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HDFC Life Super Income Plan is a non-linked participating and limited pay money-back insurance plan.
This plan comes with assured benefits and additional bonuses to plan the financial needs of an individual. Also, this insurance plan offers guaranteed income to the policyholder for a period of 8-15 years.
In this article, we will analyze the specific details of this plan and decide whether this insurance plan is really a worthy investment in the year 2019!
Table of Contents
- How does the HDFC Life Super Income Plan actually work?
- HDFC Life Super Income Plan: Key Features
- HDFC Life Super Income Plan: Survival Benefits
- HDFC Life Super Income Plan: Maturity Benefit
- HDFC Life Super Income Plan: Death Benefits
- HDFC Life Super Income Plan: Bonuses
- HDFC Life Super Income Plan: Surrender benefits
- HDFC Life Super Income Plan: Illustration and Critical Analysis
- HDFC Life Super Income Plan: Drawbacks
- Final Verdict: Should you purchase HDFC Life Super Income Plan?
- HDFC Life Super Income Plan: Commonly Asked Questions
How does the HDFC Life Super Income Plan actually work?
You should choose to pay the premiums for 8, 10 or 12 years and based on the choice of your plan.
You will receive the payouts for 8,10,12 or 15 years, based on your selection.
Plus, you will receive the Life cover for the entire policy term.
Company CLAIMS to provide the annual returns in the range of 8% – 12.5%!
We will do a detailed analysis of the return on investment of this plan later in this post.
HDFC Life Super Income Plan: Key Features
1. After completing your Premium payment term in this plan, you will get regular monthly or yearly income for a period of 8 to 15 years, along with insurance coverage throughout the policy term.
2. Range of premium payment and policy term options are available. Below are the 6 options. You should choose any one of the 6 options.
3. Survival Benefits varying from 8% to 12.5% of the Sum Assured are payable on Maturity each year during the payout period. 8% to 12.5% seems to be high return as claimed by the company. We will do our detailed analysis of this claim later in this post.
The Sum assured is known to the policyholder at the inception and paid by the insurer at the end of the year during the payout period. Details on Survival benefits are described in the next section.
4. Eligibility criteria, age at entry and minimum sum assured is given in the table below:
5. You can calculate the Sum Assured from HDFC Life online calculator. You will find a dashboard as shown below, where you can enter your premium amount and frequency to get the Sum Assured. Or, you can enter your desired Sum Assured to get your Premium Amount to be paid.
6. You can choose to pay the premiums as per your choice. You can choose to pay the premiums either monthly, quarterly, half-yearly or yearly. The below table shows the Premium Payment Frequency with a minimum instalment amount.
There is no upper limit for the Maximum Installment amount.
7. Opportunity to avail many other benefits and bonuses
In the next section, we will analyze the key benefits and bonuses provided by HDFC Life Super Income Insurance Plan.
At this point, let’s have a look at the short video illustration on the review of HDFC Life Super Income Plan. This video briefly reviews all the essential aspects of this plan.
HDFC Life Super Income Plan: Survival Benefits
This benefit is expressed as the percentage of the total sum assured amount on maturity.
According to the company’s claim, you will get 100% or 120% of the Sum Assured on Maturity, during the payout period. The percentage depends on your variant. The benefit is spread evenly across the payout term. (Remember: 100% or 120% is not returns. This includes the principal also. That is this includes the premium you have paid.)
- Survival Benefits are paid every year during a payout period which is after the completion of premium payment period. They are expressed as the percentage of Sum Assured on Maturity.
- Total Survival Benefits are calculated as Survival Benefits per year multiplied by their respective payout period.
- Premium Payment Term (A) + Payout Term(B) = Policy Term (A+B)
Look at the table below to know about the Survival Benefit percentages:
For a detailed analysis of survival benefits, refer to Illustrative example discussed later in this post.
HDFC Life Super Income Plan: Maturity Benefit
At maturity, all the outstanding premiums have been paid off. Maturity Benefit consists of:
- Last survival benefit payout
- Accrued reversionary bonuses
- Interim bonuses (if any)
- Terminal bonuses (if any)
The last instalment of survival benefit is paid along with the payment of maturity benefit.
HDFC Life Super Income Plan: Death Benefits
In the event of the demise of the policyholder during the policy term, the nominee will get:
- Sum Assured on Death
- Accrued reversionary bonuses
- Interim bonus (if any)
- Terminal bonus (if any)
Sum Assured on Death shall be the higher of:
1. Sum Assured on Maturity
2. 10 times Annualised Premium for entry age up to 50 years or 7 times Annualised Premium for entry age greater than 50 years
As you can see that there are two components to the calculation of death benefits.
The first component, that is Sum Assured on maturity.
The second component is a multiple of your premium, 10 times annual premium if your entry age is up to 50 years and 7 times annual premium if your entry age is over 50 years.
For example, If you choose to invest in option 3 of the HDFC Life Super Income Plan, estimated death benefits will be described as follows:
No further survival benefits shall be paid after the demise of the policyholder.
Let’s discuss bonuses now.
HDFC Life Super Income Plan: Bonuses
The following are the types of bonuses provided by the insurer along with this life insurance plan:
-
Reversionary Bonus:
- This bonus is declared by the insurer at the end of the financial year.
- It is expressed as the percentage of the sum assured amount on maturity.
- This bonus is NOT an assured benefit as it usually depends on several factors. But, once it is added, it is guaranteed to be payable.
- In case of policy surrender or unexpected demise of the policyholder during the inter-valuable duration, the insurance plan will be eligible to get interim bonuses as per the terms and conditions of the insurance company.
- Please note that these bonuses are in the future value of maturity and not in the present value. So this will NOT have the compounding effect.
- Current Reversionary bonus rates are given as follows:
- This bonus may also be added to an insurance plan and enables the service provider to pay a share of the surplus offered.
- Just like the reversionary bonus, this benefit is also not assured and depends on the company policies and actual future experience.
Let’s say your Policy Term is 20 years, you will get a simple reversionary bonus of 4.5% of the sum assured. Assume that in our policy, we are taking the sum assured on maturity to be Rs. 10,00,000.
Therefore, the annual bonus will Rs 45,000 per annum. You will get this benefit at the time of policy maturity.
For 20-year policy term, you will get the reversionary bonus,
Terminal Bonus:
Its value is not fixed, but we will find the terminal bonus with some assumptions and approximations later in the illustration.
HDFC Life Super Income Plan: Surrender benefits
Availability of Policy Loan:
Once an insurance policy acquires its surrender value, the policy owner may avail the facility of policy loan which is up to 80% of the policy’s surrender value.
HDFC Life Super Income Plan: Illustration and Critical Analysis
Let us say, you choose a policy term of 20 years, as provided in option 3 with an assured sum of Rs. 10 Lacs.
To get the sum assured of Rs. 10 Lacs, you have to pay the annual premium of Rs. 1,35,829 for 10 years.
And, if you want illness cover, then you have to pay the extra sum of Rs. 1,690 p.a. and your annual premium will be Rs. 1,37,519 for 10 years.
Note: Calculations are done using the online calculator of HDFC Life.
You will receive the benefits after 10 years, as shown in the table below.
The table shown below, highlights overall inflow and outflow over the 20-year policy term.
We will find out how much returns you may get on maturity!
Your return for this 20-year investment is 6% p.a. (with assumptions).
Even though this plan CLAIMS the benefits in the high range of 8.5% and 12%. You are ONLY getting a return of 6%. Note: the bonuses are non-guaranteed benefits and they may vary with the performance of company in the market and may vary each year!
HDFC Life Super Income Plan: Drawbacks
1. Hidden costs and non-guaranteed benefits.
- The commission is been paid to agents. In the first year, it is around 30%, thereafter it is around 5% in the upcoming years.
- Transparency: When you pay your premium, you will have no clue about how much goes towards expenses, how much is getting invested and where it is getting invested. It is completely not tranparent.Whereas in mutual fund investment, expenses are low and they are more transparent.
- Comparatively, SEBI (regulator of mutual funds) is more proactive in stopping misspelling by agents. IRDA (regulator of Insurance) follows the same commission structure to agents which got decided in 2016. SEBI revised the expense ratio limit multiple times and even in April 2019, there was a downward revision of expense ratio limits that hugely benefitted mutual fund investors.
- Marketing expenses: costs involved in advertising and various incentives are given to the marketing team.
- Policy operational expenses.
Many such costs are summed up and deducted from the premiums paid by the customers.
It will take more than five years for the policy to recover these expenses from the returns generated. That’s why in the first five years the surrender charges are less than the premiums you paid. That means literally there are no returns for the first three to five years.
Also, the benefits provided by this plan during maturity are not guaranteed.
2. Low returns (6%), as calculated in the above illustration.
- Such lower returns can’t even beat inflation for 20 long years.
- Mutual funds can give much better returns with fewer risks.
- Even PPF can give guaranteed returns in the range of 8%!
3. For a given assured sum, the annual premium is high and has increased further over the years.
4. Most of the calculations are done by HDFC Life Calculator, and the basis of this calculation is unclear.
Instead of investing in HDFC Life Super Income Plan; with the same amount of investment in the combination of Mutual Fund and Term Insurance Plan you will achieve much better benefits.
In short, you should avoid this HDFC Life Super Income plan.
Final Verdict: Should you purchase HDFC Life Super Income Plan?
In short, the answer is NO.
As you have noticed in the above analysis that the Survival Benefits, though they are guaranteed, their rates are been reducing every year!
Reversionary and Terminal bonuses are NOT assured bonuses; they depend on the profit that the company makes in that duration and many other hidden factors. These bonuses don’t get the compounding effect.
All you need is better returns on your investment and good insurance, right?
So, instead of opting for HDFC Life Super Income Plan, you must consider keeping your investment and insurance separate. With the same amount of investment, you will achieve much higher returns and better insurance benefits.
Finally, don’t get into the trap of some 3rd party websites endorsing such plan or your own bank’s relationship manager misselling this policy as they get the commission for each sale of the policy.
HDFC Life Super Income Plan: Commonly Asked Questions
1. What are the guaranteed returns in HDFC Life Super Income Plan?
Survival Benefits are guaranteed. Whereas the reversionary and terminal bonuses are not guaranteed, their amount may vary from time to time.
2. What will happen if you stop paying the premiums?
If you stop paying the premiums, the insurance policy will still continue but with the reduced benefits. However, you should revive it within two years from the date of their first unpaid premium. Otherwise, it lapses.
3. What is Free-look period of HDFC Life Super Income Plan?
Free-look period is 15 days from the date of receipt of the policy.
Free-look period for the policies purchased through Distance Marketing will be 30 Days from the date of the receipt.
Please note, Distance marketing refers to the policies sold through telephone or online or any other method which do not involve face to face selling.
You can cancel the policy during the free look-in period. The premium will be refunded without any questions. If your Bank relationship manager has missold this policy, you may exercise this option before the freelook-in period.
4. How to cancel HDFC Life Super Income Plan?
You can cancel the plan within the free look in period of 15/30 days, your premium will be refunded but they are subject to deduction of the:
- The proportionate risk premium for the period on cover,
- The expenses incurred by the company on medical examination (if any) and
- Stamp duty.
In OFFLINE Mode you can fill & submit the Mandate Deactivation Form available at any HDFC Life branch.
In ONLINE Mode you may send an email at: atservice@hdfclife.com from your registered email ID and request for deactivation.
A policy once returned shall not be revived, reinstated or restored at any point of time and a new proposal will have to be made for a new policy.
If you have any further queries, feel free to ask them in the comment section below.
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