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Life throws financial hurdles our way, and navigating them requires careful planning. After all, our hard-earned savings deserve to be put to work for our future dreams. So, how can we ensure our investments empower us to reach those goals?
This article dives into the specifics of Bajaj Allianz Life Smart Wealth Goal III – Wealth Variant, exploring whether it could be the key to unlocking your financial aspirations by evaluating the advantages (pros) and disadvantages (cons) with IRR analysis.
Table of Contents:
What is the Bajaj Allianz Life Smart Wealth Goal III?
What are the Features of Bajaj Allianz Life Smart Wealth Goal III?
Who is Eligible for Bajaj Allianz Life Smart Wealth Goal III?
What are the Benefits of the Bajaj Allianz Life Smart Wealth Goal III?
Investment Strategies & Fund Options in the Bajaj Allianz Life Smart Wealth Goal III
Various Charges under the Bajaj Allianz Smart Wealth Goal III
Grace period, Discontinuance & Revival of Bajaj Allianz Life Smart Wealth Goal III
Free look period of Bajaj Allianz Life Smart Wealth Goal III
Surrendering Bajaj Alliance Smart Wealth Goal III
What are the Advantages of Bajaj Alliance Smart Wealth Goal III?
What are the Disadvantages of Bajaj Alliance Smart Wealth Goal III?
Research Methodology of Bajaj Allianz Life Smart Wealth Goal III
Benefit Illustration – IRR Analysis of Bajaj Allianz Life Smart Wealth Goal III
Bajaj Allianz Life Smart Wealth Goal III Vs Other investment products
Bajaj Allianz Life Smart Wealth Goal III Vs. Term Plan + ELSS
Final verdict on Bajaj Allianz Life Smart Wealth Goal III
What is the Bajaj Allianz Life Smart Wealth Goal III?
Bajaj Allianz Life Smart Wealth Goal III is a non-participating, individual, life, regular premium, Unit-Linked, limited premium and single premium payment plan.
This Bajaj Allianz Life Smart Wealth Goal III plan is loaded with features like Life cover, Return of Life Cover charge, Return of Allocation charge, and multiple investment strategies to make the most of your savings.
What are the Features of Bajaj Allianz Life Smart Wealth Goal III?
- Option to receive Maturity Benefit or Death Benefit in instalments with Return Enhancer
- Choice of 5 investment portfolio strategies & 15 Funds
- Option to reduce the premium
- Option to change the Premium paying term
- Tax benefits may be as per prevalent tax laws
Who is Eligible for Bajaj Allianz Life Smart Wealth Goal III?
| Minimum | Maximum | |
| Entry Age | 0 year | Regular/ Limited Premium: 60 years Single Premium: 70 years |
| Age at Maturity | 18 years | Regular/ Limited Premium: 99 years Single Premium: 90 years |
| Premium Paying Term | Single pay Limited/ Regular Premium For maturity age less than or equal to 85 years: 5 years to PT chosen For maturity age greater than 85 years: 10 years to PT chosen |
|
| Premium Paying Frequency | Yearly, Half-yearly, Quarterly and Monthly | |
| Minimum & Maximum Sum Assured | Regular/ Limited Premium: Minimum: 7 times Annualized Premium Maximum: 10 times Annualized Premium Single Premium: Minimum: 1.25 times single premium Maximum: 1.25 times /10 times the single premium |
|
| Minimum Top-up Sum Assured | Single/ Regular/ Limited: 1.25 times Top-up Premium | |
| Maximum Top-up Sum Assured | Regular/ Limited Premium: 10 times Top-up Premium Single Premium: 1.25 times Top-up Premium |
|
What are the Benefits of the Bajaj Allianz Life Smart Wealth Goal III?
i.) Death benefit
If all due Premiums are paid, then, in case of unfortunate death of the Life Assured during the Bajaj Allianz Life Smart Wealth Goal III Policy term, the Death Benefit payable will be
- Higher of, Prevailing Sum Assured or Regular Premium Fund value /Single premium fund value plus
- Higher of, Prevailing Top-up Sum Assured or top-up Premium Fund value, if any.
- The Death Benefit payable is subject to the Guaranteed Benefit of 105% of the Total Premiums paid, till the date of death.
ii.) Maturity benefit
Provided the Bajaj Allianz Life Smart Wealth Goal III Policy is in force and the Life Assured is alive, the Maturity Benefit will be the Fund value as of the date of maturity of your policy.
iii.) Loyalty benefits
The Loyalty Benefits available in the Bajaj Allianz Life Smart Wealth Goal III plan are as mentioned below:
- At the end of the 10th Policy year or the date of maturity (whichever is earlier), the total of all the Premium Allocation charges will be added to the Fund as a Loyalty Benefit.
- At the end of the 15th policy year and every 5th policy year thereafter till the Policy term (maximum till 60th policy year), Fund Booster as a percentage will be added to the Fund as a Loyalty Benefit.
- At the end of the Policy term, on the date of maturity of your Policy, the total amount of Mortality charges deducted in respect of life cover provided throughout the Policy term, will be added back as ROMC, to the Fund value.
Investment Strategies & Fund Options in the Bajaj Allianz Life Smart Wealth Goal III
Bajaj Allianz Life Smart Wealth Goal III provides you with five unique portfolio strategies, out of which anyone can be chosen at the inception of your Policy:
- Investor Selectable Portfolio Strategy
- Wheel of Life Portfolio Strategy II
- Trigger Based Portfolio Strategy II
- Auto Transfer Portfolio Strategy
- Capital Preservation-Oriented Strategy
A. Investor Selectable Portfolio Strategy:
If you want to allocate your Premiums based on your personal choice and decision, you can opt for this Investment Strategy and choose from among the 15 Funds below to suit your investment needs.
| Asset Allocation | ||||
| Fund Name | Equity | Debt | Money Market | Risk profile |
| Equity Growth Fund II | Not less than 60% | 0% – 40% | 0% – 40% | Very High |
| Accelerator Mid-Cap Fund II | Not less than 60% (at least 50% in Mid-cap) | 0% – 40% | 0% – 40% | Very High |
| Pure Stock Fund | Not less than 60% | 0% – 40% | 0% – 40% | Very High |
| Pure Stock Fund II | Not less than 75% | — | 0% -25% | Very High |
| Asset Allocation Fund II | 40% – 90% | 0% – 60% | 0% – 50% | High |
| Blue-chip Equity Fund | Not less than 60% | 0% – 40% | 0% – 40% | High |
| Bond Fund | — | 40% – 100% | 0% – 60% | Moderate |
| Liquid Fund | — | — | 100% | Low |
| Flexi Cap Fund | 65% – 100% | 0% – 35% | 0% – 35% | Very High |
| Sustainable Equity Fund | 65% – 100% | 0% – 35% | 0% – 35% | Very High |
| Small Cap Fund | 65% – 100% | 0% – 35% | 0% – 35% | Very High |
| Midcap Index Fund | 65% – 100% | 0% – 35% | 0% – 35% | Very High |
| Dynamic Asset Allocation Fund | 10% 90% | 10% 90% | 0% – 80% | High |
| SmallCap Quality Index Fund | 65% – 100% | 0% – 35% | 0% – 35% | Very High |
| Individual Short-Term Debt Fund | — | 40% – 100% | 0% – 60% | Moderate |
B. Wheel of Life Portfolio Strategy – II of Bajaj Allianz Life Smart Wealth Goal III
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% |
C. Trigger-Based Portfolio Strategy II of Bajaj Allianz Life Smart Wealth Goal III
Under this Portfolio Strategy, Regular/Limited Premiums and Top up Premiums if any, will be allocated between 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 over three times the value of 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 the 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%.
D. Auto Transfer Portfolio Strategy of Bajaj Allianz Life Smart Wealth Goal III
This strategy helps you to invest your money systematically by automatically 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 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.
E. Capital Preservation-Oriented Strategy of Bajaj Allianz Life Smart Wealth Goal III
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.
| 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% |
Various Charges under the Bajaj Allianz Smart Wealth Goal III
1. Premium Allocation Charge:
| Policy Year | 1 | 2 | 3 – 5 Years | 6 – PPT years |
| Yearly Mode | 6% | 6% | 6% | NIL |
| Other Mode | 5% | 5% | 5% | NIL |
| Single Premium | 3% | _ | _ | _ |
2. Policy Administration Charge:
| Year 1 – 5 | 1.08% of Annualised Premium |
| Year 6 – 10 | 2.16% p.a. of the prevailing annualized Premium |
| 11th year onward | NIL |
| Single Premium | Year 5 -6: 2.16% p.a. of the prevailing annualized Premium |
3. Fund Management Charge:
| Fund Name | Fund Management Charge |
| Equity Growth Fund II | 1.35% |
| Accelerator Mid-Cap Fund II | 1.35% |
| Pure Stock Fund | 1.35% |
| Pure Stock Fund II | 1.30% |
| Asset Allocation Fund II | 1.25% |
| Blue-chip Equity Fund | 1.25% |
| Bond Fund | 0.95% |
| Liquid Fund | 0.95% |
| Flexi Cap Fund | 1.35% |
| Sustainable Equity Fund | 1.35% |
| Small Cap Fund | 1.35% |
| Midcap Index Fund | 1.35% |
| Dynamic Asset Allocation Fund | 1.35% |
| SmallCap Quality Index Fund | 1.35% |
| Individual Short-Term Debt Fund | 0.95% |
| Discontinued Life Policy Fund | 0.50% |
4. Miscellaneous Charge
A miscellaneous charge of Rs. 100 per transaction will be charged.
5. Discontinuance /Surrender Charge:
It depends on the Annual premium amount and the year of discontinuance or surrender. There is no Discontinuance /Surrender Charge from the 5th policy year.
6. Mortality Charge:
Mortality Charges will be deducted at each monthly anniversary by the cancellation of units. Female Life Assured will be eligible for an age setback of 3 years.
Inference from the charges:
The fees linked with this ULIP plan are standard. However, Bajaj Allianz Smart Wealth Goal III incurs significant fees and falls short in terms of transparency.
On the other hand, alternative market-related investment options typically feature minimal and transparent charges, rendering them more attractive than Bajaj Allianz Smart Wealth Goal III.
Grace period, Discontinuance & Revival of Bajaj Allianz Life Smart Wealth Goal III
(For Limited / Regular Premium Policies)
Grace period
A grace period of 30 days for yearly, half-yearly and quarterly premium payment frequency, and 15 days is available for monthly premium payment frequency from the due date of Regular/Limited Premium payment.
Discontinuance
On Discontinuance of Regular Premiums due during the first 5 Policy years, the Policy will be converted to a Discontinued Life Policy, and the Regular Premium Fund Value less the Discontinuance/Surrender charge along with Top-up Premium Fund Value, if any, will be transferred to the Discontinued Life Policy fund.
The Discontinuance Value shall be payable as the Surrender Benefit at the end of the lock-in period of five Policy years.
On Discontinuance of Regular Premiums due after the lock-in period of 5 Policy years, the Policy will be, immediately and automatically, converted to a Paid-up Policy.
The Paid-up Sum Assured will be the Sum Assured in the Policy multiplied by the proportion of the number of Regular Premiums paid to the number of Regular Premiums payable in the Policy.
Revival
A policy that has been discontinued or is paid up due to non-payment of premiums can only be revived within 3 years from the date of the first unpaid premium.
Free look period of Bajaj Allianz Life Smart Wealth Goal III
If the policyholder disagrees with any of the terms or conditions, he has the option to return the policy within 15 days from the date of receipt of the policy document and a period of 30 days in case of electronic policies and policies obtained through distance mode.
Surrendering Bajaj Alliance Smart Wealth Goal III
During the lock-in period of the first 5 policy years: The Regular Premium Fund Value less the discontinuance/ surrender charge, along with the Top-Up Premium Fund Value, if any, as on the date of surrender, will be credited to the Discontinued Life Policy Fund.
The Discontinuance Value, at the end of the Lock-in Period, will be payable to the Policyholder as Surrender Value.
On surrender after the lock-in period, the surrender value available will be the Total Fund Value as of the date of surrender.
What are the Advantages of Bajaj Alliance Smart Wealth Goal III?
- Option to take out the Loyalty Benefits as Periodical Money Backs by way of systematic partial withdrawal.
- Option to pay Top-up Premiums at any time, except during the last five Policy years.
- You can switch units from one Fund to another at any time (only under Investor Selectable Portfolio Strategy)
- You may, at any Policy anniversary, switch out from any of the five unique portfolio strategies.
- You can opt to alter your premium payment frequency.
What are the Disadvantages of Bajaj Alliance Smart Wealth Goal III?
- No loan facility is available under the plan.
- The asset allocation under the fund options looks similar. So, the fund options seem repetitive.
- The return on charges is not attractive, as they do not consider the time value of money.
- The plan does not offer any liquidity during the first five years of the policy term.
Research Methodology of Bajaj Allianz Life Smart Wealth Goal III
Bajaj Allianz Smart Wealth Goal III is a market-linked product that offers periodic money-back benefits. It’s crucial to analyse the cash flow requirements thoroughly before investing in this plan.
Calculating the Internal Rate of Return (IRR) can assist in determining whether the potential returns exceed the inflation rate. Let’s compute the IRR based on the benefit illustration provided in the policy brochure.
Benefit Illustration – IRR Analysis of Bajaj Allianz Life Smart Wealth Goal III
A 35-year-old male has taken a Bajaj Allianz Life Smart Wealth Goal III Policy (Wealth Variant) to meet his Life Goals for a Policy Term of 20 years.
He is paying an Annual Premium of Rs 1 lakh for a payment term of 10 years with a Sum Assured of Rs 10 Lakhs.
| Male | 35 years |
| Sum Assured | ₹ 10,00,000 |
| Policy Term | 20 years |
| Premium Paying Term | 10 years |
| Annualised Premium | ₹ 1,00,000 |
If he pays the premium regularly, he receives a Return of allocation charge at the end of the 10th year and Fund Booster at the end of the 15th year. At the end of the policy term, he receives Fund Booster, Return of Mortality charges and Maturity benefit.
The returns indicated at 4% and 8% are illustrative and not guaranteed and do not indicate the upper or lower limits of returns under the Policy.
| At 4% p.a. | At 8% p.a. | ||||
| Age | Year | Annualised premium / Maturity benefit | Death benefit | Annualised 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 | -1,00,000 | 10,00,000 | -1,00,000 | 10,00,000 |
| 45 | 11 | 30,000 | 10,00,000 | 30,000 | 10,00,000 |
| 46 | 12 | 0 | 10,00,000 | 0 | 10,00,000 |
| 47 | 13 | 0 | 10,00,000 | 0 | 10,00,000 |
| 48 | 14 | 0 | 10,00,000 | 0 | 10,00,000 |
| 49 | 15 | 0 | 10,00,000 | 0 | 10,00,000 |
| 50 | 16 | 11,990 | 10,00,000 | 16,986 | 10,00,000 |
| 51 | 17 | 0 | 10,00,000 | 0 | 10,00,000 |
| 52 | 18 | 0 | 10,00,000 | 0 | 10,00,000 |
| 53 | 19 | 0 | 10,00,000 | 0 | 10,00,000 |
| 54 | 20 | 0 | 10,00,000 | 0 | 10,00,000 |
| 55 | 14,32,590 | 25,82,202 | |||
| IRR | 2.57% | 6.41% | |||
Based on the Bajaj Allianz Life Smart Wealth Goal III calculator, and with the provided cash flow, the IRR at a 4% scenario yields 2.57%, while at the 8% scenario, it’s 6.41%.
Despite receiving regular cash payments, the IRR falls short of being satisfactory for investing in Bajaj Allianz Smart Wealth Goal III. A low return below the inflation rate won’t help you achieve your financial goals effectively.
Bajaj Allianz Life Smart Wealth Goal III Vs Other investment products
Let’s now compare the returns with alternative investment options. Instead of bundling life cover with market-related investments, let’s divide these aspects.
For the same metrics as given in the previous illustration, we’ll explore a standalone term life insurance policy and invest separately for specific life goals.
Bajaj Allianz Life Smart Wealth Goal III Vs. Term Plan + ELSS
Opting for a pure term life insurance policy with a sum assured of ₹10 Lakhs would incur a cost of ₹ 8,700. The policy spans 20 years, with a premium paying term of 10 years.
By choosing this policy, you could save ₹91,300 annually out of ₹1 Lakh. This saved amount can then be invested based on your risk tolerance and preferences.
| Pure Term Life Insurance Policy | |
| Sum Assured | ₹ 10,00,000 |
| Policy Term | 20 years |
| Premium Paying Term | 10 years |
| Annualised Premium | ₹ 8,700 |
| Investment | ₹ 91,300 |
In this strategy, we’ve selected an Equity Linked Savings Scheme (ELSS) fund as the market-linked investment option. Initially, any surplus funds are invested in the ELSS fund. After 10 years, the units held in the fund are redeemed (post-tax value) and reinvested in a 7% return instrument.
Subsequently, we can make withdrawals to align with the periodic cash payments of Bajaj Allianz Life Smart Wealth Goal.
| Term insurance + ELSS | |||
| Age | Year | Term Insurance premium + ELSS | Death benefit |
| 35 | 1 | -1,00,000 | 10,00,000 |
| 36 | 2 | -1,00,000 | 10,00,000 |
| 37 | 3 | -1,00,000 | 10,00,000 |
| 38 | 4 | -1,00,000 | 10,00,000 |
| 39 | 5 | -1,00,000 | 10,00,000 |
| 40 | 6 | -1,00,000 | 10,00,000 |
| 41 | 7 | -1,00,000 | 10,00,000 |
| 42 | 8 | -1,00,000 | 10,00,000 |
| 43 | 9 | -1,00,000 | 10,00,000 |
| 44 | 10 | -1,00,000 | 10,00,000 |
| 45 | 11 | 30,000 | 10,00,000 |
| 46 | 12 | 0 | 10,00,000 |
| 47 | 13 | 0 | 10,00,000 |
| 48 | 14 | 0 | 10,00,000 |
| 49 | 15 | 0 | 10,00,000 |
| 50 | 16 | 16,986 | 10,00,000 |
| 51 | 17 | 0 | 10,00,000 |
| 52 | 18 | 0 | 10,00,000 |
| 53 | 19 | 0 | 10,00,000 |
| 54 | 20 | 0 | 10,00,000 |
| 55 | 32,93,417 | ||
| IRR | 8.01% | ||
| ELSS Tax Calculation | |
| Maturity value after 10 years | 17,94,463 |
| Purchase price | 9,13,000 |
| Long-Term Capital Gains | 8,81,463 |
| Exemption limit | 1,00,000 |
| Taxable LTCG | 7,81,463 |
| Tax paid on LTCG | 78,146 |
| Maturity value after tax | 17,16,317 |
We’ve aligned the cash flow pattern with the 8% scenario of Bajaj Allianz Life Smart Wealth Goal. Based on this cash flow, the IRR calculation yields 8.01%. By refraining from intermediate withdrawals and allowing the fund to grow, we could potentially achieve even higher returns.
This analysis distinctly illustrates that investing separately for life goals is the optimal approach. It provides superior returns and liquidity compared to Bajaj Allianz Life Smart Wealth Goal.
Final verdict on Bajaj Allianz Life Smart Wealth Goal III
This Bajaj Allianz smart wealth goal plan isn’t your typical ULIP found in the market. While it touts the benefits of returning charges and fund boosters during the policy term, this approach actually disrupts the power of compounding. The significant charges, high agent commission, and interference with compounding lead to diminished returns.
The risk and return profile of this plan isn’t proportionate for investment. Opting for Bajaj Allianz Life Smart Wealth Goal won’t effectively aid in long-term wealth accumulation.
Before embarking on your investment journey, consider opting for a standalone pure-term life insurance policy for life coverage, ensuring the premium remains affordable.
Subsequently, based on your life goals, risk tolerance, and time horizon, invest your surplus wisely. Constructing a robust investment portfolio is crucial for meeting all your financial goals.
Should you trust your finances solely to the wisdom of social media such as Quora, Twitter, and Facebook? While social media can be a starting point for financial information, it might not be the most reliable source for critical decisions. For personalized guidance in navigating the financial landscape, consult a Certified Financial Planner. They can assist you in crafting a tailored financial plan to achieve your objectives effectively.
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