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What do you think a Comprehensive financial solution should contain? Is it Just Insurance and Investment or should combine all factors such as Cash flow analysis and debt Structure with Insurance and Investment Management?
Will ICICI Pru Cash Advantage Plan be just another plan with insurance and investment or will it provide you with a Comprehensive Financial Solution by taking into account all the above factors? Buying ICICI Pru Cash Advantage Plan is a Good or Bad decision?
In this review, let’s dissect the advantages(pros) and disadvantages(cons) of the ICICI Pru Cash Advantage Plan and find out whether is it worth the hype.
Let’s get started!
Table of Contents
1.What is the ICICI Pru Cash Advantage Plan?
2.What are the Features of the ICICI Pru Cash Advantage Plan?
3.Who Is Eligible For ICICI Pru Cash Advantage Plan?
4.ICICI Pru Cash Advantage Plan – Review of Benefits in Detail
5.Grace Period, Discontinuance and Revival of ICICI Pru Cash Advantage Plan – Analysis
6.What are the Advantages of the ICICI Pru Cash Advantage Plan?
7.What are the Disadvantages of the ICICI Pru Cash Advantage Plan?
8.Research Methodology of ICICI Pru Cash Advantage Plan
- Benefit Illustration – IRR (Internal rate of return ie. Interest rate) Analysis of ICICI Pru Cash Advantage Plan
9. ICICI Pru Cash Advantage Plan vs Comparison with Other Investment Options
- ICICI Pru Cash Advantage Plan Vs. Pure Term + ELSS
- ICICI Pru Cash Advantage Plan vs ICICI Pru Guaranteed Income For Tomorrow
- ICICI Pru Cash Advantage Plan vs ICICI Pru Assured Savings Plan
10. ICICI Pru Cash Advantage Plan vs Other Investment Options – Review Conclusion
11.Final Verdict on ICICI Pru Cash Advantage Plan – Good or Bad Investment Option?
1.What is the ICICI Pru Cash Advantage Plan?
ICICI Pru Cash Advantage Plan is a Non-linked Participating Life Individual Savings Product. It offers you bonuses,
a guaranteed lump sum at maturity, a guaranteed monthly payment for ten years, and life insurance that protects your family’s finances in the event of your death.
2.What are the Features of the ICICI Pru Cash Advantage Plan?
- Life cover for the entire policy term.
- Choice of paying premiums for – 5, 7, or 10 years.
- The payout term commences immediately after the premium payment term (PPT).
- Guaranteed Cash Benefit (GCB) equal to 1% of GMB every month throughout the payout term of 10 years.
- Guaranteed Maturity Benefit (GMB) at the end of the policy term.
3.Who Is Eligible For ICICI Pru Cash Advantage Plan?
| Premium Payment Options | 5 pay | 7 pay | 10 pay |
| Premium Payment Term (PPT) | 5 years | 7 years | 10 years |
| Payout Term | 10 years | ||
| Policy Term (PPT + Payout Term) | 15 years | 17 years | 20 years |
| Minimum annual Premium | ₹ 30,000 | ₹ 18,000 | ₹ 12,000 |
| Minimum age at entry | 3 years | 1 year | 0 |
| Maximum age at entry | 60 years | ||
| Maximum Annual Premium | Unlimited | ||
| Sum Assured on death | Age at entry | Sum Assured Multiple | |
| < 45 years | 10 | ||
| 45 to 54 | 7 or 10 | ||
| > 54 | 7 | ||
| Min / Max age at Maturity | 18 / 80 | ||
| Premium Payment Mode | Annual / Half-yearly / Monthly | ||
| Cash benefit Mode | Annual / Monthly | ||
4.ICICI Pru Cash Advantage Plan – Review of Benefits in Detail
Death Benefit – Review
On the death of the life assured during the ICICI Pru Cash Advantage policy term, irrespective of the Guaranteed Cash Benefits paid, the following benefits are payable to the nominee. The death benefit is the highest of
- Sum Assured on death plus Bonuses
- Guaranteed Maturity Benefit plus Bonuses
- Minimum Death Benefit (105% of total premiums received up to the date of death.
Guaranteed Cash Benefit (GCB) – Review
Throughout the ICICI Pru Cash Advantage Plan payout term, Guaranteed Cash Benefit (GCB) is payable in Advance. GCB can be received in monthly or annual installments. GCB is a percentage of the Guaranteed Maturity Benefit (GMB) and depends on cash benefit mode as per the illustration below.
| Cash benefit mode | Guaranteed Cash Benefit |
| Monthly | 1% of GMB |
| Annual | 11.5% of GMB |
Maturity Benefit – Review
On survival of the life assured till the end of the ICICI Pru Cash Advantage policy term, Maturity Benefit is payable. Maturity Benefit = Maximum of
- Guaranteed Maturity Benefit plus vested reversionary bonuses, if any plus terminal bonus, if any
- 100.1% of total premiums paid less GCBs received.
5.Grace Period, Discontinuance and Revival of ICICI Pru Cash Advantage Plan – Analysis
Grace period
A grace period for payment of ICICI Pru Cash Advantage Plan premium of 15 days applies for monthly premium payment mode and 30 days for other modes.
Discontinuance
Your ICICI Pru Cash Advantage policy will acquire a surrender value on payment of all premiums for at least two consecutive years.
If you discontinue your premiums before your ICICI Pru Cash Advantage policy has acquired a surrender value, no benefits will be payable under the policy.
If the ICICI Pru Cash Advantage policy has acquired a surrender value and no future premiums are paid, the policy may continue as a paid-up policy with reduced benefits.
Revival
An ICICI Pru Cash Advantage policy that has discontinued payment of premiums may be revived within 5 years from the due date of the first unpaid premium and before the termination date of the ICICI Pru Cash Advantage policy.
6. What are the Advantages of the ICICI Pru Cash Advantage Plan?
- Cash benefits are guaranteed at regular intervals.
- You can avail of a loan up to 80% of the Surrender Value after the ICICI Pru Cash Advantage policy acquires a surrender value.
7.What are the Disadvantages of the ICICI Pru Cash Advantage Plan?
- Accrual of cash benefits is not allowed. This leads to a chance of utilising the cash benefit for discretionary expenses.
- The cash benefit and Maturity Benefit are rigid. One can’t reschedule based on the requirement.
8.Research Methodology of ICICI Pru Cash Advantage Plan
ICICI Pru Cash Advantage provides regular cash flow through cash benefits and lumpsum benefits at maturity. But only a part of the Maturity Benefit is guaranteed, as it includes bonuses. To estimate the potential return let us work out the Internal Rate of Return.
Figures are taken from the ICICI Pru Cash Advantage policy brochure.
Benefit Illustration – IRR (Internal rate of return ie. Interest rate) Analysis of ICICI Pru Cash Advantage Plan
A 35-year-old male opts for an ICICI Pru Cash Advantage plan for a Sum Assured of ₹ 10 Lakhs. The policy term is 20 years and the premium paying term is 10 years. The annualised premium is ₹ 1 lakh. From 11th year to the 20th year, he is eligible for a monthly Income Benefit. At the end of the ICICI Pru Cash Advantage policy term, he receives the Maturity Benefit.
| Male | 35 Years |
| Sum Assured | ₹ 10 Lakhs |
| Annualised Premium | ₹ 1,00,000 |
| Policy Term | 20 years |
| Premium paying term | 10 years |
The illustration assumes two future returns – 4% p.a. and 8% p.a. The returns shown in the illustration are not guaranteed and they are not the upper or lower limits.
| Cash Benefit (Monthly) | Maturity Benefit (Including Bonus) | IRR | |
| At 4% | ₹ 5,307 | ₹ 7,66,000 | 2.60% |
| At 8% | ₹ 5,307 | ₹ 15,94,000 | 5.87% |
He is eligible for a monthly Guaranteed cash benefit of ₹ 5,307 for the next 10 years. The Maturity Benefit varies depending on the bonus rate declared. At the 4% scenario, the final maturity value is ₹ 7.66 Lakhs. The IRR calculation for the 4% scenario results in 2.60%. The final maturity value at the 8% scenario is ₹ 15.94 Lakhs. The IRR calculation for the 8% scenario results in 5.87%.
The IRR for this plan is lower than inflation. In the long run, especially after 20 years, the final maturity value will not be helpful to meet the inflated cost of your goals. Also, down the lane, the cash benefit will lose its purchasing power. Neither cash benefit nor Maturity Benefit is beneficial under the ICICI Pru Cash Advantage plan.
9.ICICI Pru Cash Advantage Plan vs Other Investment Options
Now, let us compare the calculated figures with other investment products.
For comparison purposes, let us assume the same figures as seen in the previous benefit illustration. The Sum assured is ₹ 50 Lakhs, the policy term is 20 years and the premium paying term is 10 years.
i.) ICICI Pru Cash Advantage Plan Vs. Pure Term + ELSS
For these metrics, a pure-term life insurance policy will cost you ₹ 8,700. So, you will be left with ₹ 91,300 per year for investment. With this investment, we need to look for regular income and Maturity Benefits.
| Pure Term Life Insurance Policy | |
| Sum Assured | ₹ 10 Lakhs |
| Annualised Premium | ₹ 8,700 |
| Policy Term | 20 years |
| Premium paying term | 10 years |
| ELSS Investment | ₹ 91,300 |
During the first 10 years, the chosen investment vehicle i.e., ELSS is used to accumulate the required corpus. The pre-tax value of the ELSS investment is ₹ 17.94 Lakhs. After payment of capital gains tax, the post-tax final maturity value is ₹ 17.16 Lakhs. Refer to the tax calculation below.
| 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 |
Invest ₹ 17.16 Lakhs in a 6% investment return. So that, you can have a monthly withdrawal of ₹ 5,307 for the next 10 years. This arrangement is to match the cash benefit under the ICICI Pru Cash Advantage Plan. The final investment value at the end of the policy term is withdrawn fully to match the Maturity Benefit similar to the ICICI Pru Cash Advantage plan. This arrangement leaves you a maturity value of ₹ 22.11 Lakhs.
| Life Cover | Cash Benefit (Monthly) | Maturity Benefit (Including Bonus) | IRR | |
| ICICI Pru Cash Advantage At 4% | ₹ 10 Lakhs | ₹ 5,307 | ₹ 7,66,000 | 2.60% |
| ICICI Pru Cash Advantage At 8% | ₹ 10 Lakhs | ₹ 5,307 | ₹ 15,94,000 | 5.87% |
| Pure Term + ELSS | ₹ 10 Lakhs | ₹ 5,307 | ₹ 22,11,416 | 7.53% |
The above table clearly shows that, in this alternate investment you get a better IRR. All the criteria – Life cover, Cash benefit, and Maturity Benefit are met, at the same time the returns are higher than the inflation rate. Even you can have a step-up withdrawal to cope with the inflation. ICICI Pru’s cash Advantage is lacking to cope the inflation in the long run.
ii.) ICICI Pru Cash Advantage Plan vs ICICI Pru Guaranteed Income For Tomorrow
Guaranteed Income For Tomorrow (GIFT), a participating non-linked life insurance plan from ICICI Pru with its Guaranteed Benefits and policy coverage, seeks to assist you in reaching your life’s objectives.
Read the complete review of ICICI Pru Guaranteed Income For Tomorrow.
iii.) ICICI Pru Cash Advantage Plan vs ICICI Pru Assured Savings Plan
The ICICI Pru Assured Savings Insurance Plan is a protection plus savings option provided by ICICI. It promises that you will achieve your life objectives with this plan’s guaranteed savings advantages.
Read the complete review of the ICICI Pru Assured Savings Plan.
10. ICICI Pru Cash Advantage Plan vs Other Investment Options – Review Conclusion
After a thorough and detailed analysis of all other alternate investment options for the ICICI Pru Cash Advantage Plan. It is very clear that even though the ICICI Pru Cash Advantage Plan claims to provide Guaranteed Income. The combination of insurance and investment will not work and the best alternative is to take pure life cover and invest the remaining amount in ELSS.
11.Final Verdict on ICICI Pru Cash Advantage Plan – Good or Bad Investment Option?
It is a protection-oriented savings plan. You pay a premium for a limited period and start receiving the regular income during the policy term and lumpsum income at the end of the policy term. The cash benefit is guaranteed but the Maturity Benefit varies based on the bonus declaration.
The cash benefit can’t be deferred. Also, the cash benefit term is fixed at 10 years. This leaves you with no other option other than receiving the cash benefit for 10 years. This may sometimes end up in utilising the money for discretionary expenses.
If you invest separately for life goals, you will have better liquidity. Flexibility and liquidity are missing in the ICICI Pru Cash Advantage plan. Also, the return analysis is not satisfying for a long-term investment because of many reasons and one among them is high agent commission.
It is better to have a diversified investment portfolio based on your financial goals. This allows you to design your cash flow to meet the goal as and when due. Apart from this, have a Pure Term Life Cover to protect your family from uncertainties.
To design your personalised investment planning, instead of just searching social media sites like Quora, Facebook, Twitter, etc. You can consult an Investment Advisor who will guide you the best in the process.
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