Assured Income every month till the end of the ABSLI Income Assured Plan policy term at the rate of 8.0% of the Sum Assured per annum is payable. You can opt at inception to receive the Assured Income in either of the following ways:
Option A – Receive Assured Income on a monthly basis till the end of the policy term; or
Option B – Accrue the Assured Income to receive it as a lump sum at the end of the policy term or on earlier death.
The accrued Assured Income to date, payable on death or maturity will be increased to 137.5% for policy terms 15, 17 & 20 years and increased to 175% for policy terms 22 and 25 years.
ii.) Guaranteed Additions
It will be added to your ABSLI Income Assured Plan policy at the beginning of each quarter after the completion of the premium payment term, until the policy maturity date. The quarterly Guaranteed Addition rate will be 1/4th of the per annum rate.
The Guaranteed Additions per annum as a percentage of the Sum Assured for the various premium-paying terms are 7%, 8.5% and 10% for premium-paying terms 5, 7 and 10 years respectively.
iii.) Death benefit
In the unfortunate event of death of the life insured during the ABSLI Income Assured Plan policy term, the death benefit payable to the nominee shall be
- Sum Assured on death; plus
- Guaranteed Additions accrued to the date of death;
In addition, the increased accrued Assured Income is payable if opted for.
Sum Assured on Death is highest of:
- Sum Assured as the absolute amount to be paid on death; or
- 10 times the Annualized premium; or
- 105% of Total Premiums Paid up to the date of death
iv.) Maturity benefit
In the event the life insured survives to the end of the ABSLI Income Assured Plan policy term, the following is payable
- Sum Assured; plus
- Guaranteed Additions accrued to date
In addition, the increased accrued Assured Income is payable if opted for
Grace Period, Reduced Paid-up and Revival of ABSLI Income Assured Plan
Grace period
If you are unable to pay your premium by the due date, you will be given a grace period of 30 days.
Reduced paid-up
If you discontinue paying premiums after having paid premiums for at least two full years, your ABSLI Income Assured Plan policy will not lapse but will continue on a Reduced Paid-Up basis.
Under Reduced Paid-Up, your Sum Assured and Sum Assured on death shall be reduced in proportion to the premiums actually paid to the total premiums payable during the ABSLI Income Assured Plan policy term and shall be payable on death or maturity.
Revival
You can revive your ABSLI Income Assured Plan policy for its full coverage within five years from the due date of the first unpaid premium.
Free Look Period of ABSLI Income Assured Plan
You will have the right to return your ABSLI Income Assured Plan policy to us within 15 days (30 days in case the policy is issued under Distance Marketing) from the date of receipt of the policy.
Surrendering ABSLI Income Assured Plan
Your ABSLI Income Assured Plan policy will acquire a surrender value after all due premiums for at least two full policy years are paid. The Guaranteed Surrender Value is a percentage of Total premiums paid plus the percentage of Guaranteed Additions less Assured Income already paid.
The Guaranteed Surrender Value will vary depending on the premium paying term and the year the ABSLI Income Assured Plan policy is surrendered.
What are the advantages of the ABSLI Income Assured Plan
- Once the ABSLI Income Assured Plan policy has acquired a surrender value, a loan against your policy is available with a maximum of 85% of the surrender value.
- You may choose to pay your premium annually, semi-annually, quarterly or monthly as per your convenience.
- You can enhance your insurance coverage during the policy term by adding riders
- Premium rebate for a higher sum insured
What are the disadvantages of the ABSLI Income Assured Plan?
- Assured income benefit will end up in discretionary expenses.
- The plan disturbs the compounding effect with the annual assured income.
Research Methodology of ABSLI Income Assured Plan
The guaranteed annual income after the premium paying term can be a significant advantage for those who require regular income. However, when evaluating an investment, it is essential to consider the ABSLI Income Assured plan’s return in percentage terms in addition to cash flow.
To aid in effective decision-making, let’s calculate the Internal Rate of Return (IRR) based on the benefit illustration provided in the ABSLI Income Assured Plan policy brochure.
Benefit Illustration – IRR Analysis of ABSLI Income Assured Plan
A 35-year-old male selects the ABSLI Income Assured Plan with a sum assured of ₹5 Lakhs. The policy term is 20 years, with a premium paying term of 10 years, and an annual premium of ₹74,680.
| Male | 35 years |
| Sum Assured | ₹ 5,00,000 |
| Policy Term | 20 years |
| Premium Paying Term | 10 years |
| Annualised Premium | ₹ 74,680 |
After the premium paying term ends, an assured income of 8% of the sum assured, amounting to ₹40,000, is received each year until the end of the policy term. Additionally, a maturity benefit of ₹10 Lakhs is paid at the end of the term, along with accrued guaranteed additions.
| Age | Year | Annualised premium / Maturity benefit | Death benefit |
| 35 | 1 | -74,680 | 5,00,000 |
| 36 | 2 | -74,680 | 5,00,000 |
| 37 | 3 | -74,680 | 5,00,000 |
| 38 | 4 | -74,680 | 5,00,000 |
| 39 | 5 | -74,680 | 5,00,000 |
| 40 | 6 | -74,680 | 5,00,000 |
| 41 | 7 | -74,680 | 5,00,000 |
| 42 | 8 | -74,680 | 5,00,000 |
| 43 | 9 | -74,680 | 5,00,000 |
| 44 | 10 | -74,680 | 5,00,000 |
| 45 | 11 | 0 | 5,00,000 |
| 46 | 12 | 40,000 | 5,00,000 |
| 47 | 13 | 40,000 | 5,00,000 |
| 48 | 14 | 40,000 | 5,00,000 |
| 49 | 15 | 40,000 | 5,00,000 |
| 50 | 16 | 40,000 | 5,00,000 |
| 51 | 17 | 40,000 | 5,00,000 |
| 52 | 18 | 40,000 | 5,00,000 |
| 53 | 19 | 40,000 | 5,00,000 |
| 54 | 20 | 40,000 | 5,00,000 |
| 21 | 10,40,000 | ||
| IRR | 4.51% |
In this scenario, the IRR for the cash flow is calculated to be 4.51% as per the ABSLI Income Assured Plan maturity calculator.
The annual assured income disrupts the compounding effect, leading to lower returns. Consequently, the guaranteed income is diminished due to these poor returns, making the ABSLI Income Assured Plan a less attractive investment option for investors.
ABSLI Income Assured Plan Vs. Other Investments
Comparing other investment returns provides better insight and serves as an important criterion in selecting your investment plan.
Let’s compare by assuming a pure term life insurance policy for life cover and using an investment vehicle to generate annual income. We will use the same figures from the previous benefit illustration.
ABSLI Income Assured Plan Vs. Pure Term + ELSS
Consider a pure term life insurance policy with a sum assured of ₹5 Lakhs over a 20-year policy term, costing ₹4,400 per annum, with a premium paying term of 10 years. This leaves an annual investment amount of ₹70,280. This amount is invested to build a corpus for annual withdrawals.
| Pure Term Life Insurance Policy | |
| Sum Assured | ₹ 5,00,000 |
| Policy Term | 20 years |
| Premium Paying Term | 10 years |
| Annualised Premium | ₹ 4,400 |
| Investment | ₹ 70,280 |
| Term insurance + ELSS | |||
| Age | Year | Term Insurance premium + ELSS | Death benefit |
| 35 | 1 | -74,680 | 5,00,000 |
| 36 | 2 | -74,680 | 5,00,000 |
| 37 | 3 | -74,680 | 5,00,000 |
| 38 | 4 | -74,680 | 5,00,000 |
| 39 | 5 | -74,680 | 5,00,000 |
| 40 | 6 | -74,680 | 5,00,000 |
| 41 | 7 | -74,680 | 5,00,000 |
| 42 | 8 | -74,680 | 5,00,000 |
| 43 | 9 | -74,680 | 5,00,000 |
| 44 | 10 | -74,680 | 5,00,000 |
| 45 | 11 | 0 | 5,00,000 |
| 46 | 12 | 40,000 | 5,00,000 |
| 47 | 13 | 40,000 | 5,00,000 |
| 48 | 14 | 40,000 | 5,00,000 |
| 49 | 15 | 40,000 | 5,00,000 |
| 50 | 16 | 40,000 | 5,00,000 |
| 51 | 17 | 40,000 | 5,00,000 |
| 52 | 18 | 40,000 | 5,00,000 |
| 53 | 19 | 40,000 | 5,00,000 |
| 54 | 20 | 40,000 | 5,00,000 |
| 21 | 20,90,811 | ||
| IRR | 8.30% | ||
We use an ELSS fund for corpus accumulation. The units are redeemed at the end of 10 years. After accounting for capital gains tax, the post-tax figure in the ELSS fund is ₹13.23 Lakhs. This amount is then invested in an instrument yielding a 7% return.
This arrangement allows for annual withdrawals of ₹40,000, similar to the assured income benefit. At the end of 20 years, the remaining investment is fully withdrawn to match the maturity benefit.
| ELSS Tax Calculation | |
| Maturity value after 10 years | 13,81,324 |
| Purchase price | 7,02,800 |
| Long-Term Capital Gains | 6,78,524 |
| Exemption limit | 1,00,000 |
| Taxable LTCG | 5,78,524 |
| Tax paid on LTCG | 57,852 |
| Maturity value after tax | 13,23,472 |
The IRR for this cash flow is 8.30%. If the investment is allowed to compound instead of making annual withdrawals, it would yield even higher returns.
Additionally, this approach offers liquidity, allowing you to alter the amount and frequency of withdrawals or defer them based on personal needs. This flexibility is lacking in the ABSLI Income Assured Plan.
Final Verdict on ABSLI Income Assured Plan
The ABSLI Income Assured Plan is a traditional savings plan where you pay premiums for a limited period and start receiving benefits immediately. It offers immediate payouts, which are promoted as a major advantage.
However, in the investment realm, benefits are generally higher when the investment is allowed to grow over a longer period.
The ABSLI Income Assured Plan falls short due to its below-average return, lack of flexibility, and low sum assured. Despite the annual payouts, these factors hinder the plan’s performance and can adversely affect your long-term financial journey. Also, it has a high agent commission.
A better approach to financial planning involves a pure-term life insurance policy with adequate coverage combined with goal-based investments. Separating insurance and investment components can enhance overall returns.
Do Quora, Facebook, and Twitter have the final say when it comes to financial advice?
Consulting a Certified Financial Planner is recommended for comprehensive planning. A detailed plan can help accelerate your investment journey and achieve your financial goals.
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