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You have to make smart choices when it comes to investments, especially for the financial future of your kids.
Bajaj Allianz Life has a Unit linked endowment plan called Bajaj Allianz Life Smart Wealth Goal. It has three variants Viz.
- Wealth
- Child Wealth
- Joint Life Wealth
You can choose any one variant & it can’t be changed during the policy term. This article only focuses on the Child Wealth variant.
Let us analyze this policy in-depth to decide whether you should opt for this plan or not.
Table of Contents:
1.) What is Bajaj Allianz Life Smart Wealth Goal – Child Wealth variant?
2.) Features of the Bajaj Allianz Life Smart Wealth Goal – Child Wealth variant
3.) Eligibility criteria of the Balaji Allianz Life Smart Wealth Goal – Child Wealth Variant
4.) Investment strategies of the Bajaj Allianz Life Smart Wealth Goal – Child Wealth Variant
5.) Benefits of the Bajaj Allianz Life Smart Wealth Goal – Child Wealth Variant
- Maturity Benefit
- Death or Accidental Total Permanent Disability Benefit
- Income Benefit
- Waiver of Premium Benefit (WOP)
- Loyalty Benefits (LB)
- Systematic Partial withdrawal (Periodical Money Backs)
6.) Advantages of the Bajaj Allianz Life Smart Wealth Goal – Child Wealth Variant
7.) Disadvantages of the Bajaj Allianz Life Smart Wealth Goal – Child Wealth Variant
8.) Research Methodology
9.) IRR of the Bajaj Allianz Life Smart Wealth Goal – Child Wealth Variant
10.) Bajaj Allianz Life Smart Wealth Goal – Child Wealth Variant Vs. Other Investment Products
11.) Bajaj Allianz Life Smart Wealth Goal – Child Wealth Variant Vs. Pure Term Insurance + PPF / ELSS
12.) Final verdict of the Bajaj Allianz Life Smart Wealth Goal – Child Wealth Variant
What is Bajaj Allianz Life Smart Wealth Goal – Child Wealth variant?
Bajaj Allianz Life Smart Wealth Goal is a non-participating, individual, life, Regular Premium, Limited Premium & Single Premium Unit-Linked endowment plan.
The plan offers a market-linked return. Premiums you pay are invested, as per your chosen portfolio strategy across the various applicable Funds.
To make the most of your investments, the plan has some special features like Life cover, Return of Life Cover charge, Return of Allocation charge & multiple investment strategies to choose from.
Features of the Bajaj Allianz Life Smart Wealth Goal – Child Wealth variant
- You have the choice of five investment portfolio strategies & Ten Funds to choose from.
- Systematic Partial Withdrawal to meet your Child’s Key Milestones.
- Return of charges: Return of Premium Allocation Charge (ROAC), Return of Mortality Charges at maturity (ROMC), Return of Income Benefit Charge (ROIBC), Return of Morbidity Charge (ROMBC), Return of Waiver of Premium Charge (ROWC).
- Life covers payable in case of earlier occurrence of Death or Accidental Total Permanent Disability (ATPD).
- In case of earlier occurrence of Death or Accidental Total Permanent Disability, all future prevailing premiums will be waived & Income Benefit paid each year till the end of the policy term
Eligibility criteria of the Balaji Allianz Life Smart Wealth Goal – Child Wealth Variant
Let us look at some of the basic information needed to know to enter this plan at a glance below;
| Parameter | Details |
| Minimum Entry Age | 18 years |
| Maximum Entry Age | 55 years |
| Minimum Age at Maturity | 33 years |
| Maximum Age at Maturity | 85 years |
| Policy Term Min | 15 years and Max 30 years |
| Premium Paying Term | Min 5 years and Max Equal to Policy Term |
| Maximum Premium | No Limit |
| Premium Payment Frequency | Yearly, Half-yearly, Quarterly, and Monthly |
| Minimum & Maximum Sum Assured | 10 times Annualized Premium |
| Minimum Top-up Sum Assured | 1.25 times Top-up Premium |
| Maximum Top-up Sum Assured | 10 times Top-up Premium |
| Minimum Premium | Mode | Entry Age | PPT | Annual | Half-yearly | Quarterly | Monthly |
| Regular /Limited Pay | Up to 50 Years | 5 & 6 | 24000 | 12000 | 6000 | 2000 | |
| 7 & above | 12000 | 6000 | 3000 | 1000 | |||
| 50 Years and above | All | 48000 | 24000 | 12000 | 4000 |
Investment strategies of the Bajaj Allianz Life Smart Wealth Goal – Child Wealth Variant
Bajaj Allianz Life Smart Wealth Goal – Child Wealth Variant provides you with five unique portfolio strategies, out of which anyone can be chosen at the inception of your policy.
- 1.Investor Selectable Portfolio Strategy:
If you want to allocate your Premiums based on your personal choice and decision, you can opt for this strategy and choose from among the ten Funds below to suit your investment needs.
| Fund Name | Risk Profile | Portfolio Allocation | ||
| Equity | Bank Deposit | Money Market | ||
| Equity Growth Fund II | Very High | Not less than 60% | 0-40% | 0-40% |
| Accelerator Mid-Cap Fund II | Very High | Not less than 60% (50% in Mid-cap) | 0-40% | 0-40% |
| Pure Stock Fund | Very High | Not less than 60% | 0-40% | 0-40% |
| Pure Stock Fund ll | Very High | Not less than 75% | _ | 0-25% |
| Asset Allocation Fund II | High | 40-90% | 0-50% | 0-40% |
| Blue-chip Equity Fund | High | Not less than 60% | 0-40% | 0-40% |
| Bond Fund | Moderate | _ | 0-100% | 0-60% |
| Liquid Fund | Low | _ | 100% | 100% |
| Flexi Cap Fund | Very High | 65-100% | 0-35% | 0-35% |
| Sustainable Equity Fund | Very High | 65-100% | 0-35% | 0-35% |
- 2.Wheel of Life Portfolio Strategy – II:
In this Portfolio Strategy at the commencement of the Policy, the Regular/Limited Premium and the Top up Premium, if any, would be allocated in the Funds mentioned (namely Equity Growth Fund II, Accelerator Mid-Cap Fund II, Bond Fund & Liquid Fund) in the proportion as mentioned in the table below, depending on the outstanding years to maturity.
| Proportion in Following Funds | |||||
| Years to Maturity | Equity Growth Fund II | Accelerator Mid-Cap Fund II | Bond Fund | Liquid Fund | Total |
| 10 & above | 40% | 45% | 15% | 0% | 100% |
| 9 | 35% | 50% | 15% | 0% | 100% |
| 8 | 30% | 55% | 15% | 0% | 100% |
| 7 | 25% | 60% | 15% | 0% | 100% |
| 6 | 25% | 60% | 15% | 0% | 100% |
| 5 | 20% | 65% | 15% | 0% | 100% |
| 4 | 20% | 55% | 15% | 10% | 100% |
| 3 | 20% | 50% | 15% | 15% | 100% |
| 2 | 10% | 30% | 30% | 30% | 100% |
| 1 | 0% | 0% | 35% | 65% | 100% |
- 3.Trigger-Based Portfolio Strategy II:
Under this Portfolio Strategy, Regular/Limited Premium and Top up Premiums if any, will be allocated between the two Funds, Equity Growth Fund II (an equity-oriented Fund), and Bond Fund (a debt-oriented Fund), in a 75%:25% proportion.
The Fund value proportions may subsequently get altered due to market movements. Any appreciation in excess of three times the value of the units is considered a gain and is switched to the Liquid Fund. Later it will be switched to the Equity Growth Fund II and the Bond Fund such that, after a transfer, the ratio of the value of units in the Equity Growth Fund II to that in the Bond Fund is restored to 75%:25%.
- 4. Auto Transfer Portfolio Strategy:
This strategy helps you invest your money systematically transferring your money every month, from a low-risk Fund to the Fund(s) of your choice.
In this Portfolio Strategy, your Premium will be allocated to Bond Fund and/or Liquid Fund, as specified by you. At the start of each monthly anniversary of the Policy, a proportion (as mentioned below) of the Fund value in the Bond Fund and/or Liquid Fund as on that date will be switched to the other Fund/s (available in the plan) as specified by you.
The proportion of Fund value = 1/ Outstanding no. of months till the next premium due date.
- 5. Capital Preservation-Oriented Strategy:
The objective of the strategy is to optimize risk and return, by investing across five pre-determined Funds, which are a mix of very high to low-risk Funds, in such a way that the monies invested over the years along with the accumulated returns are subjected to lesser market volatility, in the years closer to maturity. Under this strategy, at the commencement of the policy, the Regular Premium and the Top Up premium, if any, would be allocated to the Funds mentioned (namely Equity Growth Fund II, Accelerator Mid-Cap Fund II, Pure Stock Fund II, Bond Fund & Liquid Fund) in the proportion as mentioned in the table below.
Benefits of the Baj
| Proportion in Following Funds | ||||||
| Years to Maturity | Equity Growth Fund II | Accelerator Mid-Cap Fund II | Pure Stock fund II | Bond Fund | Liquid Fund | Total |
| 10 & above | 40% | 15% | 15% | 30% | 0% | 100% |
| 9 | 35% | 15% | 15% | 35% | 0% | 100% |
| 8 | 30% | 15% | 15% | 40% | 0% | 100% |
| 7 | 30% | 15% | 15% | 40% | 0% | 100% |
| 6 | 30% | 10% | 15% | 45% | 0% | 100% |
| 5 | 25% | 10% | 15% | 40% | 10% | 100% |
| 4 | 20% | 5% | 10% | 40% | 25% | 100% |
| 3 | 15% | 0% | 5% | 40% | 40% | 100% |
| 2 | 0% | 0% | 0% | 40% | 60% | 100% |
| 1 | 0% | 0% | 0% | 0% | 100% | 100% |
Benefits of the Bajaj Allianz Life Smart Wealth Goal – Child Wealth Variant
Maturity Benefit:
The Maturity Benefit will be the Fund value as of the date of maturity of your policy. Even in case of unfortunate death or Accidental Total Permanent Disability (ATPD) of the Life Assured during the Policy term, the Maturity Benefit will be paid.
Death or Accidental Total Permanent Disability Benefit:
If all due Premiums are paid, then, in the case of the unfortunate death or Accidental Total Permanent Disability (ATPD) of the Life Assured, whichever is earlier, during the Policy term, the Benefit payable will be:
- Prevailing Sum Assured plus
- Prevailing Top-up Sum Assured if any
Subject to a maximum of 105% of total premiums paid.
Income Benefit:
On the occurrence of death or ATPD of the Life Assured, whichever is earlier, an additional benefit as Income Benefit will be payable. Each installment of the Income Benefit is equal to one prevailing Annual Premium payable on the Policy anniversary after the date of death or ATPD, whichever is earlier.
Income Benefits will not be payable in case of a Discontinued or Paid-up Policy.
Waiver of Premium Benefit (WOP):
On the occurrence of ATPD or death of the Life Assured, whichever is earlier during the Premium Paying Term, all future prevailing Premiums due under the Policy will be paid by the Company.
The Policy will continue with all the other benefits till the date of maturity of your policy. WOP Benefit will not be payable in case of a Discontinued or Paid-up policy.
Loyalty Benefits (LB):
The Company shall add Loyalty Benefits to the Regular Premium Fund value, provided all due Regular Premiums have been paid up to date. Even after the occurrence of death or ATPD of the Life Assured, Loyalty Benefits will be added to the Regular Premium Fund value. The Loyalty Benefits available in the plan are as mentioned below:
| End of Policy Year | 15th year | 20th year | 25th year | 30th year |
| Fund Booster (%) | 1.00% | 1.25% | 1.50% | 1.75% |
Systematic Partial withdrawal (Periodical Money Backs)
Child Milestone Pay-outs, an annual systematic partial withdrawal for Child’s Key Milestones will be available in the last four Policy Anniversaries before the maturity date. You will also have the option to take the Child Milestone Payouts at the monthly frequency.
| Child Milestone Payout | 1st | 2nd | 3rd | 4th |
| As a Percentage of Fund value | 8% | 10% | 12% | 14% |
Advantages of the Bajaj Allianz Life Smart Wealth Goal – Child Wealth Variant
- At the end of the policy term, the company shall return you the following charges;
-
- Mortality Charge.
- Income benefit charge.
- Morbidity charge.
- Waiver of premium charge.
- Loyalty benefit is added at regular intervals.
- There are 5 investment strategies & 10 funds to choose from.
- Systematic withdrawal or partial withdrawals are allowed (post the lock-in period).
- Option to increase Premium paying term.
- Option to pay Top-up Premiums (except in the last 5 years) or reduce your premium (except in the initial 5 years).
- Settlement Option – Option to receive Maturity Benefit in installments spread over a maximum period of five years.
Disadvantages of the Bajaj Allianz Life Smart Wealth Goal – Child Wealth Variant
-
- Trigger-Based Portfolio Strategy II and Capital Preservation-Oriented Strategy can be opted for only at inception. Once selected, these 2 strategies can’t be switched – between these 2 categories.
- The lock-in period is 5 years.
- The premium is invested after the deduction of charges. Even though they assure you to return these charges, the time value of money is not considered.
- There is a chance of a mismatch in the milestone pay-out & your child’s educational requirement.
For more details, you can read the Bajaj Allianz Life Smart Wealth Goal Policy Brochure.
Research Methodology
As an investor, you would be convinced to buy an investment product if you know the return on investment.
The internal rate of return for this Bajaj Allianz Life Smart Wealth Goal is worked out in detail below. The benefit illustration is taken from the Bajaj Allianz official website.
So let us take a closer look at this plan to understand if it could potentially provide a better return in the long run.
IRR of the Bajaj Allianz Life Smart Wealth Goal – Child Wealth Variant
The Assumptions for Comparison
| Male | 35 years |
| Policy Term | 20 years |
| Premium Paying term | 15 years |
| Sum Assured | 10,00,000 |
| Annual premium | 1,00,000 |
| Fund | Pure stock fund II |
If a 35-year-old male buys this plan for a sum assured of Rs. 10 lakhs, then his annual premium would be Rs. 1 Lakh. The policy term is 20 years & the premium paying term is 15 years.
The assumed rate of future investment is at 4% & 8% at worst and best-case scenarios respectively. These assumed rates of return are not guaranteed and they are not the upper or lower limits of what you might get back, as the value of your policy is dependent on several factors including its future investment performance.
| At 4% p.a. | At 8% p.a. | ||||
| Age | Year | Annualized premium / Maturity benefit | Death benefit | Annualized premium / Maturity benefit | Death benefit |
| 35 | 1 | -1,00,000 | 10,00,000 | -1,00,000 | 10,00,000 |
| 36 | 2 | -1,00,000 | 10,00,000 | -1,00,000 | 10,00,000 |
| 37 | 3 | -1,00,000 | 10,00,000 | -1,00,000 | 10,00,000 |
| 38 | 4 | -1,00,000 | 10,00,000 | -1,00,000 | 10,00,000 |
| 39 | 5 | -1,00,000 | 10,00,000 | -1,00,000 | 10,00,000 |
| 40 | 6 | -1,00,000 | 10,00,000 | -1,00,000 | 10,00,000 |
| 41 | 7 | -1,00,000 | 10,00,000 | -1,00,000 | 10,00,000 |
| 42 | 8 | -1,00,000 | 10,00,000 | -1,00,000 | 10,00,000 |
| 43 | 9 | -1,00,000 | 10,00,000 | -1,00,000 | 10,00,000 |
| 44 | 10 | -89,000 | 10,00,000 | -89,000 | 10,00,000 |
| 45 | 11 | -1,00,000 | 10,00,000 | -1,00,000 | 10,00,000 |
| 46 | 12 | -1,00,000 | 10,00,000 | -1,00,000 | 10,00,000 |
| 47 | 13 | -1,00,000 | 10,00,000 | -1,00,000 | 10,00,000 |
| 48 | 14 | -1,00,000 | 10,00,000 | -1,00,000 | 10,00,000 |
| 49 | 15 | -84,509 | 10,00,000 | -79,222 | 10,00,000 |
| 50 | 16 | 1,38,836 | 10,00,000 | 1,38,836 | 10,00,000 |
| 51 | 17 | 1,62,331 | 10,00,000 | 1,62,331 | 10,00,000 |
| 52 | 18 | 1,78,062 | 10,00,000 | 1,78,062 | 10,00,000 |
| 53 | 19 | 1,85,418 | 10,00,000 | 1,85,418 | 10,00,000 |
| 54 | 20 | 12,83,819 | 10,00,000 | 21,13,713 | 10,00,000 |
| IRR | 2.46% | 5.46% | |||
The allocation charge is returned in the 10th policy year to the policyholder. There is a Fund booster in the 15th policy year. The policy has a pay-out feature in the last 4 years before maturity.
Also, at the end of the term period, all the charges are returned along with the fund value. You can observe the cash flow in the above table.
The IRR @4% return is 2.46% & @8% return is 5.46%. Though the plan invests the premium in the market, the returns we get are less than a debt instrument return. As an investor, this return on investment is not beneficial in the long run as it will not be sufficient to beat inflation in the long term.
Bajaj Allianz Life Smart Wealth Goal – Child Wealth Variant Vs. Other Investment Products
Bajaj Allianz Life Smart Wealth Goal – Child Wealth Variant does not help to combat inflation in the long run.
Let us compare them with other investment vehicles to see if they can produce a better return. To provide us with life cover, let us take a pure term policy & for investment let us consider investments such as PPF(Debt) & ELSS (Equity).
For comparison purposes, let us assume a similar cash flow as in the Bajaj Allianz Life Smart Wealth Goal – Child Wealth Variant. There are cash pay-outs towards the end of the policy term, we can assume the same.
Bajaj Allianz Life Smart Wealth Goal – Child Wealth Variant Vs. Pure Term Insurance + PPF / ELSS
Let us assume the information from the below table to calculate the Investment return we might potentially get from investing in a Pure Term Insurance Policy along with a combination of PPF/ELSS.
| Pure Term Policy | |
| Sum Assured | 10,00,000 |
| Policy Term | 20 |
| Premium Paying term | 10 |
| Annual premium | 8,700 |
| Balance amount (Investment) | 91,300 |
| Term Insurance + PPF | Term insurance + ELSS | ||||
| Age | Year | Term Insurance premium + PPF | Death benefit | Term Insurance premium + ELSS | Death benefit |
| 35 | 1 | -1,00,000 | 10,00,000 | -1,00,000 | 10,00,000 |
| 36 | 2 | -1,00,000 | 10,00,000 | -1,00,000 | 10,00,000 |
| 37 | 3 | -1,00,000 | 10,00,000 | -1,00,000 | 10,00,000 |
| 38 | 4 | -1,00,000 | 10,00,000 | -1,00,000 | 10,00,000 |
| 39 | 5 | -1,00,000 | 10,00,000 | -1,00,000 | 10,00,000 |
| 40 | 6 | -1,00,000 | 10,00,000 | -1,00,000 | 10,00,000 |
| 41 | 7 | -1,00,000 | 10,00,000 | -1,00,000 | 10,00,000 |
| 42 | 8 | -1,00,000 | 10,00,000 | -1,00,000 | 10,00,000 |
| 43 | 9 | -1,00,000 | 10,00,000 | -1,00,000 | 10,00,000 |
| 44 | 10 | -1,00,000 | 10,00,000 | -1,00,000 | 10,00,000 |
| 45 | 11 | -1,00,000 | 10,00,000 | -1,00,000 | 10,00,000 |
| 46 | 12 | -1,00,000 | 10,00,000 | -1,00,000 | 10,00,000 |
| 47 | 13 | -1,00,000 | 10,00,000 | -1,00,000 | 10,00,000 |
| 48 | 14 | -1,00,000 | 10,00,000 | -1,00,000 | 10,00,000 |
| 49 | 15 | -1,00,000 | 10,00,000 | -1,00,000 | 10,00,000 |
| 50 | 16 | 1,38,836 | 10,00,000 | 1,38,836 | 10,00,000 |
| 51 | 17 | 1,62,331 | 10,00,000 | 1,62,331 | 10,00,000 |
| 52 | 18 | 1,78,062 | 10,00,000 | 1,78,062 | 10,00,000 |
| 53 | 19 | 1,85,418 | 10,00,000 | 1,85,418 | 10,00,000 |
| 54 | 20 | 25,33,040 | 10,00,000 | 39,85,409 | 10,00,000 |
| IRR | 6.48% | 9.51% | |||
By referring to the above table, you could get a clear picture of your potential Investment Returns.
The IRR (post-tax return) for Pure Term Insurance + PPF & Pure Term Insurance + ELSS is 6.48% & 9.51% respectively. Although Bajaj Allianz Life Smart Wealth Goal – Child Wealth Variant plan invests in the market, the returns are substantially low.
Here in PPF (Debt), we get a better return compared to the Bajaj Allianz Life Smart Wealth Goal Plan. The ELSS option provides you with inflation-beating returns which are required for your child’s future education goals.
This shows that from the investment return perspective, Bajaj Allianz Life Smart Wealth Goal – Child Wealth Variant plan will not be suitable for your child’s future educational goals as its cost to pursue it will be inflated in the future.
Final verdict of the Bajaj Allianz Life Smart Wealth Goal – Child Wealth Variant
Bajaj Allianz Life Smart Wealth Goal plan offers you various investment strategies for its investors. The plan also returns all the charges at the end of your policy term. This is nothing but returning your own premium amount which was deducted earlier. They just sum up the charges & return them to you without considering the time value of your money.
The education inflation has been around 10-12% these years which is double that of your household inflation. To meet the skyrocketing educational expenses this Bajaj Allianz Life Smart Wealth Goal plan is not suitable.
The analysis proves that separate investment for your goals helps you to achieve your goal. Any ready-made child wealth plan may leave in deficit when that financial goal is near. You can read about a more practical way in which you can plan for your children’s education here.
If you still need a one on one guidance on financial planning according to your child’s education goals, you should consult with your Financial Advisor who will help you to customize your Financial Plan.
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