HDFC SL Crest Plan Review (2023): Is It Worth Investing?
Everyone wants to ride the crest of the wave with their investment.
HDFC SL crest provides Life Protection along with Market Linked returns.
Will this Insurance Plan help to build your investment portfolio?
This detailed analysis will let you know, whether you can ride the crest of the wave by investing in HDFCSL Crest Plan.
Table of Contents:
1.)What is HDFC SL Crest Plan?
2.)Features of the HDFC SL Crest Plan
3.)Eligibility Criteria for the HDFC SL Crest Plan
4.)Investment Options of the HDFC SL Crest Plan
- Maturity Benefit
- Death Benefit
- Partial Withdrawals
5.)Various Charges under the HDFC SL Crest Plan
6.) A Grace Period, Discontinuance & Revival of the HDFC SL Crest Plan
7.)Free look-up period of the HDFC SL Crest Plan
8.)Surrendering the HDFC SL Crest Plan
9.) Advantages of the HDFC SL Crest Plan
10.) Disadvantages of the HDFC SL Crest Plan
12.) IRR Analysis of the HDFC SL Crest Plan
13.) HDFC SL Crest Plan Vs Other Investment Alternatives
14.) HDFC SL Crest Plan Vs. Pure Term Insurance + ELSS
15.)Final verdict on the HDFC SL Crest Plan
What is HDFC SL Crest Plan?
It is a Unit Linked, Non – Participating, Life Insurance Plan.
In this plan, your premiums (net of charges) will be invested in the fund(s) as per the investment option of your choice. On maturity of the plan, you will receive the fund value. In case of your unfortunate death during the policy term, your nominee will receive the greater Sum Assured (fewer withdrawals) or fund value.
Features of the HDFC SL Crest Plan
- Pay Premium(s) for just 5 years and enjoy a Policy Term of 10 years.
- Sum Assured could be selected up to 20 times the Annual Premium.
- Option to invest in any of the 10 fund options available and create your investment strategy.
- Partial Withdrawal from Funds is allowed (post lock-in period) to meet your financial emergencies.
- Fund switch option allows you to switch between funds.
Eligibility Criteria for the HDFC SL Crest Plan
Let us look at the basic information about this plan at a glance below;
|Entry Age||14 years||55 years|
|Maturity Age||NA||65 Years|
|Premium amount||Rs. 50,000||No Limit|
|Sum Assured||•Age at entry below 45 years – 10 * Annualized premium
•Age at entry above 45 years – 7 * Annualized premium
|20 * Annualized Premium|
|Premium Paying Term||5 years|
|Policy Term||10 years|
|Premium Payment Frequency||Annual|
Investment Options of the HDFC SL Crest Plan
This plan will enable you to invest in any of the 10 non-guaranteed fund(s). You can make your investment strategy by switching or redirecting your future premium.
|Fund Name||Money Market Instruments Cash & Deposits & Liquid Mutual Fund||Government Securities, Fixed Income Securities||Equity||Risk & Return Rating|
|Income Fund||0-20%||80-100%||–||Moderate to High|
|Balanced Fund||0-20%||0-60%||40-80%||Moderate to High|
|Blue Chip Fund||0-20%||–||80-100%||Very High|
|Opportunities Fund||0-20%||–||80-100%||Very High|
|Equity Plus Fund||0-20%||0-20%||80-100%||Very High|
|Diversified Equity Fund||0-40%||0-40%||60-100%||Very High|
|Discovery Fund||0-10%||0-10%||90-100%||Very High|
|Equity Advantage Fund||0-20%||0-20%||80-100%||Very High|
Benefits of the HDFC SL Crest Plan
At the end of the policy term, the fund value prevailing on the date of maturity will be paid to the policyholder. You can opt for the settlement option where you can receive the maturity benefit in periodical instalments over a period that may extend a maximum of 5 years.
In case of Life Assured’s unfortunate demise, the nominee will receive;
- Sum Assured less all withdrawals made during the two years immediately preceding the death of the Life Assured and
- Unit Fund Value
The Minimum death benefit will be at least 105% of the total premiums paid.
You can make lump sum partial withdrawals from your funds after 5 years of your policy. The minimum withdrawal amount is Rs. 10,000.
Various Charges under the HDFC SL Crest Plan
Premium Allocation Charge
After deducting this charge from your premiums, the remainder is invested to buy units.
|Year||Years 1 & 2||Year 3||Years 4 & 5|
|Premium Allocation Charge||4%||3%||2%|
Fund Management Charge (FMC)
The daily unit price already includes the fund management charge of 1.35 % per annum, charged daily, of the fund’s value.
Policy Administration Charge:
A Policy Administration Charge of 0.31 % per month of the original annual premium will be deducted monthly and will increase by 5% on every policy anniversary, subject to a maximum charge of Rs. 500 per month.
The amount of the charge taken each month depends on your age & level of coverage.
Any Policy alteration request initiated by the Policyholder will attract a charge of Rs. 250 per request.
Partial withdrawal charge:
A partial withdrawal request from the Policyholder will attract a charge of Rs. 250 per request. However, if the request is executed through the Company’s web portal the Policyholder will be charged Rs. 25 per request.
A fund switch request from the Policyholder will attract a charge of Rs. 250 per request. However, if the request is executed through the Company’s web portal the Policyholder will be charged Rs. 25 per request.
A premium redirection request initiated by the Policyholder will attract a charge of Rs. 250 per request. However, if the request is executed through the Company’s web portal the Policyholder will be charged Rs. 25 per request.
This charge depends on the year of discontinuance and the annual premium amount. There is no charge after the 5th policy year.
Inference from the charges:
Any investment will involve some administration or handling charge. This policy involves some rationale charges like Fund management charges & mortality charges. Other than these two charges all other charges are irrational. A partial withdrawal charge won’t be levied on any other investments. Levying charges for partially withdrawing your own money is not a good sign. These charges will pull down the potential return in the long run.
A Grace Period, Discontinuance & Revival of the HDFC SL Crest Plan
This plan has a grace period of 30 days for paying your Premium Amount.
Discontinuance of Policy during the lock-in-Period (5 years) –
For other than single premium policies, upon the expiry of the grace period, the fund value after deducting the applicable discontinuance charge shall be credited to the discontinued policy fund and the risk cover and rider cover, if any, shall cease.
Discontinuance of Policy after the lock-in-Period (5 years) –
The policy shall be converted into a reduced paid-up policy with the paid-up sum assured i.e., the original sum assured multiplied by the total number of premiums paid to the original number of premiums payable as per the terms and conditions of the policy.
You have the option to revive a discontinued policy within three consecutive years from the date of the first unpaid premium.
Free look-up period of the HDFC SL Crest Plan
In case you disagree with any of the terms & conditions of the HDFC SL Crest Plan, you have the option of returning the policy, within 15 days from the date of receipt of the policy. The Free-Look period for policies purchased through distance marketing will be extended up to 30 days.
Surrendering the HDFC SL Crest Plan
In the case of Single premium policies, the policyholder has the option to surrender at any time during the lock-in period. Upon receipt of a request for surrender, the fund value, after deducting the applicable discontinuance charges, shall be credited to the discontinued policy fund. On completion of the lock-in period of 5 years, the fund value as of date shall be payable.
In case of other than single premium policies –
Surrender of the policy before the lock-in period – The policy shall continue to be invested in the discontinued policy fund and the proceeds from the discontinuance fund shall be paid at the end of the lock-in period of 5 years.
Surrender of the policy after the lock-in period – The policyholder has the option to surrender the policy at any time after the lock-in period. Upon receipt of the request for surrender, the fund value as of the date of surrender shall be payable.
Advantages of the HDFC SL Crest Plan
- Dual benefit of Life Cover & Market Linked Return.
- The premium is invested as per your fund choice.
- Rider options enhance the life cover.
Disadvantages of the HDFC SL Crest Plan
- The policy term (10 years) & the premium paying term (5 years) is fixed. Increasing or decreasing policy terms, Premium paying terms, and sum assured is not allowed.
- Premium can be paid only in the Annual mode.
- The premium has invested a net of charges. This will reduce the potential return of the policy.
- There is no loyalty benefit or any other bonus addition.
- The lock-in period is for 5 years.
- No loans are available on this policy.
For more details, you can read the HDFC SL Crest Policy Brochure.
You may be in a dilemma of whether this policy should be in your portfolio or not. This confusion could be eliminated by analyzing the benefit illustration of this policy.
Let us figure out the potential Internal Rate of Return (IRR) of the HDFC SL Crest Plan using the benefit illustration given in the Policy Brochure.
Since the HDFC SL Crest is a Market Linked product, we can compare the potential returns with other Market Linked Instruments.
IRR Analysis of the HDFC SL Crest Plan
The Assumptions for Comparisons:
|Age in Years||35 Years|
|Policy term||10 years|
|Premium Paying term||5 years|
|Annual Premium||Rs. 50,000|
|Sum Assured||Rs. 5,00,000|
|At 4%||At 8%|
In this illustration, the policyholder pays a premium for 5 years but the life cover is for 10 years. At the end of the policy term, the policyholder will receive the maturity benefit. Fund value as of the date of maturity is paid to the policyholder.
|At 4% p.a.||At 8% p.a.|
|Age||Year||Annualized premium / Maturity benefit||Death benefit||Annualized premium / Maturity benefit||Death benefit|
Here the assumed future investment rates are @4% & @8%. 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 your future investment performance.
The IRR at @4% future investment rate is negative. The reason behind this is that the policy levies a lot of charges. So, the premium is invested after the deduction of these charges. There is no transparency in the charges & after the money that goes into the investment bucket. Even in the best-case scenario i.e., @8% future investment rate the IRR is 3.84%. This rate is far below the fixed instrument rate. Under the HDFC SL Crest Plan, the sum assured is also too low.
HDFC SL Crest Plan Vs Other Investment Alternatives
Since HDFC SL Crest is not beneficial for a policyholder, let us take the analysis one step further. Comparing the return of HDFC SL Crest with other investments will give us clear insight into whether there are other better alternatives available in the market.
HDFC SL Crest Plan Vs. Pure Term Insurance + ELSS
Here for comparison purposes, we have chosen a sum assured of Rs. 5 lakhs in a Pure Term Insurance Policy. The annual cash flow is Rs. 50,000.
A pure term policy for a sum assured of Rs. 5 lakhs will cost Rs. 3,800 for a 10-year term period & 5-year premium paying term. So, the balance amount of Rs. 46,200 could be invested for wealth accumulation.
|Pure Term policy|
|Sum Assured||Rs. 5 Lakhs|
|Policy Term||10 years|
|Premium Paying Term||5 Years|
|Annual Premium||Rs. 3,800|
|Balance amount for investment||Rs. 46,200|
In general, always opt for an adequate life cover considering all your goals & liabilities separately from your choice of investment. This will be a better combination for Investments.
|Term insurance + ELSS|
|Age||Year||Term Insurance premium + ELSS||Death benefit|
Here we have assumed that the balance amount is being invested in the market Via the ELSS fund. You can infer from the table below that the IRR (Post-tax) for Pure Term + ELSS is 10.34%. This is an inflation-beating return. The final maturity value will aid you in achieving your life’s financial goals.
Final verdict on the HDFC SL Crest Plan
HDFC SL Crest Plan is a plain Vanilla, Unit-Linked Insurance policy. You pay the premium for limited years & it gets invested in the stock market. Every time the premium is invested after the deduction of various charges.
Even though it is a Market Linked Product, the potential return is on the lower side due to the hefty charges. So, having the HDFC SL Crest Plan in your portfolio doesn’t have an edge over other market-linked products. Also, from the life cover perspective, the sum assured is too low.
You can always consult your Financial Advisor for estimating the required life cover & also to build a diversified investment portfolio to achieve your life’s financial goals.
Leave a Reply