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Can the HDFC Life Guaranteed Wealth Plus Plan secure your family’s future with a plan that guarantees wealth?
Could the HDFC Life Guaranteed Wealth Plus Plan be the ideal solution to help you achieve both financial protection and wealth accumulation?
Is the HDFC Life Guaranteed Wealth Plus Plan the right choice to provide both financial security and investment returns to achieve your goals?
In this review, we will explore the features, advantages, disadvantages, and returns of the HDFC Life Guaranteed Wealth Plus Plan, utilizing Internal Rate of Return (IRR) analysis. This article will help you better understand the plan and determine its suitability for your needs.
Table of Contents:
What is the HDFC Life Guaranteed Wealth Plus Plan?
What are the features of HDFC Life Guaranteed Wealth Plus Plan?
Who is eligible for the HDFC Life Guaranteed Wealth Plus Plan?
What are the benefits of HDFC Life Guaranteed Wealth Plus Plan?
Grace Period, Reduced Paid-up and Revival of HDFC Life Guaranteed Wealth Plus Plan
Free Look Period of HDFC Life Guaranteed Wealth Plus Plan
Surrendering HDFC Life Guaranteed Wealth Plus Plan
What are the advantages of HDFC Life Guaranteed Wealth Plus Plan?
What are the disadvantages of HDFC Life Guaranteed Wealth Plus Plan?
Research Methodology of HDFC Life Guaranteed Wealth Plus Plan
Benefit Illustration – IRR Analysis of HDFC Life Guaranteed Wealth Plus Plan
HDFC Life Guaranteed Wealth Plus Plan Vs Other Investments
HDFC Life Guaranteed Wealth Plus Plan Vs Pure Term + ELSS
Final Verdict on HDFC Life Guaranteed Wealth Plus Plan
What is the HDFC Life Guaranteed Wealth Plus Plan?
HDFC Life Guaranteed Wealth Plus Plan is a Non-Linked, Non-Participating Individual Life Insurance Savings Plan. It provides Guaranteed Death benefits during the term of the policy.
HDFC Life Guaranteed Wealth Plus Plan offers two variants – Lump sum variant and Income variant – to choose from at the inception of the policy and depending on the variant chosen, this plan may also provide Guaranteed Survival Benefit during the policy term in addition to the Maturity Benefit at the end of the policy term.
What are the features of HDFC Life Guaranteed Wealth Plus Plan?
- Pay once or for a limited term, and enjoy Life insurance coverage during the full HDFC Life Guaranteed Wealth Plus Plan policy term
- Guaranteed Benefits on survival in case the Income variant has been opted
- The choice to take guaranteed benefit as a lump sum at maturity or as Regular Income and lump sum both
Who is eligible for the HDFC Life Guaranteed Wealth Plus Plan?
What are the benefits of HDFC Life Guaranteed Wealth Plus Plan?
i.) Death benefit
Sum assured on death is applicable on the death of the life assured during the HDFC Life Guaranteed Wealth Plus Plan policy term and is defined as higher of:
- X times the annualized premium for Limited pay and 1.25 times the single premium for Single pay; or
- 105% of the Total Premiums Paid up to the date of death.
ii.) Maturity benefit
Variant 1: Lump sum Variant
Under this Variant, the HDFC Life Guaranteed Wealth Plus Plan policyholder will receive a fixed percentage of either the single premium or the total Annualized Premium payable under the policy as a lump sum maturity benefit at the end of the policy term.
Variant 2 – Income Variant
Under this variant, you receive a lump sum as a maturity benefit at the end of the HDFC Life Guaranteed Wealth Plus Plan policy term which is equal to 100% of the total premiums paid during the policy term.
iii.) Survival benefit
Variant 1: Lump sum Variant
No survival benefit is applicable under this variant
Variant 2 – Income Variant
Guaranteed Income is calculated as a fixed percentage of Annualized Premium and is payable in arrears as per the payout frequency chosen by the HDFC Life Guaranteed Wealth Plus Plan policyholder.
Guaranteed Income shall commence from the 7th, 8th, 9th, 10th, 12th & 14th policy years in arrears for 5, 6, 7, 8, 10 and 12 Pay policies respectively and continue till the end of the HDFC Life Guaranteed Wealth Plus Plan policy term.
Grace Period, Reduced Paid-up and Revival of HDFC Life Guaranteed Wealth Plus Plan
Grace Period
The grace period for payment of premium shall be 15 days, where the policyholder pays the premium on a monthly basis; and 30 days in case of other applicable premium payment frequencies.
Reduced Paid-up
For Policies with Limited Premium Payment Term, if at least 1 full year’s premiums have not been paid within the grace period, the HDFC Life Guaranteed Wealth Plus Plan policy will lapse on the date of expiry of the grace period.
For Policies with Limited Premium Payment Terms, if at least 1 full year of premiums have been paid and further premiums are unpaid, and the policy is not surrendered.
The HDFC Life Guaranteed Wealth Plus Plan policy will acquire the status of reduced paid-up on the date of expiry of the grace period until the policy is revived for full benefits.
Revival
The HDFC Life Guaranteed Wealth Plus Plan policy can be revived during the policy term but within a period of five years from the date of the first unpaid premium
Free Look Period of HDFC Life Guaranteed Wealth Plus Plan
If the HDFC Life Guaranteed Wealth Plus Plan policyholder disagrees with any of the terms and conditions, he/she shall have the option to return the Policy within 30 days from the date of receipt of the Policy, whether received electronically or otherwise.
Surrendering HDFC Life Guaranteed Wealth Plus Plan
A single premium Policy can be surrendered anytime during the HDFC Life Guaranteed Wealth Plus Plan Policy Term. For Limited Pay, if at least 2 full years’ Premiums have been paid, the Policy acquires a Guaranteed Surrender Value.
The surrender benefits are payable immediately upon surrender. All benefits under the policy shall automatically terminate upon payment of surrender benefit. The surrender benefit is higher than the Special Surrender Value (SSV), if any or the Guaranteed Surrender Value (GSV).
What are the advantages of HDFC Life Guaranteed Wealth Plus Plan?
- Policyholders can avail of loans under this HDFC Life Guaranteed Wealth Plus Plan policy.
- Policyholders have the flexibility to choose the mode for both premium payments and Guaranteed Income payouts.
- Rider options are available to enhance your protection.
- Tax benefits are available for both the premium paid and maturity proceeds, as per prevailing tax laws.
What are the disadvantages of HDFC Life Guaranteed Wealth Plus Plan?
- No alterations are allowed other than changes in the premium payment mode and guaranteed income payout mode.
- The life cover is reduced after the premium paying term, resulting in less life coverage during the income payout period.
- No loyalty additions for staying invested.
Research Methodology of HDFC Life Guaranteed Wealth Plus Plan
HDFC Life Guaranteed Wealth Plus Plan allows you to choose the cash flow that suits your needs, offering either the Lump Sum variant or the Income Variant.
However, simply examining the cash flow pattern is not enough to determine the plan’s suitability. Let’s delve into the Internal Rate of Return (IRR) calculation for HDFC Life Guaranteed Wealth Plus.
Benefit Illustration – IRR Analysis of HDFC Life Guaranteed Wealth Plus Plan
Consider a 35-year-old male who opts to pay a single premium of ₹10,00,000 for the Lump Sum Variant of HDFC Life Guaranteed Wealth Plus with a policy term of 15 years. He receives a life insurance cover of 1.25 times the single premium, amounting to ₹12,50,000 at the policy’s inception.
| Male | 35 years |
| Sum Assured | ₹ 12,50,000 |
| Policy Term | 15 years |
| Premium Paying Term | Single Pay |
| Annualised Premium | ₹ 10,00,000 |
In the Lump Sum variant, the final maturity benefit is provided at the end of the policy term. The guaranteed maturity benefit is ₹21.45 lakhs, resulting in an IRR of 5.22% as per the HDFC Life Guaranteed Wealth Plus Plan maturity calculator.
|
Age |
Year |
Annualised premium / Maturity benefit |
Death benefit |
|
|
35 |
1 |
-10,00,000 |
12,50,000 |
|
|
36 |
2 |
0 |
12,50,000 |
|
|
37 |
3 |
0 |
12,50,000 |
|
|
38 |
4 |
0 |
12,50,000 |
|
|
39 |
5 |
0 |
12,50,000 |
|
|
40 |
6 |
0 |
12,50,000 |
|
|
41 |
7 |
0 |
12,50,000 |
|
|
42 |
8 |
0 |
12,50,000 |
|
|
43 |
9 |
0 |
12,50,000 |
|
|
44 |
10 |
0 |
12,50,000 |
|
|
45 |
11 |
0 |
12,50,000 |
|
|
46 |
12 |
0 |
12,50,000 |
|
|
47 |
13 |
0 |
12,50,000 |
|
|
48 |
14 |
0 |
12,50,000 |
|
|
49 |
15 |
0 |
12,50,000 |
|
|
50 |
|
21,45,400 |
|
|
|
|
|
|
|
|
|
|
IRR |
5.22% |
|
|
Although the returns are guaranteed, the rate of return is lower than that of a typical debt instrument. For those looking to park a lump sum, there are alternative investment options, such as bank fixed deposits, that offer guaranteed higher returns.
Additionally, the life coverage provided under the HDFC Life Guaranteed Wealth Plus Plan is minimal.
The life cover and guaranteed benefits are the key features of the HDFC Life Guaranteed Wealth Plus Plan. However, neither aspect is compelling enough to make this plan a worthwhile investment. Overall, the HDFC Life Guaranteed Wealth Plus Plan is a traditional policy with mediocre returns.
HDFC Life Guaranteed Wealth Plus Plan Vs Other Investments
The returns offered by the HDFC Life Guaranteed Wealth Plus Plan are not sufficient to consider it a viable investment option.
To determine the best way to utilize your savings, let’s compare the returns of other investment options with those of the HDFC Life Guaranteed Wealth Plus Plan using the metrics from the previous illustration.
HDFC Life Guaranteed Wealth Plus Plan Vs Pure Term + ELSS
For life coverage, a pure-term life insurance policy with a sum assured of ₹12.50 lakhs costs a single premium of ₹54,500 for a 15-year policy term.
In the previous illustration, the premium was ₹10 lakhs. By choosing a pure-term life insurance policy, you save ₹9.45 lakhs, which can be invested to achieve your future goals.
|
Pure Term Life Insurance Policy |
|
|
Sum Assured |
₹ 12,50,000 |
|
Policy Term |
15 years |
|
Premium Paying Term |
Single Pay |
|
Annualised Premium |
₹ 54,500 |
|
Investment |
₹ 9,45,500 |
|
|
|
Term insurance + ELSS |
|
|
Age |
Year |
Term Insurance premium + ELSS |
Death benefit |
|
35 |
1 |
-10,00,000 |
12,50,000 |
|
36 |
2 |
0 |
12,50,000 |
|
37 |
3 |
0 |
12,50,000 |
|
38 |
4 |
0 |
12,50,000 |
|
39 |
5 |
0 |
12,50,000 |
|
40 |
6 |
0 |
12,50,000 |
|
41 |
7 |
0 |
12,50,000 |
|
42 |
8 |
0 |
12,50,000 |
|
43 |
9 |
0 |
12,50,000 |
|
44 |
10 |
0 |
12,50,000 |
|
45 |
11 |
0 |
12,50,000 |
|
46 |
12 |
0 |
12,50,000 |
|
47 |
13 |
0 |
12,50,000 |
|
48 |
14 |
0 |
12,50,000 |
|
49 |
15 |
0 |
12,50,000 |
|
50 |
|
46,62,162 |
|
|
|
|
|
|
|
|
IRR |
10.81% |
|
In this scenario, the saved premium is invested in an ELSS fund. Risk-averse investors can stick to debt instruments. The pre-tax final maturity value in the ELSS fund would be ₹51.75 lakhs.
After accounting for capital gains tax, the final maturity value is ₹46.62 lakhs. This substantial corpus can help you achieve various goals.
|
ELSS Tax Calculation |
|
|
Maturity value after 15 years |
51,75,256 |
|
Purchase price |
9,45,500 |
|
Long-Term Capital Gains |
42,29,756 |
|
Exemption limit |
1,25,000 |
|
Taxable LTCG |
41,04,756 |
|
Tax paid on LTCG |
5,13,095 |
|
Maturity value after tax |
46,62,162 |
The IRR for the combination of pure-term life insurance and ELSS investment is 10.81% (post-tax return). This rate outpaces inflation, making it a favourable investment option. The substantial corpus and inflation-beating returns are missing in the HDFC Life Guaranteed Wealth Plus Plan.
Final Verdict on HDFC Life Guaranteed Wealth Plus Plan
HDFC Life Guaranteed Wealth Plus is designed as an insurance-cum-savings plan to provide financial security through death benefits or financial support via guaranteed survival/maturity benefits for achieving your financial goals. However, it falls short in both aspects.
The returns analysis clearly shows that even the lump sum variant yields relatively low returns. If you opt for the Income variant, the regular payouts will further reduce the returns.
To achieve future goals, especially in an inflationary environment, your investment should generate a post-tax return higher than the inflation rate and also has a high agent commission. Therefore, investing in HDFC Life Guaranteed Wealth Plus is not advisable.
To secure your family, you need a pure-term life insurance policy with an adequate sum assured, available at affordable premiums. To achieve your goals, invest in a diversified investment portfolio. Always assess your risk tolerance, time frame, and life goals before investing.
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For assistance in choosing the right investment or insurance product, consult a Professional Certified Financial Planner. Their expertise will help you create a tailor-made financial plan that considers all your requirements.
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