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Can the Aditya Birla Sun Life Insurance Savings Plan offer both financial security and growth potential in one package?
Is Aditya Birla Sun Life Insurance Savings Plan the way to secure your loved ones’ future while also building your savings?
Is Aditya Birla Sun Life Insurance Savings Plan that adapts to your evolving financial goals?
To determine if this plan can provide a secure financial future, we will examine its features, advantages, disadvantages, and returns through the lens of the Internal Rate of Return (IRR). This review aims to assess the suitability of the ABSLI Savings Plan for meeting your financial needs.
Table of Contents:
What is the ABSLI Savings Plan?
What are the features of the ABSLI Savings Plan?
Who is eligible for the ABSLI Savings Plan?
What are the benefits of ABSLI Savings Plan?
Grace Period, Discontinuance and Revival of ABSLI Savings Plan
Free Look Period of ABSLI Savings Plan
Surrendering ABSLI Savings Plan
What are the advantages of the ABSLI Savings Plan?
What are the disadvantages of the ABSLI Savings Plan?
Research Methodology of ABSLI Savings Plan
Benefit Illustration – IRR Analysis of ABSLI Savings Plan
ABSLI Savings Plan Vs. Other Products
ABSLI Savings Plan Vs. Pure Term + PPF / ELSS
Final Verdict on ABSLI Savings Plan
What is the ABSLI Savings Plan?
Aditya Birla Sun Life Insurance Savings Plan is a non-linked participating life insurance plan. Aditya Birla Sun Life Insurance Savings Plan aims to provide secured growth to your savings and comprehensive financial protection to your family from the risk of your unfortunate death.
What are the features of the ABSLI Savings Plan?
- Flexibility to choose the policy term and the premium paying term
- Additional Sum Assured payable in case of accidental death
- Flexibility to choose Sum Assured based on your protection and savings needs
- Guaranteed Additions for the first 5 ABSLI Savings Plan policy years
- Boost your savings with bonuses starting from the first ABSLI Savings Plan policy year
Who is eligible for the ABSLI Savings Plan?
| Entry Age | 18 – 50 years | |
| Maturity Age | 70 years | |
| Policy Term (PT) | 10, 15, 20 years | |
| Premium Paying Term (PPT) | PT | PPT |
| 10 years | Regular Pay | |
| 15 years | 10 years, Regular pay | |
| 20 years | 10 years, 15 years, Regular pay | |
| Minimum Sum Assured | ₹ 30,000 | |
| Maximum Sum Assured | ₹ 10,00,000 | |
| Premium Frequency | Annual, Semi-annual, Quarterly or Monthly | |
What are the benefits of ABSLI Savings Plan?
i.) Death Benefit
In the unfortunate event of the death of the life insured during the ABSLI Savings Plan policy term, the following death benefit is payable to the nominee:
- Guaranteed Death Benefit (Sum Assured on Death); plus
- Accrued Guaranteed Additions; plus
- Accrued regular bonuses as of date of death; plus
- Terminal Bonus; if any
Guaranteed Death Benefit is higher of
- Sum Assured or
- 10 times the Annualized Premium
ii.) Maturity benefit
In the event the life insured survives to the end of the ABSLI Savings Plan policy term, the following is payable:
- Sum Assured; plus
- Accrued Guaranteed additions; plus
- Accrued regular bonuses; plus
- Terminal Bonus; if any
The ABSLI Savings Plan policy shall be terminated once the maturity benefit is paid
iii.) Guaranteed Additions
Guaranteed Additions of 40 per thousand Sum Assured will be added to ABSLI Savings Plan your policy at the end of each policy year during the first 5 years.
Grace Period, Discontinuance and Revival of ABSLI Savings Plan
Grace period
A grace period of 30 days (15 days for monthly mode) will be given to pay the premium due.
Discontinuance
In case you have not paid premiums for two full years, then all benefits under your ABSLI Savings Plan policy will cease immediately.
In case you have paid premiums for at least two full years, then your ABSLI Savings Plan policy will continue on a Reduced Paid-Up basis.
Under Reduced Paid-Up, you will be paid an RPU Guaranteed Benefit equal to your Sum Assured and accrued Guaranteed Additions reduced in proportion to the premiums paid to the total premiums payable during the policy term and shall be payable on death and maturity.
Revival
You can reinstate your ABSLI Savings Plan policy for its full coverage within five years from the due date of the first unpaid premium by paying all outstanding premiums together with interest.
Free Look Period of ABSLI Savings Plan
You will have the right to return your ABSLI Savings 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 Savings Plan
Your ABSLI Savings Plan policy will acquire a surrender value after all due premiums for at least 2 full policy years are paid. The Guaranteed Surrender Value is a percentage of Total premiums paid plus the surrender value of accrued guaranteed additions and accrued regular bonuses.
The Guaranteed Surrender Value will vary depending on the premium paying term and the year the ABSLI Savings Plan policy is surrendered.
What are the advantages of the ABSLI Savings Plan?
- You may take a loan against your ABSLI Savings Plan policy and the maximum loan amount is 85% of the surrender value.
- Simple reversionary bonuses will be added to your ABSLI Savings Plan policy at the end of each financial year.
What are the disadvantages of the ABSLI Savings Plan?
- The sum assured is insufficient to cover the family’s basic future needs.
- The returns are relatively low.
- Benefits are non-guaranteed, as it includes bonuses.
Research Methodology of ABSLI Savings Plan
The savings-cum-insurance plan allocates premiums to both savings and insurance components. To evaluate the investment aspect, it’s crucial to calculate the Internal Rate of Return (IRR), which provides a more insightful analysis than merely considering cash flows.
Let’s analyse the benefit illustration from the policy brochure to understand the ABSLI Savings Plan.
Benefit Illustration – IRR Analysis of ABSLI Savings Plan
A 35-year-old male purchases the plan with a sum assured of ₹1 Lakh. The policy term and premium payment term are both 20 years, with an annual premium of ₹7,492.
| Male | 35 years |
| Sum Assured | ₹ 1,00,000 |
| Policy Term | 20 years |
| Premium Paying Term | 20 years |
| Annualised Premium | ₹ 7,492 |
At the end of the ABSLI Savings Plan policy term, he is entitled to receive the maturity benefit, including guaranteed additions and bonuses. The illustrations below show two different assumed future investment return rates of 8% p.a. and 4% p.a.
These rates are not guaranteed and do not represent the maximum or minimum potential returns, as the policy value depends on several factors, including future investment performance.
| At 4% p.a. | At 8% p.a. | ||||
| Age | Year | Annualised premium / Maturity benefit | Death benefit | Annualised premium / Maturity benefit | Death benefit |
| 35 | 1 | -7,492 | 1,00,000 | -7,492 | 1,00,000 |
| 36 | 2 | -7,492 | 1,00,000 | -7,492 | 1,00,000 |
| 37 | 3 | -7,492 | 1,00,000 | -7,492 | 1,00,000 |
| 38 | 4 | -7,492 | 1,00,000 | -7,492 | 1,00,000 |
| 39 | 5 | -7,492 | 1,00,000 | -7,492 | 1,00,000 |
| 40 | 6 | -7,492 | 1,00,000 | -7,492 | 1,00,000 |
| 41 | 7 | -7,492 | 1,00,000 | -7,492 | 1,00,000 |
| 42 | 8 | -7,492 | 1,00,000 | -7,492 | 1,00,000 |
| 43 | 9 | -7,492 | 1,00,000 | -7,492 | 1,00,000 |
| 44 | 10 | -7,492 | 1,00,000 | -7,492 | 1,00,000 |
| 45 | 11 | -7,492 | 1,00,000 | -7,492 | 1,00,000 |
| 46 | 12 | -7,492 | 1,00,000 | -7,492 | 1,00,000 |
| 47 | 13 | -7,492 | 1,00,000 | -7,492 | 1,00,000 |
| 48 | 14 | -7,492 | 1,00,000 | -7,492 | 1,00,000 |
| 49 | 15 | -7,492 | 1,00,000 | -7,492 | 1,00,000 |
| 50 | 16 | -7,492 | 1,00,000 | -7,492 | 1,00,000 |
| 51 | 17 | -7,492 | 1,00,000 | -7,492 | 1,00,000 |
| 52 | 18 | -7,492 | 1,00,000 | -7,492 | 1,00,000 |
| 53 | 19 | -7,492 | 1,00,000 | -7,492 | 1,00,000 |
| 54 | 20 | -7,492 | 1,00,000 | -7,492 | 1,00,000 |
| 55 | 1,80,000 | 1,00,000 | 2,34,000 | 1,00,000 | |
| IRR | 1.72% | 4.07% | |||
In the 4% scenario, the maturity value at the end of 20 years is ₹1.80 Lakhs, with an IRR of 1.72%. This rate is lower than the interest offered by a savings bank account.
In the 8% scenario, the maturity value at the end of 20 years is ₹2.34 Lakhs, with an IRR of 4.07% as per the ABSLI Savings Plan maturity calculator which is also lower than the returns from a bank fixed deposit.
These returns are minimal. Investing in the ABSLI Savings Plan may not help you achieve your financial goals. Additionally, the life insurance coverage provided is insufficient to meet the family’s basic needs in the future.
Therefore, both the insurance and investment aspects of the ABSLI Savings Plan are not favourable for an investor.
ABSLI Savings Plan Vs. Other Products
The ABSLI Savings Plan offers a minimum sum assured of ₹30,000 and a maximum of ₹10 Lakhs. However, according to IRDAI guidelines, the minimum sum assured for a standard pure-term policy (Saral Jeevan Bima) is ₹5 Lakhs.
Therefore, any sum assured below this threshold would provide inadequate financial support to a family. In the previous illustration, the sum assured is only ₹1 Lakh, which is insufficient for meaningful life insurance coverage.
ABSLI Savings Plan Vs. Pure Term + PPF / ELSS
Pure-term policies offer high coverage at a lower cost, allowing you to invest the savings in higher-yielding instruments that match your risk appetite. This strategy ensures focused financial protection for your loved ones without the complexities and lower returns associated with bundled plans.
Risk-averse investors can choose debt instruments, while those with a higher risk tolerance can opt for equity instruments.
In the realm of debt instruments, the Public Provident Fund (PPF) offers tax benefits similar to traditional insurance policies, including tax deductions for contributions and tax exemptions for interest and maturity proceeds. The current interest rate for a PPF account is 7.1% p.a.
For equity investments, Equity-Linked Savings Schemes (ELSS) provide tax deductions for contributions, with capital gains tax applicable on maturity proceeds. Despite this, the post-tax returns are expected to exceed the inflation rate, with potential returns of around 12% p.a.
It’s important to note that traditional insurance policies typically offer low coverage and comparatively low returns.
Final Verdict on ABSLI Savings Plan
The ABSLI Savings Plan encourages regular saving habits but fails to channel these savings effectively for better returns. Investing in the ABSLI Savings Plan is akin to keeping your money in a savings account, with the added drawback of a low sum assured.
As a result, both the savings and insurance aspects of this plan are unfavourable for investors, offering no significant value addition. Traditional policies like the ABSLI Savings Plan can derail your financial plans, leaving you in a difficult situation and also it has a high agent commission
A more effective approach is to secure your family’s future with Pure-Term Life Insurance Policies and invest separately to meet your life goals. This strategy ensures you remain on track even during challenging times.
Diversifying your investments across various asset classes is crucial for achieving your dreams.
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