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Can the ICICI Pru Signature Capital Guarantee II really guarantee capital growth?
Can ICICI Pru Signature Capital Guarantee II really offer both safety and high returns?
Is the ICICI Pru Signature Capital Guarantee II the ultimate investment solution?
In this article, Let’s analyse the ICICI Pru Signature Capital Guarantee II plan’s features, costs involved, advantages, and disadvantages in detail, and calculate the potential returns i.e., IRR to determine if it is a suitable addition to your portfolio.
Table of Contents:
What is ICICI Pru Signature Capital Guarantee II?
What are the Features of ICICI Pru Signature Capital Guarantee II?
Who is Eligible for ICICI Pru Signature Capital Guarantee II?
What are the Benefits of ICICI Pru Signature Capital Guarantee II?
What are the Advantages of ICICI Pru Signature Capital Guarantee II?
What are the Disadvantages of ICICI Pru Signature Capital Guarantee II?
Research Methodology of ICICI Pru Signature Capital Guarantee II?
Benefit Illustration – IRR Analysis of ICICI Pru Signature Capital Guarantee II
ICICI Pru Signature Capital Guarantee II Vs. other investment product
ICICI Pru Signature Capital Guarantee II Vs. Term Plan + PPF / ELSS
Final Verdict on ICICI Pru Signature Capital Guarantee II
What is ICICI Pru Signature Capital Guarantee II?
ICICI Pru Signature Capital Guarantee II is a Unit-Linked Insurance Policy. This ICICI Pru Signature Capital Guarantee II plan is designed by combining the benefits of two individual and separate products named,
- ICICI Pru Signature and
- ICICI Pru Guaranteed Income For Tomorrow.
What are the Features of ICICI Pru Signature Capital Guarantee II?
- The capital you invest is 100% safe and returned to you at maturity along with the market-linked returns.
- Choose from multiple combinations of payment terms and policy terms as per your needs.
- Choice of 4 portfolio strategies and 22 funds across equity, debt, and balanced to suit your investment needs.
- Get 3.25% of fund value every 5 years starting from the 10th policy year by staying invested in the plan.
- Get unlimited free withdrawals including a systematic withdrawal plan (SWP).
- Benefit from the Zero premium allocation charges and return of mortality and admin charges at the end of the policy term.
Who is Eligible for ICICI Pru Signature Capital Guarantee II?
| Entry Age | Minimum: 18 years Maximum: 60 years |
| Premium Payment Term | 5,7,10 years |
| Policy Term | For PPT 5: 5,10,12 For PPT 7: 12,15 For PPT 10: 15, 20 |
| Premium Payment Frequency | Yearly, half-yearly, Monthly |
| Premium | Minimum: ₹ 60,000 per annum Maximum: Unlimited |
What are the Benefits of ICICI Pru Signature Capital Guarantee II?
Under this ICICI Pru Signature Capital Guarantee II plan, you have to pay premiums for a certain period and wait for a few years, after which you will receive a lump sum amount. This lump sum will comprise the following:
- Guaranteed benefit equals the total of all premiums paid by you and,
- Market-linked returns to boost your savings.
You can choose the premium payment term i.e. the number of years for which you have to pay premiums.
What are the Advantages of ICICI Pru Signature Capital Guarantee II?
- Even though it is a market-linked product, your capital is preserved.
- A part of the maturity benefit is guaranteed.
What are the Disadvantages of ICICI Pru Signature Capital Guarantee II?
- There is no clarity regarding the surrender procedure, as this is a combination of two different products.
- Combining two different products does not add any value addition.
Research Methodology of ICICI Pru Signature Capital Guarantee II Review
As previously discussed, the ICICI Pru Signature Capital Guarantee II plan offers both guaranteed maturity benefits and market-linked returns. In this section, we will calculate the potential return and compare it with other investment products.
Below is a quote from the portal to help you understand the cash flow pattern:
Benefit Illustration – IRR Analysis of ICICI Pru Signature Capital Guarantee II
A 40-year-old male purchases the ICICI Pru Signature Capital Guarantee II plan with a sum assured of ₹15 lakhs. The annual premium is ₹1.5 lakhs, with a premium payment term of 10 years and a policy term of 10 years.
| Male | 40 years |
| Sum Assured | ₹ 15,00,000 |
| Policy Term | 15 years |
| Premium Paying Term | 10 years |
| Annualised Premium | ₹ 1,50,000 |
If he pays the premium for 10 years, he receives a guaranteed maturity benefit of ₹ 17.76 lakhs. For illustration, the rates of investment returns are assumed as 8% and 4%.
They are not guaranteed and they are not the upper or lower limits that you may get, as the value of the ICICI Pru Signature Capital Guarantee II policy depends on several factors including future investment performance.
| At 4% p.a. | At 8% p.a. | ||||
| Age | Year | Annualised premium / Maturity benefit | Death benefit | Annualised premium / Maturity benefit | Death benefit |
| 40 | 1 | -1,50,000 | 15,00,000 | -1,50,000 | 15,00,000 |
| 41 | 2 | -1,50,000 | 15,00,000 | -1,50,000 | 15,00,000 |
| 42 | 3 | -1,50,000 | 15,00,000 | -1,50,000 | 15,00,000 |
| 43 | 4 | -1,50,000 | 15,00,000 | -1,50,000 | 15,00,000 |
| 44 | 5 | -1,50,000 | 15,00,000 | -1,50,000 | 15,00,000 |
| 45 | 6 | -1,50,000 | 15,00,000 | -1,50,000 | 15,00,000 |
| 46 | 7 | -1,50,000 | 15,00,000 | -1,50,000 | 15,00,000 |
| 47 | 8 | -1,50,000 | 15,00,000 | -1,50,000 | 15,00,000 |
| 48 | 9 | -1,50,000 | 15,00,000 | -1,50,000 | 15,00,000 |
| 49 | 10 | -1,50,000 | 15,00,000 | -1,50,000 | 15,00,000 |
| 50 | 11 | 0 | 15,00,000 | 0 | 15,00,000 |
| 51 | 12 | 0 | 15,00,000 | 0 | 15,00,000 |
| 52 | 13 | 0 | 15,00,000 | 0 | 15,00,000 |
| 53 | 14 | 0 | 15,00,000 | 0 | 15,00,000 |
| 54 | 15 | 0 | 15,00,000 | 0 | 15,00,000 |
| 55 | 24,23,000 | 15,00,000 | 27,81,000 | 15,00,000 | |
| IRR | 4.59% | 5.92% | |||
At the end of 15 years, the final maturity value under a 4% scenario, based on the ICICI Pru Signature Capital Guarantee II policy maturity calculator is ₹24.23 lakhs, yielding an IRR of 4.59%. Under an 8% scenario, the final maturity value is ₹27.81 lakhs with an IRR of 5.92%.
The investment return ranges from 5% to 6%. Given that this is a long-term investment, these returns may not be sufficient to achieve the desired corpus for your goals. Therefore, investing in the ICICI Pru Signature Capital Guarantee II plan could impact your overall investment strategy.
ICICI Pru Signature Capital Guarantee II Vs. other investment product
Comparing the ICICI Pru Signature Capital Guarantee II with other investment options provides better insights into alternative investment strategies.
In an alternative strategy, life cover and investment are addressed by separate products. Separating the insurance and investment components can enhance the final returns.
ICICI Pru Signature Capital Guarantee II Vs. Term Plan + PPF / ELSS
For life cover, a pure-term life insurance policy is an ideal choice. For a sum assured of ₹15 lakhs, the annual premium is ₹13,200, with a premium payment term of 10 years and a policy term of 15 years.
In contrast, the ICICI Pru Signature Capital Guarantee II plan costs ₹1.5 lakhs annually for the same sum assured. Opting for the more affordable term life insurance policy saves you ₹1.36 lakhs annually.
| Pure Term Life Insurance Policy | |
| Sum Assured | ₹ 15,00,000 |
| Policy Term | 15 years |
| Premium Paying Term | 10 years |
| Annualised Premium | ₹ 13,200 |
| Investment | ₹ 1,36,800 |
The saved amount can be invested according to your personal risk appetite. In this illustration, we have considered both debt instruments (PPF account) and equity instruments (ELSS fund).
| Term Insurance + PPF | Term insurance + ELSS | ||||
| Age | Year | Term Insurance premium + PPF | Death benefit | Term Insurance premium + ELSS | Death benefit |
| 40 | 1 | -1,50,000 | 15,00,000 | -1,50,000 | 15,00,000 |
| 41 | 2 | -1,50,000 | 15,00,000 | -1,50,000 | 15,00,000 |
| 42 | 3 | -1,50,000 | 15,00,000 | -1,50,000 | 15,00,000 |
| 43 | 4 | -1,50,000 | 15,00,000 | -1,50,000 | 15,00,000 |
| 44 | 5 | -1,50,000 | 15,00,000 | -1,50,000 | 15,00,000 |
| 45 | 6 | -1,50,000 | 15,00,000 | -1,50,000 | 15,00,000 |
| 46 | 7 | -1,50,000 | 15,00,000 | -1,50,000 | 15,00,000 |
| 47 | 8 | -1,50,000 | 15,00,000 | -1,50,000 | 15,00,000 |
| 48 | 9 | -1,50,000 | 15,00,000 | -1,50,000 | 15,00,000 |
| 49 | 10 | -1,47,500 | 15,00,000 | -1,50,000 | 15,00,000 |
| 50 | 11 | -500 | 15,00,000 | 0 | 15,00,000 |
| 51 | 12 | -500 | 15,00,000 | 0 | 15,00,000 |
| 52 | 13 | -500 | 15,00,000 | 0 | 15,00,000 |
| 53 | 14 | -500 | 15,00,000 | 0 | 15,00,000 |
| 54 | 15 | -500 | 15,00,000 | 0 | 15,00,000 |
| 55 | 28,65,280 | 15,00,000 | 44,11,442 | 15,00,000 | |
| IRR | 6.21% | 10.40% | |||
A PPF account requires a minimum annual contribution of ₹500 for 15 years. However, given the premium paying term is 10 years, adjustments are made in the final years’ contributions to meet the guidelines.
The final maturity value of the PPF account is ₹28.65 lakhs, with an IRR of 6.21% when combined with a pure-term life insurance policy.
ELSS funds are subject to capital gains tax on final unit redemptions. The pre-tax maturity value is ₹47.38 lakhs, and the post-tax maturity value is ₹44.11 lakhs. The IRR for the ELSS investment, combined with a pure term life insurance policy, is 10.40% (post-tax return).
| ELSS Tax Calculation | |
| Maturity value after 15 years | 47,38,491 |
| Purchase price | 13,68,000 |
| Long-Term Capital Gains | 33,70,491 |
| Exemption limit | 1,00,000 |
| Taxable LTCG | 32,70,491 |
| Tax paid on LTCG | 3,27,049 |
| Maturity value after tax | 44,11,442 |
The investment returns in these scenarios surpass the inflation rate, which the ICICI Pru Signature Capital Guarantee II plan fails to do. This calculation highlights the advantage of separating insurance and investment components.
Final Verdict on ICICI Pru Signature Capital Guarantee II
The ICICI Pru Signature Capital Guarantee II plan combines endowment and ULIP plans. The endowment portion ensures capital preservation, while the ULIP component offers market-linked returns, meaning the returns are not fully guaranteed.
The potential return of the ICICI Pru Signature Capital Guarantee II is less than the inflation rate, which implies that capital preservation alone does not fulfill the purpose of investing.
For an investment to be viable, it needs to offer commendable returns. Without higher returns, the capital guarantee provided by the ICICI Pru Signature Capital Guarantee II is not advantageous. The returns are poor due to many reasons including high agent commission.
From both the returns perspective and an insurance cover perspective, this ICICI Pru Signature Capital Guarantee II plan is unfavourable for an investor.
While social media platforms like Facebook, Quora, and Twitter might be great places to start learning about finance, you shouldn’t end up there. While you might come across some fascinating tales and guidance, it lacks the necessary elements needed to make informed financial choices.
Instead, consider opting for a pure-term life insurance policy and building a diversified investment portfolio to achieve your financial goals. Consulting a Certified Financial Planner for personalized financial planning can help you navigate financial challenges more effectively.
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