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Can the Kotak Guaranteed Savings Plan assure guaranteed returns and financial security for our loved ones?
Can the Kotak Guaranteed Savings Plan help you achieve your financial goals?
Will the guaranteed benefits of the Kotak Guaranteed Savings Plan help you navigate life’s uncertainties?
Let’s explore the features, advantages, disadvantages, and returns of the Kotak Guaranteed Savings Plan through an Internal Rate of Return (IRR) analysis. This review aims to provide a better understanding of a traditional endowment policy.
Table of Contents:
What is the Kotak Guaranteed Savings Plan?
What are the features of the Kotak Guaranteed Savings Plan?
Who is eligible for the Kotak Guaranteed Savings Plan?
What are the benefits of the Kotak Guaranteed Savings Plan?
4. Guaranteed Loyalty Addition
Grace Period, Reduced paid-up, and Revival of Kotak Guaranteed Savings Plan
Free Look Period of Kotak Guaranteed Savings Plan
Surrendering Kotak Guaranteed Savings Plan
What are the advantages of the Kotak Guaranteed Savings Plan?
What are the disadvantages of the Kotak Guaranteed Savings Plan?
Research Methodology of Kotak Guaranteed Savings Plan
Benefit Illustration – IRR Analysis of Kotak Guaranteed Savings Plan
Kotak Guaranteed Savings Plan Vs. Other Investments
Kotak Guaranteed Savings Plan Vs. Pure Term + PPF / ELSS
Final Verdict on Kotak Guaranteed Savings Plan
What is the Kotak Guaranteed Savings Plan?
Kotak Guaranteed Savings Plan is a Non-Linked Non-Participating Endowment Life Insurance Plan. Kotak Guaranteed Savings Plan is a savings and protection-oriented plan that provides ‘Guaranteed benefits.’
What are the features of the Kotak Guaranteed Savings Plan?
- Limited premium payment options
- After the premium payment term, the Kotak Guaranteed Savings Plan will accrue Guaranteed Additions for the remaining term
- Lump sum Guaranteed Loyalty Addition at the end of the Kotak Guaranteed Savings Plan policy term
- Enhanced protection through optional riders
Who is eligible for the Kotak Guaranteed Savings Plan?
| Minimum | Maximum | |
| Entry Age | 3 years | 60 years |
| Maximum Maturity Age | 18 years | For 10 Policy Term: 70 years For Other Policy Term: 75 years |
| Policy Term (PT) | 10 / 14 /15 / 16 / 20 years | |
| Premium Levels | Yearly | 12,000 |
| Half-yearly | 6,120 | |
| Quarterly | 3,120 | |
| Monthly | 1,056 | |
| Premium Payment Term (PPT) | PPT | PT |
| 5 pay | 10 years | |
| 5 pay, 7 pay | 14 years | |
| 5 pay, 8 pay | 16 years | |
| 5 pay, 10 pay | 15 years | |
| 5 pay, 10 pay | 20 years | |
| Premium Payment Mode | Yearly, Half-yearly, Quarterly and Monthly | |
| Basic Sum assured | Will be derived basis of Premium, Age, PPT & Policy Term | |
What are the benefits of the Kotak Guaranteed Savings Plan?
i.) Maturity benefit
At the end of the Kotak Guaranteed Savings Plan policy term, the following Guaranteed Maturity Benefit will be paid out provided the policy is in force and all premiums are paid:
- Basic Sum Assured PLUS
- Accrued Guaranteed Additions PLUS
- Guaranteed Loyalty Addition
ii.) Death Benefit
In the unfortunate event of death during the term of the Kotak Guaranteed Savings Plan policy, the nominee will receive:
- Sum Assured on Death PLUS
- Accrued Guaranteed Additions
Where Sum Assured on Death is, higher of
- 11 times of Annualised Premium including extra premium, if any or
- Basic Sum Assured Plus Guaranteed Loyalty Addition or
- 105% of all premiums paid including extra premium, if any till the date of death
iii.) Guaranteed Additions
After completion of the Premium Payment Term, starting from the end of the next Kotak Guaranteed Savings Plan policy year, Guaranteed Additions will start accruing yearly under the Kotak Guaranteed Savings Plan till the end of the last policy year.
Guaranteed Addition Rates will be as a % of the Annualised Premium (AP). The Rates will vary by Premium Payment Term & Policy Term options as follows:
iv.) Guaranteed Loyalty Addition
Guaranteed Loyalty Addition will be as a % of the Annualised Premium (AP) and will be paid at maturity. The guaranteed Loyalty Addition rate will be based on the Annualised Premium band and the Premium Payment Term and Kotak Guaranteed Savings Plan Policy Term options chosen.
The rates are as follows:
Grace Period, Reduced paid-up, and Revival of Kotak Guaranteed Savings Plan
Grace Period
There is a grace period of 30 days from the due date for payment of premium for the yearly, half-yearly, and quarterly modes, and 15 days for the monthly mode.
Reduced paid-up
The Kotak Guaranteed Savings Plan policy shall lapse from the due date of the first unpaid premium if premiums for the first two policy years are not paid within the grace period.
After the Kotak Guaranteed Savings Plan policy acquires Surrender Value (on payment of two years’ premium), if the subsequent premiums are not paid within the grace period, the Kotak Guaranteed Savings Plan policy will be converted into a Reduced Paid-Up policy by default.
Upon being made Reduced Paid-up, the Kotak Guaranteed Savings Plan policy will be eligible for accrual of Reduced Guaranteed Additions and Reduced Guaranteed Loyalty Additions.
Revival
A lapsed / Reduced Paid-up policy can be revived within five years from the due date of the first unpaid premium.
Free Look Period of Kotak Guaranteed Savings Plan
If the Kotak Guaranteed Savings Plan policyholder is not agreeable with any of the terms and conditions of the plan.
Then he may choose to return the Kotak Guaranteed Savings Plan policy within 15 days (except in the case of policies obtained through Distance Marketing mode and electronic policies which will have 30 days) from the date of receipt of the policy.
Surrendering Kotak Guaranteed Savings Plan
The Kotak Guaranteed Savings Plan policy will acquire Surrender Value after payment of full premiums for two consecutive policy years. Guaranteed Surrender Value (GSV) shall be a percentage of total Premiums paid including extra premium if any, PLUS the value of accrued Guaranteed Additions, if any.
What are the advantages of the Kotak Guaranteed Savings Plan?
- Loan can be availed, with a maximum of 50% of surrender value.
- Riders can be added to the base policy.
- All the benefits are guaranteed.
What are the disadvantages of the Kotak Guaranteed Savings Plan?
- The sum assured is too low to meet the family’s future needs.
- The returns are comparatively low.
Research Methodology of Kotak Guaranteed Savings Plan
The Kotak Guaranteed Savings Plan encourages the habit of saving. As an investor, it is crucial to ensure that your savings are being invested wisely. The potential return on investment should ideally outpace inflation in the long run, thereby boosting your wealth accumulation.
Let’s assess the Kotak Guaranteed Savings Plan’s return using the figures provided in the Kotak Guaranteed Savings Plan policy brochure.
Benefit Illustration – IRR Analysis of Kotak Guaranteed Savings Plan
Consider a 30-year-old male who chooses the Kotak Guaranteed Savings Plan with a sum assured of ₹17.35 lakhs. The premium paying term is 10 years, while the Kotak Guaranteed Savings Plan policy term is 20 years, with an annualized premium of ₹1 lakh.
| Male | 30 years |
| Sum Assured | ₹ 17,35,180 |
| Policy Term | 20 years |
| Premium Paying Term | 10 years |
| Annualised Premium | ₹ 1,00,000 |
| Age | Year | Annualised premium / Maturity benefit | Death benefit |
| 30 | 1 | -1,00,000 | 17,35,180 |
| 31 | 2 | -1,00,000 | 17,35,180 |
| 32 | 3 | -1,00,000 | 17,35,180 |
| 33 | 4 | -1,00,000 | 17,35,180 |
| 34 | 5 | -1,00,000 | 17,35,180 |
| 35 | 6 | -1,00,000 | 17,35,180 |
| 36 | 7 | -1,00,000 | 17,35,180 |
| 37 | 8 | -1,00,000 | 17,35,180 |
| 38 | 9 | -1,00,000 | 17,35,180 |
| 39 | 10 | -1,00,000 | 17,35,180 |
| 40 | 11 | 0 | 17,35,180 |
| 41 | 12 | 0 | 17,35,180 |
| 42 | 13 | 0 | 17,35,180 |
| 43 | 14 | 0 | 17,35,180 |
| 44 | 15 | 0 | 17,35,180 |
| 45 | 16 | 0 | 17,35,180 |
| 46 | 17 | 0 | 17,35,180 |
| 47 | 18 | 0 | 17,35,180 |
| 48 | 19 | 0 | 17,35,180 |
| 49 | 20 | 0 | 17,35,180 |
| 50 | 22,65,180 | 17,35,180 | |
| IRR | 5.34% | ||
The sum assured, along with the accrued guaranteed addition and guaranteed loyalty addition, is payable at the end of the policy term as a maturity benefit. This maturity benefit amounts to ₹22.65 lakhs.
The Internal Rate of Return (IRR) for this cash flow is 5.34% as per the Kotak Guaranteed Savings Plan maturity calculator
Although the guaranteed benefit is appealing, the returns are lower compared to other debt instruments. A long-term investment yielding a modest return can hinder your wealth accumulation journey.
Consequently, investing in the Kotak Guaranteed Savings Plan may fall short of providing the necessary corpus to achieve your financial goals.
Kotak Guaranteed Savings Plan Vs. Other Investments
As part of our analysis, we will compare the returns from the Kotak Guaranteed Savings Plan with other investment options using the same metrics from the previous illustration.
The Kotak Guaranteed Savings Plan offers the dual benefit of life cover and investment, but for this comparison, we will separate these two aspects.
Kotak Guaranteed Savings Plan Vs. Pure Term + PPF / ELSS
A pure-term life insurance policy with a sum assured of ₹20 lakhs (instead of ₹17.5 lakhs from the previous illustration) costs an annual premium of ₹13,700. The policy term is 20 years with a limited premium payment period of 10 years.
After paying the insurance premium, a balance of ₹86,300 can be invested towards long-term goals.
| Male | 30 years |
| Sum Assured | ₹ 17,35,180 |
| Policy Term | 20 years |
| Premium Paying Term | 10 years |
| Annualised Premium | ₹ 1,00,000 |
Depending on your risk profile, you can choose to invest in either debt or equity instruments. In our analysis, we consider two scenarios: the Public Provident Fund (PPF) and the Equity-Linked Savings Scheme (ELSS).
| Term Insurance + PPF | Term insurance + ELSS | ||||
| Age | Year | Term Insurance premium + PPF | Death benefit | Term Insurance premium + ELSS | Death benefit |
| 30 | 1 | -1,00,000 | 17,35,180 | -1,00,000 | 17,35,180 |
| 31 | 2 | -1,00,000 | 17,35,180 | -1,00,000 | 17,35,180 |
| 32 | 3 | -1,00,000 | 17,35,180 | -1,00,000 | 17,35,180 |
| 33 | 4 | -1,00,000 | 17,35,180 | -1,00,000 | 17,35,180 |
| 34 | 5 | -1,00,000 | 17,35,180 | -1,00,000 | 17,35,180 |
| 35 | 6 | -1,00,000 | 17,35,180 | -1,00,000 | 17,35,180 |
| 36 | 7 | -1,00,000 | 17,35,180 | -1,00,000 | 17,35,180 |
| 37 | 8 | -1,00,000 | 17,35,180 | -1,00,000 | 17,35,180 |
| 38 | 9 | -1,00,000 | 17,35,180 | -1,00,000 | 17,35,180 |
| 39 | 10 | -97,500 | 17,35,180 | -1,00,000 | 17,35,180 |
| 40 | 11 | -500 | 17,35,180 | 0 | 17,35,180 |
| 41 | 12 | -500 | 17,35,180 | 0 | 17,35,180 |
| 42 | 13 | -500 | 17,35,180 | 0 | 17,35,180 |
| 43 | 14 | -500 | 17,35,180 | 0 | 17,35,180 |
| 44 | 15 | -500 | 17,35,180 | 0 | 17,35,180 |
| 45 | 16 | 0 | 17,35,180 | 0 | 17,35,180 |
| 46 | 17 | 0 | 17,35,180 | 0 | 17,35,180 |
| 47 | 18 | 0 | 17,35,180 | 0 | 17,35,180 |
| 48 | 19 | 0 | 17,35,180 | 0 | 17,35,180 |
| 49 | 20 | 0 | 17,35,180 | 0 | 17,35,180 |
| 50 | 25,46,702 | 17,35,180 | 48,37,599 | 17,35,180 | |
| IRR | 6.12% | 10.42% | |||
For PPF, ₹500 is the minimum investment amount, and it must be invested for at least 15 years. However, since the premium payment term in the previous illustration is 10 years, adjustments are made for the last few years to meet the threshold.
The final maturity value in the PPF account is ₹25.46 lakhs, with an IRR of 6.12% for the combination of the pure-term policy and PPF investment.
In the ELSS scenario, the final maturity value is ₹52.68 lakhs. After accounting for capital gains, the post-tax value is ₹48.37 lakhs, resulting in an IRR of 10.42% (post-tax return) for the combination of the pure-term policy and ELSS investment.
| ELSS Tax Calculation | |
| Maturity value after 20 years | 52,68,110 |
| Purchase price | 8,63,000 |
| Long-Term Capital Gains | 44,05,110 |
| Exemption limit | 1,00,000 |
| Taxable LTCG | 43,05,110 |
| Tax paid on LTCG | 4,30,511 |
| Maturity value after tax | 48,37,599 |
These comparisons demonstrate that higher returns are achievable when investments are aligned with your risk profile and time frame.
The Kotak Guaranteed Savings Plan, in this context, falls short in both providing adequate insurance and delivering competitive investment returns.
Final Verdict on Kotak Guaranteed Savings Plan
As the name suggests, the Kotak Guaranteed Savings Plan offers guaranteed returns on your savings. However, focusing solely on this guarantee isn’t ideal for long-term investments.
The primary focus should be on the returns on investment, especially since long-term investments need to generate returns that outpace inflation to meet the rising costs of your goals.
Upon analysing the Kotak Guaranteed Savings Plan’s return, it becomes evident that the guaranteed benefits do not provide sufficient returns to keep up with inflation and it also has a high agent commission
While the benefits are guaranteed, investing in the Kotak Guaranteed Savings Plan might not help you accumulate the required corpus to achieve your financial goals.
The major drawback of the Kotak Guaranteed Savings Plan is the combination of insurance and investment. Instead, consider opting for a pure-term life insurance policy and investing separately for your life goals. This approach allows you to achieve both objectives more efficiently.
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For personalized financial planning based on your risk profile, time horizon, and life goals, consult a Certified Financial Planner. They can guide you in effectively channeling your savings and achieving all your financial objectives.
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