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Does the ABSLI Jeevan Bachat Plan have the comprehensive benefits to secure your future?
Is ABSLI Jeevan Bachat Plan the life insurance Plan that Grows Your Savings?
Will the ABSLI Jeevan Bachat Plan be a good fit for your portfolio to address these uncertainties?
Let’s analyze the plan’s features, advantages, disadvantages, and returns through an IRR analysis. A detailed review will help highlight the ABSLI Jeevan Bachat plan’s key attributes and determine its suitability for your needs.
Table of Contents:
What is the ABSLI Jeevan Bachat Plan?
What are the features of the ABSLI Jeevan Bachat Plan?
Who is eligible for the ABSLI Jeevan Bachat Plan?
What are the benefits of the ABSLI Jeevan Bachat Plan?
Grace period, Discontinuance and Revival of ABSLI Jeevan Bachat Plan
Free Look Period of ABSLI Jeevan Bachat Plan
Surrendering ABSLI Jeevan Bachat Plan
What are the advantages of the ABSLI Jeevan Bachat Plan?
What are the disadvantages of the ABSLI Jeevan Bachat Plan?
Research Methodology of ABSLI Jeevan Bachat Plan
Benefit Illustration – IRR Analysis of ABSLI Jeevan Bachat
ABSLI Jeevan Bachat Plan Vs. Other Investment Return
ABSLI Jeevan Bachat Plan Vs. Pure Term + PPF / ELSS
Final Verdict on ABSLI Jeevan Bachat Plan
What is the ABSLI Jeevan Bachat Plan?
ABSLI Jeevan Bachat Plan is a non–linked, non–participating life insurance plan. ABSLI Jeevan Bachat Plan offers financial protection for your family and guaranteed saving benefits if you are not around. You receive guaranteed benefits on death or maturity.
What are the features of the ABSLI Jeevan Bachat Plan?
- Flexibility to choose the Premium Paying Term
- Flexibility to choose the policy term
- Inbuilt accidental death benefit for additional protection
- Fully guaranteed benefits on death or maturity
Who is eligible for the ABSLI Jeevan Bachat Plan?
| Entry Age | 1 – 55 Years |
| Premium Paying term | Single pay |
| Limited Pay – 6,9,12 years | |
| Regular pay – 10, 15 years | |
| Policy term | For single pay and 6 pay: 10/ 15/ 20 years |
| For 9 and 12 pay: 15/ 20 years | |
| For Regular pay: 10/ 15 years | |
| Maturity age | Minimum – 18 years |
| Maximum – 65 years | |
| Premium | For single pay – ₹ 20,000 – ₹ 1,00,000 |
| For Limited and Regular pay: ₹ 5,000 – ₹ 1,00,000 | |
| Sum Assured | Minimum – Single pay – ₹ 25,000 & Limited & Regular pay -₹ 50,000 |
| Maximum – ₹ 1,00,000 | |
| Premium Mode | Single, Annual, Semi-annual, Quarterly, Monthly |
What are the benefits of the ABSLI Jeevan Bachat Plan?
i.) Death benefit
The Death benefit is the Sum Assured on Death plus Guaranteed Additions accrued till the date of death.
For Limited pay and Regular Pay, Sum Assured on Death will be the highest of
- Sum Assured as the absolute amount to be paid on death; or
- 10 times the Annualized Premium; or
- 105% of the Total Premiums Paid up to the date of death
For single pay, Sum Assured on Death will be the highest of
- Sum Assured as the absolute amount to be paid on death; or
- 125% of single premium
If the Life Insured (18 years & above) dies as a result of an accident during the ABSLI Jeevan Bachat Plan Policy Term then in addition to the Death Benefit defined above, an Accidental Death Benefit equal to the Sum Assured on Death will be payable.
ii.) Maturity benefit
The Maturity Sum Assured plus the Guaranteed Additions accrued till maturity is payable as maturity benefit.
iii.) Guaranteed Addition
For limited pay and single pay policies, the Guaranteed Additions per 1000 of Maturity Sum Assured will accrue on a monthly basis, after the completion of the premium paying term till the maturity date and shall be payable in the event of death of the life-insured after the premium paying term or policy maturity whichever is earlier.
For Regular pay policies, the Guaranteed Additions per 1000 of Maturity Sum Assured accrue at the end of each ABSLI Jeevan Bachat Plan policy month from the 8th policy year, until the policy maturity. Guaranteed Additions per annum shall be determined based on the guaranteed addition rate and the maturity sum assured.
Grace period, Discontinuance and Revival of ABSLI Jeevan Bachat 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
Discontinuance
In case you have not paid premiums for two full years, then all benefits under your ABSLI Jeevan Bachat Plan policy will cease immediately and your policy shall be lapsed for all.
In case you have paid premiums for at least two full years, then your ABSLI Jeevan Bachat Plan policy will be continued on a Reduced Paid-Up basis.
Revival
You can revive your ABSLI Jeevan Bachat Plan policy for its full coverage within five years from the due date of the first unpaid premium.
Free Look Period of ABSLI Jeevan Bachat Plan
You will have the right to return your ABSLI Jeevan Bachat Plan policy within 15 days (30 days in case the policy is issued under Distance Marketing) from the date of receipt of the policy.
Surrendering ABSLI Jeevan Bachat Plan
The ABSLI Jeevan Bachat Plan policy will acquire a surrender value any time after 2nd policy anniversary upon receipt of at least all premiums due in the first two policy years and immediately after policy issuance for single pay.
The Guaranteed Surrender Value shall be a percentage of the Total Premiums Paid and a percentage of the accrued Guaranteed Additions.
What are the advantages of the ABSLI Jeevan Bachat Plan?
- You may take a loan against your ABSLI Jeevan Bachat Plan policy with a maximum of 85% of the surrender value.
- It offers you the freedom to choose your premium and Sum Assured.
- Accidental death benefit is an inbuilt feature.
What are the disadvantages of the ABSLI Jeevan Bachat Plan?
- The returns are poor.
- The sum assured is too low.
Research Methodology of ABSLI Jeevan Bachat Plan
The ABSLI Jeevan Bachat Plan is often highlighted for its guaranteed benefits. However, as investors, it is crucial to evaluate the ABSLI Jeevan Bachat in terms of returns. In the following section, we work through a benefit illustration from the ABSLI Jeevan Bachat policy brochure.
The calculation of the Internal Rate of Return (IRR) aids in making investment decisions by allowing us to compare these returns with those of other investment options.
Benefit Illustration – IRR Analysis of ABSLI Jeevan Bachat
Consider a 35-year-old male who chooses the ABSLI Jeevan Bachat Plan with a sum assured of ₹5 Lakhs. The premium payment term and the policy term are both 15 years, requiring an annual premium of ₹50,000.
| Male | years |
| Sum Assured | ₹ 5,00,000 |
| Policy Term | 15 years |
| Premium Paying Term | 15 years |
| Annualised Premium | ₹ 50,000 |
If the premiums are paid regularly, he will receive the maturity benefit at the end of the policy term. This maturity benefit amounts to ₹10.84 Lakhs, yielding an IRR of 4.49% as per the ABSLI Jeevan Bachat Plan maturity calculator.
| Age | Year | Annualised premium / Maturity benefit | Death benefit |
| 35 | 1 | -50,000 | 5,00,000 |
| 36 | 2 | -50,000 | 5,00,000 |
| 37 | 3 | -50,000 | 5,00,000 |
| 38 | 4 | -50,000 | 5,00,000 |
| 39 | 5 | -50,000 | 5,00,000 |
| 40 | 6 | -50,000 | 5,00,000 |
| 41 | 7 | -50,000 | 5,00,000 |
| 42 | 8 | -50,000 | 5,00,000 |
| 43 | 9 | -50,000 | 5,00,000 |
| 44 | 10 | -50,000 | 5,00,000 |
| 45 | 11 | -50,000 | 5,00,000 |
| 46 | 12 | -50,000 | 5,00,000 |
| 47 | 13 | -50,000 | 5,00,000 |
| 48 | 14 | -50,000 | 5,00,000 |
| 49 | 15 | -50,000 | 5,00,000 |
| 50 | 10,84,944 | 5,00,000 | |
| IRR | 4.49% |
From this IRR calculation, we can infer that the guaranteed maturity benefit should not be the sole factor in deciding to invest in this plan. The IRR of the ABSLI Jeevan Bachat Plan is lower than the returns from debt instruments.
Given that the ABSLI Jeevan Bachat is a long-term investment, the low return does not significantly enhance wealth creation over time.
ABSLI Jeevan Bachat Plan Vs. Other Investment Return
The returns from the ABSLI Jeevan Bachat Plan fail to outpace the inflation rate. Therefore, let’s evaluate the returns of alternative investments.
The ABSLI Jeevan Bachat Plan combines life cover and investment components. Instead of combining these, we will separate them for a clearer comparison, using the previous illustration metrics.
ABSLI Jeevan Bachat Plan Vs. Pure Term + PPF / ELSS
A life cover with a sum assured of ₹5 Lakhs costs a premium of ₹2,500 per annum, with both the policy term and the premium paying term spanning 15 years.
Out of the ₹50,000 annual premium, after paying for the insurance, a balance of ₹47,500 can be invested for wealth accumulation. Align your investments with your risk profile.
| Pure Term Life Insurance Policy | |
| Sum Assured | ₹ 5,00,000 |
| Policy Term | 15 years |
| Premium Paying Term | 15 years |
| Annualised Premium | ₹ 2,500 |
| Investment | ₹ 47,500 |
In the following scenario, we consider both high-risk (ELSS fund) and low-risk (PPF account) investments. The final maturity is calculated at the end of 15 years.
| Term Insurance + PPF | Term insurance + ELSS | ||||
| Age | Year | Term Insurance premium + PPF | Death benefit | Term Insurance premium + ELSS | Death benefit |
| 35 | 1 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 36 | 2 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 37 | 3 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 38 | 4 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 39 | 5 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 40 | 6 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 41 | 7 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 42 | 8 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 43 | 9 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 44 | 10 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 45 | 11 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 46 | 12 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 47 | 13 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 48 | 14 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 49 | 15 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 50 | 12,88,266 | 5,00,000 | 18,66,203 | 5,00,000 | |
| IRR | 6.51% | 10.74% | |||
– PPF Account: The final maturity value is ₹12.88 Lakhs, with an IRR of 6.51%.
– ELSS Fund: The final maturity value is ₹19.83 Lakhs, subject to capital gains tax. After paying the tax, the post-tax value amounts to ₹18.66 Lakhs, with an IRR of 10.74% (post-tax return).
| ELSS Tax Calculation | |
| Maturity value after 15 years | 19,83,281 |
| Purchase price | 7,12,500 |
| Long-Term Capital Gains | 12,70,781 |
| Exemption limit | 1,00,000 |
| Taxable LTCG | 11,70,781 |
| Tax paid on LTCG | 1,17,078 |
| Maturity value after tax | 18,66,203 |
In both scenarios, the IRR surpasses the inflation rate, accelerating your wealth accumulation. In contrast, the ABSLI Jeevan Bachat Plan offers lower returns, which can slow down your investment growth.
Final Verdict on ABSLI Jeevan Bachat Plan
The ABSLI Jeevan Bachat Plan is a straightforward endowment plan. You pay premiums at your convenience and receive the maturity benefit along with guaranteed additions at the end of the policy term. However, the lump sum maturity payment is not substantial.
Traditional endowment plans like the ABSLI Jeevan Bachat Plan combine life cover and investment. Unfortunately, this plan falls short in both aspects.
The sum assured is insufficient to meet a family’s future needs, and the return on investment is too low to achieve financial goals. Also, it has a high agent commission
Consequently, the ABSLI Jeevan Bachat Plan fails to effectively serve as either an insurance or investment solution.
A better approach is to secure adequate life insurance coverage through a pure-term policy, which offers high coverage at affordable prices. To achieve life goals, build an investment portfolio tailored to your risk profile. A diversified portfolio will help you navigate the volatile financial landscape.
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