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Do you think that having an alternate source of regular income always helps?
Is it, however, simple to create a new source of income?
ABSLI Vision LifeIncome Plan is one such plan that claims to guarantee regular income PLUS a cash bonus PLUS complete flexibility PLUS a life cover up to the age of 100.
Can ABSLI Vision Life Income Plan fulfill its claim of offering you income for life?
There is only one way to discover the truth.
Read this in-depth review of the ABSLI Vision Life Income Plan, including its benefits and disadvantages, as well as a return comparison.
Table Of Contents
1.)ABSL Vision Life Income Plan: Key Features
2.)ABSL Vision Life Income Plan: Eligibility Conditions
3.)ABSL Vision Life Income Plan: Review of Key Benefits
4.)ABSLI Vision Life Income Plan: Guaranteed Income Benefit
5.)ABSLI Vision Life Income Plan: Other Benefits
6.)ABSLI Vision Life Income Plan: Bonuses
7.)ABSLI Vision Life Income Plan is a Pro or a Con?
8.)ABSLI Vision Life Income Plan: Benefit Illustration
9.)Comparison of ABSL Vision Life Income Plan Returns against PPF and Term Insurance Plan
10.)Comparison of ABSL Vision Life Income Plan Returns against ELSS Mutual Fund and Term Insurance Plan
11.)ABSLI Vision Life Income Plan: Good or Bad
12.)How to surrender/cancel your ABSL Vision Life Income Plan?
13.)Final Takeaway: Should you buy ABSLI Vision Life Income Plan?
ABSLI Vision Life Income Plan: Key Features
ABSLI Vision LifeIncome Plan is a non-linked participating whole life insurance plan which offers a blend of regular income and financial protection for your family in your absence.
Below are some key features of the ABSLI Vision Life Income Plan.
1.) It is a traditional participating whole life policy.
2.) It is a limited premium paying plan – 8/10/12/15-40 years. The premiums are paid for a limited period while the life cover continues till 100 years of age.
3.) It provides income for life after the premium paying term. This income includes 5% of the Sum assured as a guaranteed benefit plus a bonus for the year.
4.) There are 3 bands of Sum assured. Premiums will be based on these bands
- Band 1 2,00,000 to 3,99,999
- Band 2 4,00,000 to 7,99,999
- Band 3 8,00,000 +
5.) There are 6 riders available that can be added to the base policy for a nominal extra cost.
- BSLI Accidental Death and Disability Rider (UIN: 109B018V03)
- BSLI Critical Illness Rider (UIN: 109B019V03)
- BSLI Surgical Care Rider (UIN: 109B015V03)
- BSLI Hospital Care Rider (UIN: 109B016V03)
- BSLI Waiver of Premium Rider (UIN: 109B017V02)
- BSLI Accidental Death Benefit Rider Plus (UIN: 109B023V01)
6.) ABSLI Vision Life Income Plan Benefit Option:
At policy inception, you will have the option to choose from the below mentioned options
- Short Term Income
- Long Term Income
- Whole Life Income
Once you’ve chosen a Benefit Option, you can’t go back and change it.
ABSLI Vision Life Income plan: Eligibility Conditions
The ABSLI Vision Life Income Plan doesn’t have maximum age eligibility and maximum sum assured to buy this policy. Also, being a whole life policy for up to 100 years there is no such policy term for this Plan.
Hence, the policy term will be based on their age.
However, it has minimum age eligibility, the minimum age at maturity, and the minimum sum assured.
The table below shows the eligibility conditions of the ABSLI Vision Life Income Plan.
ABSLI Vision Life Income Plan: Review of Key Benefits
1.) Review of Death Benefit
In the unfortunate event of the death of the insured during the premium-paying term, the insurance company will pay the following to the nominee:
Sum assured on death + Accrued bonus till the date of death + Terminal bonus (if any)
If the life insured dies after the premium-paying term, the company will pay the nominee the following:
Sum assured + Bonus for the current policy year + Terminal bonus (if any)
For all the three Benefit Options, Sum Assured on Death shall be defined as higher of the following:
- Sum Assured
- 11 times the Annualised Premium
- 105% of Total Premiums paid till the date of death Where, Sum Assured is a multiple (depending upon Benefit Option, Premium Payment Term, Policy Term, Gender and Life Insured’s age at inception of the policy) of the Annualised Premium.
Annualized Premium is the amount payable in a year chosen by the policyholder, excluding taxes, rider premiums, underwriting extra premiums, and loadings for modal premiums (if any).
2.) Review of Maturity Benefit
If the insurer survives till the end of the policy term, the company shall pay the insured,
Sum assured + Terminal bonus (if any)
When the policy matures, the company shall pay the insured –
- Higher of, Sum Assured or 105% of total premiums paid to date excluding premiums paid towards underwriting extra and any attached riders; plus
- Terminal bonus (if any)
3.) Review of Survival Benefit
If Life Insured survives until the end of the premium-paying period, the company will pay Insured the Accrued bonus until the end of the premium-paying term.
After the end of the premium paying term, thereafter each year till maturity life assured will receive:
5% of Sum assured + Bonus for the current policy year
ABSLI Vision Life Income Plan: Guaranteed Income Benefit
Provided the policy is in force and all due premiums under the policy have been paid, We will pay the following Guaranteed Income Benefit:
1.) Short Term Income: On completion of the Premium Payment Term, a Guaranteed Income Benefit of 1% of Sum Assured will be payable to You at the beginning of every month during the Benefit Payout Period till the end of the Policy Term.
All the monthly payout transactions would be effected on a date specific to the policy anniversary date i.e. monthly anniversary.
You have the flexibility to receive the Guaranteed Income Benefit in ‘Annual’ frequency and consequently, the income will be payable at the beginning of each policy year during the Benefit Payout Period. The chosen Benefit Payout Frequency can be changed during the term of the policy and the same shall be applicable from the next policy anniversary. For Benefit Payout Frequency of Annual mode, the Annual Guaranteed Income Benefit payable at the beginning of each year during the Benefit Payout Period will be = 96% x 12 x Monthly Guaranteed Income Benefit.
2.) Long Term Income: On survival of the Life Insured till the end of Premium Payment Term, a Guaranteed Income Benefit as a pre-defined percentage of Sum Assured, will be payable to You at the end of each policy year during the chosen Benefit Payout Period. The table below gives the Guaranteed Income Benefit percentages for Annual frequency:
3.) Whole Life Income: On survival of the Life Insured till the end of Premium Payment Term, a Guaranteed Income Benefit as a pre-defined percentage of Sum Assured, will be payable to You at the end of each year during the chosen Benefit Payout Period. The Guaranteed Annual Income Benefit as a percentage of Sum Assured will be as follows:
All the pay-outs would be effected on a date specific to the policy anniversary.
ABSLI Vision Life Income Plan: Other Benefits
Other Benefits of Investing in ABSLI Vision Life Income Plan are:
The following are the modal rebates & Sum assured rebates available :
1.) Annual premium payment – 3%
2.) Semi-annual premium payment – 1.5%
3.) ECS method of payment ( irrespective of payment frequency) – 3%
4.) High Sum assured Rebate:
- Band premium rebate per 1000 Sum assured
- Band 1 NIL
- Band 2 2.5
- Band 3 3.5
After having paid for at least three full years, the policy can be converted into a paid-up policy. On a reduced paid-up basis, the policy will continue.
The policy can be surrendered after all due premiums for at least three full policy years are paid.
Similarly, a loan can be taken against the policy after all due premiums for at least three full policy years are paid (85% of the Surrender value).
You get tax benefits under Section 80C, 80D, and Section 10(10D) of the Income Tax Act, 1961.
ABSLI Vision Life Income Plan: Bonuses
Bonuses are non-guaranteed. There are two types of bonuses available in this plan, which are explained below:
Reversionary Bonuses
Reversionary Bonus is declared every year as a percentage of Guaranteed Maturity Benefit and Earlier Reversionary Bonuses (if any).
A reversionary bonus is payable at maturity of the policy, or it is payable along with death benefits. A reversionary bonus in Cash advantage is added every year to your maturity benefits. The actual formula for calculating the Reversionary bonus is unknown. It’s determined with the help of the website’s online calculator.
Terminal bonuses
A terminal bonus is a one-time bonus declared at the time of the maturity of participating policy. If the first five Policy Years have been completed and the Policy is in force and all due Installment Premiums under the Policy have been paid, We shall pay a Terminal Bonus, if any. Such terminal bonus is payable on earlier of death of the Life Insured, Surrender, or maturity.
Is the ABSLI Vision Life Income Plan Pro or Con?
Is ABSLI Vision Life Income Plan really a vision for you and your family?
To find out this, let us evaluate the advantages, and returns of this Plan with other similar products.
Now we will have a look at an illustrative example to get a better idea of the various benefits, bonuses, and overall returns you can expect from this policy.
ABSLI Vision Life Income Plan: Benefit Illustration
Suppose your age is 35 years. You opt for the premium paying term of 15 years with a life expectancy of 75 years.
You decide to pay an annual premium of ₹414,500 for the policy term of 40 years. Your Sum assured, in this case, will be Rs.5,000,000
On surviving the policy term, your maturity benefit will be the sum assured plus a terminal bonus (if any). You get both guaranteed and non-guaranteed benefits in this plan.
The official policy brochure of ABSLI Vision Life Income Plan gives an estimated return rate of 4% and 8%. These estimated rates of return are not guaranteed and are not the top or lower limits of what you might earn back.
At the end of the premium payment term, you get a Reversionary/Accrues Bonus, and thereafter you receive Guaranteed Income + Non-Guaranteed Cash bonus at an assumed rate of return of 4% or 8% every year till the age of 75 years.
If Policy generates 4% returns your IRR will be:
The table below shows the calculation of a net annual rate of return (IRR) in case your funds get a lower return of 4%:
Assuming the funds you choose are giving a return of 4% CAGR, your maturity value will be ₹65,90,788.
Even though the fund return is 4% CAGR, it is not the return rate in the hands of the investors.
So, you are getting the average return of just 2.83%.
2.83% return rate in 40 long years!! Don’t you believe there are better choices for you if you just explore around a little bit more?
Alternative options will be discussed in the later section.
If Policy generates 8% returns your IRR will be:
The table below shows the calculation of a net annual rate of return (IRR) in case your funds get a higher return of 8%:
In this case, your maturity value will be ₹80,38,288. But in the hands of the investor, the 8% fund return will come down to a net return rate of 6.38%.
Please note it is the best interest rate of this policy, as we assume the ARR as 8%.
Can such lower returns even beat inflation for 40 long years?
Comparison of ABSLI Vision Life Income Plan Returns Against PPF and Term Insurance Plan
Similar to the illustration for the Vision Income Plan, 15 years of investment is assumed PPF and ELSS.
You should notice that while the ABSLI Vision Life Income Plan offers a life cover, PPF is an investment-only product.
Hence, for life cover, you can choose to buy a term insurance policy of ₹50 lakh sum assured for a premium of ₹9750 is assumed for comparison.
So, an additional 10 years of term insurance premium is continued till the age of 60.
Also, let’s discover what the PPF has in store for an investor in terms of investing.
The interest rate in PPF for Q4 2021-2022 is 7.1% p.a.
PPF and ELSS pay-outs are also based on the accumulated corpus, just like policy pay-outs.
See the compounding table below for the potential return from PPF and Term Insurance for the same investment as in the ABSLI Vision Life Income Plan.
The accumulated corpus is invested in a 6% return investment, and from that investment amount similar to policy pay-out is assumed to be withdrawn.
From the table above we can observe that even after paying a life insurance premium for 10 years, your maturity value and IRR are much higher in PPF compared to the ABSLI Vision Income Plan at an assumed return rate of 4%.
In the previous section, we calculated that the IRR of the ABSLI Vision Life Income Plan @ 4% return rate is just 2.83%. Even for endowment insurance, this is an extremely low rate of return.
The more interesting thing is that PPF has an EEE tax status. It means that the investment, interest earnings, and maturity value are completely exempt from income tax.
Additionally, the interest rate from the PPF is guaranteed by the government of India, despite the fact that the interest rate is updated quarterly.
On the contrary, the returns from ABSLI Vision Income Plan are not fully guaranteed.
It is evident that the PPF is a better investment option compared to the ABSLI Vision Income Plan for a risk-averse investor looking for guaranteed returns.
Comparison of ABSLI Vision Life Income Plan Returns Against ELSS Mutual Fund and Term Insurance Plan
Similar to PPF, ELSS Mutual Fund is also a pure investment option.
As an alternative, for life insurance, you might purchase a term insurance policy with the same 50 lakh sum assured for a premium of Rs.9750.
Let us now calculate the expected return from ELSS Mutual Fund.
Since ELSS Mutual Funds invest in high-yielding equities, it’s fairer to evaluate ABSLI Vision Life Income Plan at an 8% return rate rather than a 4% return rate.
We assume a very conservative 12% CAGR for the ELSS mutual fund—though equity funds deliver better returns.
Here is the returns illustration from ELSS Mutual Fund and Term Insurance Plan.
The maturity amount the policyholder will receive by investing in ELSS Mutual Fund will be almost ₹4.56 crore with an IRR of 7.93%.
ELSS Mutual Fund return is approximately 5 times more than the ABSLI Vision Life Income Plan returns.
The ABSLI Vision Life Income Plan and the ELSS Mutual Fund may not have the same risk but have very similar tax implications. However, even an average performing ELSS fund offers better returns than the endowment plan.
ELSS + a term insurance policy is a far better investment + insurance option than the ABSLI Vision Life Income Plan.
ABSLI Vision Life Income Plan: Good or Bad
After our above observation, it is evident that you will get higher returns with PPF or ELSS as compared to ABSLI Vision Income Plan.
However one may argue the following things:
- This plan promises to deliver you a regular source of income in the form of various types of bonuses.
- Also, the investment risk in the ABSLI Vision Life Income Plan is not the same as ELSS Mutual Fund.
Here are a few reasons why ABSLI Vision Life Income Plan is a disadvantage
- The yield in PPF is currently 7.1% per annum. But with this plan, your yield on maturity and death benefit varies from plan to plan.
- The Lock-in period is 3 years for paid-up/surrendering/loan.
- The regular bonus rate may vary from year to year and will depend on the experience regarding various factors and the prevailing economic conditions. Bonuses will depend upon the profits of the participating business.
- The life income is a standard amount & not adjusted to inflation. In real life, this pay-out amount will not suffice for the expenses.
- The sum assured will not be sufficient to cater to the need of the family in case of the death of the insurer.
- It is an insurance cum investment plan. Here neither the insurance nor the investment is beneficial to the insurer.
Already purchased this plan but looking for a way out?
There is undoubtedly a way out.
How to Surrender/cancel ABSLI Vision Life Income Plan?
If you have signed up for this policy without understanding the complete details of this policy or you signed up because your bank relationship manager pushed it to you, there is a way out. You can exit this policy.
There will be a 15-day and 30-day free look period, as described below.
If you have purchased this policy straight from the company, you have 15 days from the date of receipt to return it by stating your reason.
Whereas, if you have taken this policy through some other medium such as online, or telephone, which does not involve face-to-face interaction, then you will have a free look-in period of 30 days.
On receiving your letter along with the original policy document, you will get the refund of your paid premium, however, it will be subject to deduction of the proportionate risk premium for the period on cover, the expenses incurred by the company for stamp duty and medical examination if any.
What if you wish to surrender your policy after the free look period?
You can surrender the policy any time during the Policy Term once the policy has acquired a Surrender Value. Your policy will acquire a Surrender Value in any case due premiums for a minimum of two full policy years are paid.
The Surrender Value payable will be higher than the Guaranteed Surrender Value (GSV) and Special Surrender Value (SSV).
Where,
Guaranteed Surrender Value (GSV) is defined as (Guaranteed Surrender Value Factor multiplied by Total Premiums Paid) Plus (Guaranteed Surrender Value Factor multiplied by accrued Paid-Up Additions, if any) Minus (survival benefits already paid).
Special Surrender Value (SSV) is determined by the company from time to time basis changing economic scenarios. The SSV factors may be revised by the Company depending on market conditions at the time. Any changes to the approach or formula for computing the SSV factors must be approved by the IRDAI.
Final Takeaway: Should you buy ABSLI Vision Life Income Plan?
In short, you should AVOID investing in ABSLI Vision Life Income Plan.
Though they claim it to be an “income for life or safety for your loved ones”; but actually it is an “expense for life” policy, as you might have noticed in the analysis and illustration given above!!
They also claim to give Cash Bonuses over the next 70 years, however, none of these bonuses are guaranteed!
In the best-case scenario, this policy offers returns in the range of 3%-6%, which can’t even beat the rate of inflation. Even your savings bank’s returns are better than this policy because they are guaranteed!
Therefore, as an alternative, you must invest in PPF if you are a conservative investor looking for guaranteed returns.
And equity Mutual Funds, if you are risk-tolerant planning to invest for the long term. You must read this Comprehensive and Complete Guide to Mutual Funds for a better understanding of Mutual Fund investing.
If you have any further queries about this article, please leave them in the comments section.
For more details on investment and your customized financial planning, you should book your FREE consultation call by clicking the link below:
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