ICICI Prudential Future Perfect is a non-linked insurance plan.
This plan claims guaranteed benefits and guaranteed bonuses. How “guaranteed” are their claims, we will find out in this article.
In this article, we will demonstrate all you need to know about this plan by giving an elaborative example. You will be able to figure out whether this policy is really making your Future PERFECT, as it claims. Or, does it have the elements which make your Future “Tense” instead; regardless of their claim.
Let’s read on and figure out the rest by yourself.
Table of Content
1. Key Features
2. ICICI Prudential Future Perfect: Guaranteed Benefits
1. ICICI Prudential Future Perfect is an endowment plan.
2. You will get guaranteed benefits such as Guaranteed Maturity Benefit and Guaranteed Additions each year, based on your policy term.
3. You may also receive non-guaranteed bonuses such as reversionary and terminal bonuses; they are detailed in later sections in this article.
4. In case of the death of a policyholder, death benefits will be provided.
5. The below table shows the Premium Payment Term, Policy term, and basic eligibility criteria to invest in this policy. [Source: ICICI Pru Future Perfect brochure]
ICICI Prudential Future Perfect: Guaranteed Benefits
This plan offers 2 guaranteed benefits, discussed below:
Guaranteed Maturity Benefits (GMB):
The Guaranteed Maturity Benefit (GMB) is a fixed amount that depends on various things like age, policy term, premium payment term & gender.
GMB gets activated as soon as you purchase the ICICI Prudential Future Perfect Policy. And, you will receive the guaranteed amount from this benefit as soon as your policy matures. For example, if your policy term is 20 years, you will receive the GMB in the 20th year.
These benefits are payable subject to payment of all the due premiums.
Guaranteed Addition Benefits
Guaranteed Additions are added to your maturity amount for every policy year that you stay invested in.
The table below shows you how much GAs that will be paid out as a percentage of your annual premium:
You can notice from the table above that the longer you are invested; you will receive higher guaranteed returns on maturity. For example, if you choose a premium payment term of more than 10 years and stay invested for more than 16 years, you will get the maximum Guaranteed Addition of 18%!
The Guaranteed Maturity Benefit & Guaranteed Additions together contribute to the total Guaranteed Returns you receive at maturity.
ICICI Prudential Future Perfect: Bonuses
Bonuses are non-guaranteed. This plan offers 2 types of bonuses, described below:
Reversionary Bonus is declared every year as a percentage of Guaranteed Maturity Benefit and Earlier Revisionary Bonuses (if any). The exact calculation of the Reversionary bonus is unclear. It is calculated using the online calculator available on the website.
Reversionary bonus is payable at maturity of the policy, or it is payable along with death benefits. Reversionary bonus in Cash advantage is added every year to your maturity benefits.
Terminal bonus is a one-time bonus declared at the time of the maturity for participating policy. Though they are a non-guaranteed bonus, still its value depends on the duration you stay invested. There is no clear cut way to find Terminal Bonuses but you can use the online calculator available on the company’s website to get the rough estimates.
Now we will have a look at an illustrative example to get a better idea of the various benefits, bonuses and overall returns you can expect from this policy.
ICICI Prudential Future Perfect Plan: Illustration
Let us say you are 30 years old and you choose to invest in ICICI Pru Future Perfect Plan with the premium amount of Rs.1,00,000 per annum.
You opted your payment duration as 20 years and you have fixed your policy term as 25 years. Now putting all these values in the Online Calculator, you will get various values shown below
Therefore, if you invest the premium of Rs.1,00,000 per annum. With taxes, you have to pay the total yearly premium of Rs.1,04,501 for the first year and Rs.1,02,251 for subsequent years.
At maturity, you will get Rs.47,06,617, which consists of Guaranteed Benefits and Estimated Bonuses of Rs.26,46,231 @ 8%.
Please note, the estimated bonuses are not guaranteed.
The assured sum is Rs.16,95,386, it is the amount of life-insurance cover paid to the nominee, in case of policy holder’s death.
Now, let’s have a closer look at the Guaranteed Benefits and Estimated Bonuses.
As you can notice, the total Guaranteed Benefits are Rs.20,60,386. It consists of Guaranteed Maturity Benefits (GMB) and Guaranteed Additions (GA) on Maturity. They described below:
Guaranteed Maturity Benefits are set at the inception of the policy, its value depends on the policy holder’s age, policy term, premium, premium payment term, and gender.
They are guaranteed but how this sum actually fixed is unknown.
Guaranteed Additions as we have defined earlier, they are added to your maturity amount for every policy year that you stay invested according to the rate of interest (per annum) as described in the previous section.
Breakdown amount of Guaranteed Maturity Benefit and Guaranteed Additions on Maturity is shown below:
You are paying Rs. 1 Lacs per annum for 20 years exclusive of GST and you are receiving the guaranteed benefits of Rs.20,60,386. It shows that ONLY the principal you paid is guaranteed, which does not contain ANY return!!
Instead of returns, they are providing some non-guaranteed ‘estimated’ bonuses, which is described in the next section.
Bonuses consist of Reversionary bonuses and Terminal Bonuses. Both of these bonuses are non-guaranteed.
There won’t be any Reversionary bonuses at the Assumed Rate of Return (ARR) of 4%.
Whereas at the ARR of 8%, there is a Reversionary Bonus of Rs.12,61,615, as described below:
Whereas, at the ARR of 4%, the total estimated bonuses are only Rs.7,35,517, with NO reversionary bonus, as shown below:
The procedure of such calculation is uncertain. It is difficult to say whether you will get the ARR of 4% or 8%, beforehand!
Now, in the next section let’s have a look at the average returns provided by this policy along with bonuses at ARR of 4%, as well as with ARR 8%.
ICICI Prudential Future Perfect: Actual Returns
As defined earlier, your policy term is 25 years and your premium payment duration is 20 years. And, you choose to invest Rs.1,00,000 per annum.
Let’s calculate the average returns using all the data discussed earlier,
So, in the policy term of 25 long years, you are getting the average return of just 7%.
Please note it is the best interest rate of this policy, as we have assumed the ARR of 8%.
If we consider the Assumed Rate of Return (ARR) as 4%, the average IRR comes down to 3%!!
On average, you can expect your returns to be somewhere between 3% to 7%!!
Reversionary Bonuses: Update for 2019
This policy started in the year 2016 and though they claim their estimated bonuses to be around 4% or 8%; below table shows the rate of reversionary bonuses declared so far…
It is in the range of 2%-2.25%!!
Now, do you think it is good enough return for a 25-year long investment term?
Do you think, at this bonus rate, will they be abe to achieve an IRR of 7%? I doubt.
If you are still looking for more details on this plan, then you should read the ICICI Prudential Future Perfect Product Brochure.
ICICI Prudential Future Perfect: Disadvantage (Secrets Exposed)
Though this policy uses catchy words such as “Guaranteed Benefits” or “Future Perfect”, but in reality, it is not true. Let’s have a look at its biggest disadvantage:
As you might have noticed in the illustration in the above section, that in the best case scenario you are getting the maximum returns of merely 7%!
Therefore, you are receiving Rs.20,60,386, plus the non-guaranteed estimated bonus of Rs.26,46,231!
Anyways, in the best-case scenario, you will receive the sum of above, that is Rs.47,06,617 on maturity, means after 25 years!!
Is it a good deal?
Let’s say if you invest in PPF or Mutual Fund instead, as defined below:
- If you invest Rs. 1 Lacs in PPF for 20 years you will receive the guaranteed returns of Rs.49,42,292 at the rate of 8%!
Higher than the returns of this 25-year long plan!!
- And, if you are willing to take a risk, you should invest in Mutual Funds. The same amount (Rs.1 Lacs) after 20 years, it will give you the returns more than Rs.85 Lacs at the average return rate of 12%! Or, you can use this Mutual Fund Calculator to find your returns on any sum you invest.
As the company claims of guaranteed benefits, you can clearly see that ONLY your principal is guaranteed, and returns are NOT GUARANTEED!!
You can clearly see how much money you are losing if you choose to invest in this plan.
Your guaranteed sum will be Rs.20,60,368 and you will never know how much-estimated bonus you will finally get out of Rs.26,46,231!! Even if you get the full bonus, your rate of return is still 7%!!
Now, you may also find your bank insisting you to buy this product. Be aware of their misselling. And, understand why your bank wants you to invest in such insurance policies.
I hope you got the point now.
As you might have noticed that the claim of the company of making Future Perfect, is not so perfect. Instead, it is making your Future Tensed by providing you the returns less than the average rate of inflation of 8%!
In fact, you are losing your money through this policy!!
Our advice is you should avoid investing in this policy.
RDs can offer you the guaranteed return greater than 7%, in the much shorter term!
Or, you can invest in PPF which offers a guaranteed return of 8%.
If you can tolerate the risk, then we suggest you invest in equity mutual funds where you can get 12% returns on average.
ICICI Prudential Future Perfect: Commonly asked questions
1. How to cancel this policy?
You can discontinue this policy by downloading and filling up the surrender form. You can access the surrender form by visiting the official website of ICICI Prudential Life. You need to enter your Policy number and date of birth to access your surrender form.
After downloading the surrender form you can fill up the important details and submit it at your nearby branch of ICICI Prudential Life and your surrender request will be processed from there.
2. What payouts to expect after surrendering this policy?
If you have chosen to pay a premium for 10 years or more, your policy will acquire a surrender value after you have paid premium fully for 3 years.
If you have chosen to pay a premium for less than 10 years, the policy will acquire a surrender value after you paid premium fully for 2 years.
And, if you discontinue your premiums before your policy has acquired a surrender value, you will NOT receive any pay-out.
For more details on the exact surrender payout value, you can refer to the product brochure.
3. What if I stop paying my premiums?
If you stop paying the premium before your policy acquires a surrender value, your policy will lapse and no benefits will be paid.
However, if you stop paying the premiums AFTER your policy acquires a surrender value, the policy would continue as a “paid-up” policy with reduced benefits.
4. Who to contact in case any help is required during the policy term?
You can give a missed call on 18003157751 and you will get a callback.
Or, you can contact them through their official website by sending an online message or request a callback.
Still, if you have any specific queries on this plan, feel free to ask them in the comment section.
For your customized investment advice, you can take advantage of our FREE complementary consultation call, by clicking the link in the description below.