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Kotak Platinum Plan-ULIP Review (2023): Is it worth investing in?

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Kotak Platinum is a ULIP investment plan. It promises life protection and long-term wealth creation.

But we cannot say whether Kotak Platinum Plan can really help us to create long-term wealth or not.

In this article, we are going to do research on Kotak Life’s Kotak Platinum Plan and discover whether you should invest or not.

Table of Content

1. Kotak Platinum Plan-ULIP Review
2. Features of Kotak Platinum Plan
3. Kotak Platinum Plan: 3 variants of Investment Strategies

4. Benefits of Kotak Platinum Plan

5. Additional Benefits of Kotak Platinum
6. Eligibility
7. Kotak Platinum Plan Analysis with illustrations
8. Charges of Kotak Platinum Plan

9. Advantages and Disadvantages of Kotak Platinum Plan

10. Research Methodology of Kotak Platinum Plan (ULIP) Review
11. Kotak Platinum Plan vs. PPF + Pure Term Insurance
12. Kotak Platinum vs. ELSS + Pure Term Insurance
13. What is discontinuance in Kotak Platinum Plan
14. Discontinue during lock-in period of 5 years
15. Discontinue after a lock-in period of 5 years
16. How to Cancel/Surrender Kotak Platinum Plan during Free Look in Period?
17. Final Verdict of Kotak Platinum Plan-ULIP Review

Kotak Platinum Plan-ULIP Review:

Kotak Platinum Plan aims to satisfy its customer’s expectations by charging very low compared to other ULIPs.

The customers can customize their plans according to their financial goals.

Kotak Platinum  plan’s premium allocation varies somewhere between 95% to 98.5%, guaranteeing that you get better returns during the course of the policy.

But, how exactly guaranteed are they? Let’s continue our research to discover.

Features of Kotak Platinum Plan:

  • Increase your wealth with a low-cost plan.
  • Multiple investing options to choose from.
  • Improve your long-term wealth creation through Survival Units.
  • Select a policy with flexible premium payment terms for your convenience.
  • Rider selection to improve protection.
  • Take advantage of liquidity by making partial withdrawals.

Kotak Platinum Plan: 3 variants of Investment Strategies

Kotak Platinum is a combination of 3 investment strategies that give us flexibility and complete control over our savings reserves.

Here, if you want, you can stop your current investment strategy and choose the other strategy that will be effective from the next policy term.

You can also stop your investment strategy by writing a request at any time. It will take effect the next policy month after receipt of the written request.

  • Self Management Strategy
  • Age-Based Strategy
  • Systematic Switching Strategy (SSS)

Self Management Strategy:

If you want to manage your investments all on your own, then “Self Management Strategy” is the right fit for you.

You can maximize your potential return and the available funds can help you to balance your risk profile.

Age-Based Strategy:

There are two scenarios as to how it will go. It will either make you worry or make you lose all the money you have earned all these years, whenever the market crashes. But choosing an “Age-Based Strategy” can help you in reducing a significant amount of risk. Its allocation is based on age and risk tolerance level.

So, based on the risk tolerance level, you can choose aggressive, moderate, and conservative allocation between Classic Opportunity Fund and Dynamic Bond Fund.

Units will be rebalanced as needed every month to achieve the above proportions of the Fund Value in the selected funds. On the monthiversary (monthly policy anniversary), the units will be re-balanced.

Systematic Switching Strategy:

If you choose this option, you can put all or part of your money in a Money Market Fund and have a pre-determined amount transferred to either Classic Opportunities Fund or Frontline Equity Fund every month. This will be accomplished by redeeming the requisite number of units from the Money Market Fund at the current unit value and assigning fresh units to the Classic Opportunities Fund or Frontline Equity Fund at the current unit value. The transfer occurs automatically at the start of each policy month (and even at the start of the policy). 

The mechanism for switching:

The money in the Money Market Fund can be switched automatically to the chosen fund. For instance, Classic Opportunities Fund or Frontline Equity Fund in the following manner:

(Premium Payment Frequency/(12 – (t * Premium Payment Frequency))) X the units available at the beginning of Policy Month t

Where,

  • Premium Payment Frequency Is number of times premium is payable in a policy year.
  • “t” is number of complete months elapsed since last premium payment due date
  • the above formula is applicable for both, Base Plan and Top-Up Account. For Top-Up, it will start after Top-Up Premium is received and the formula will apply for a year assuming annual premium payment frequency and the Policy month will mean the Policy month of Top-Up

For Example,

Systematic Exit Strategy:

To protect your accumulated assets from short-term market volatility, you might opt to swap out of the Classic Opportunities Fund or Frontline Equity Fund for the Money Market Fund during the previous policy year in the following manner:

Benefits of Kotak Platinum Plan:

Convenient to pay your premium policy term:

You can customize Kotak Platinum  plan at your convenience by opting for short-term premium payment terms.

You can pay off your premiums in 5 years for the policy term of 10 years, and 10 years for 15-30 years.

You can pay your premium on a yearly, half-yearly, quarterly, and monthly basis. But you cannot pay your premium on a quarterly and monthly basis in the Systematic Switching Strategy option.

Additional Protection:

 Kotak Platinum provides two riders to supplement your protection:

  • Kotak Accidental Death Benefit Rider (Linked): In addition to the base plan’s death benefit, the Rider Sum Assured is paid in the event of the life insured’s untimely death due to an accident.
  • Kotak Permanent Disability Benefit Rider (Linked): The Rider Sum Assured is payable in the event of total and permanent disability of the life insured as a result of an accident, and the basic policy continues.

For further information, please read the brochure here.

Partial Withdrawals to enjoy liquidity:

Many investors surprisingly find themselves in a scenario where a big withdrawal from their fixed-term savings is not possible due to an unanticipated cost. This is something Kotak Platinum is designed to avoid. After the five years of the policy term have passed, you are allowed to make partial withdrawals from your investment.

Maturity Benefit:

The Fund Value, inclusive of all Survival Units (including Fund Value in Top-Up Account(s), if any), will represent the maturity benefit under Kotak Platinum  plan. You have the option of taking your Fund Value as a lump amount and terminating your policy OR you can choose the Settlement Option.

  • Settlement Option 1: 50% of the proceeds as lumpsum and a balance of 50% as regular installments over a period of 5 years  
  • Settlement Option 2: Whole of the proceeds as regular installments over a period of 5 years. 

Death Benefit:

If the policyholder passes away, then his nominee will get the highest sum assured of the following:

  • Basic Sum Assured more occasional partial withdrawals if any 
  • Worth of the Fund in Main Account including Loyalty Additions, if any        
  • 105% of the premium(s) paid up to the time of death       

Plus in respect of each Top-Up Premium paid, the highest of:

  • Top-Up Sum Assured, Or     
  • 105% of the Premiums paid till the time of death, Or        
  • Worth of the fund in the Top-Up Account, if any      

Tax Benefit :

Under section 10(10D) and section 80C of the Income-tax Act, 1961, you can get a tax benefit.

Additional Benefits of Kotak Platinum:

Eligibility:

Kotak Platinum Plan Analysis with illustrations:

Now, let’s calculate Kotak Platinum Plan return by using its online return calculator illustration.

Charges of Kotak Platinum Plan:

Premium Allocation Charge:

This fee is calculated as a percentage of the total premium. 

Policy Administration Charge:

The policy’s administration fee is nothing but a percentage of the first year’s yearly premium and will be recovered through unit cancellations every month. This fee will be charged until the policy term ends. Top-Up accounts are not subject to these fees. 

Fund Management Charge:

A fee is assessed as a percentage of the Fund Value and is modified in the Net Asset Value for efficient fund management (NAV). 

Switching Charge:

The first 12 switches are completely free. For an additional switch, it will be charged Rs. 250 per switching.

Partial Withdrawal Charge:

For each partial withdrawal from the main account in any policy year will be charged Rs, 250.

Discontinuance Charge:

The discontinuance charge is only applicable on the main account, not a top-up account.

Mortality Charge:

This is the monthly cost of life insurance, which will be assessed by unit cancellation. The costs per thousand Sum at Risk for a healthy person are listed below.

Miscellaneous Charge:

Advantages and Disadvantages of Kotak Platinum Plan:

Advantages:

  • Kotak Platinum plan is a unit-linked plan which provides both life insurance and investment opportunities.
  • Kotak Platinum plan allows you to pick between three investing techniques in order to develop a sizable corpus after the policy term ends.
  • Kotak Platinum Plan provides access to seven investment funds with risk-return profiles ranging from conservative to aggressive.
  • Kotak Platinum plan does offer a loan, but only after at least two years of premiums have been paid.
  • The lowest loan amount is Rs 10,000, with a maximum loan amount of 40% of the policy’s Fund Value at the moment.
  • Choose a option with easy payment terms.
  • Kotak Platinum Plan also allows for partial withdrawals after the five-year policy period to solve liquidity concerns.

Disadvantages:

  • There is a 5-year lock-in term.
  • Before the payment is invested, several fees are assessed.
  • The Systematic Switching Strategy is not accessible for premium payments made quarterly or monthly.
  • “While switching between funds is still a possibility, each approach requires the adequate time required to execute and in return provide high returns.”
  • The Life Insured bears the investment risk in the investment portfolio during the settlement term.
  • During the settlement period, no life insurance or other advantages such as partial withdrawal or transferring between funds are available.

Research Methodology of Kotak Platinum Plan (ULIP) Review:

As per our research, Kotak Platinum Plan is a ULIP investment plan that allows us to explore both insurance and investment. Its three types of investment strategy give us the assurance needed to handle our investment and create a sizable investment corpus. But we cannot simply decide the outcome with these few points. So, now, let’s compare Kotak Platinum Plan and its benefits with other investment plans and see which investment plan is better.

Kotak Platinum Plan vs. PPF + Pure Term Insurance:

Now, let’s calculate the return on Kotak Platinum Plan with PPF.

Kotak Platinum Plan calculation is created based on the online illustration calculator given by Kotak Platinum Plan.

Here let’s compare Kotak Platinum Plan with PPF.

Let’s take the annual contribution as Rs. 1, 50, 000

Tenure: 20 years.

Pure Term Insurance Premium: Rs. 16,500/annum

Investment in PPF: Rs. 1, 33, 500/annum 

The current interest rate in PPF is 7.10% without risk

As you can see in the above illustration, in Kotak Platinum Plan, after taking the risk, in the worst-case scenario, with 4% of assumed gross return, it will give us the IRR (Internal Rate of Return) of 2.03%. In the best-case scenario, with 8% of the assumed gross return, the IRR will be 6.07%.

On the other hand, if you invest the money in PPF, then the IRR will be 6.11%.

With taking risks the Kotak Platinum Plan gives us only Rs. 37, 31, 007 in the worst-case scenario and Rs. 58, 97, 650 in the best-case scenario. But in PPF without taking any risk it gives Rs. 59, 25, 876 for 20 years.

Now, let’s compare the Kotak Platinum with ELSS.

Kotak Platinum vs. ELSS + Pure Term Insurance:

Let’s take the annual contribution as Rs. 1, 50, 000

Tenure: 20 years.

Pure Term Insurance Premium: Rs. 16,500/annum

Investment in ELSS: Rs. 1, 33, 500/annum 

The assumed return rate in ELSS is 12% with risk

Then, 

As you can see in the above illustration, compare to Kotak Platinum Plan, ELSS gives an IRR of 10.14%. So, if we invest Rs. 1, 33, 500 for 20 years, we will get Rs. 96, 19, 001.

So, now what do you think?

Which one is better Kotak Platinum Plan? 

Or

PPF + Pure Term Insurance?

Or

ELSS + Pure Term Insurance?

Now, if you have already taken this Kotak Platinum  plan and thinking about canceling, then let’s see how to cancel or surrender Kotak Platinum Plan.

What is discontinuance in Kotak Platinum Plan?

If you don’t pay your premium on a date, then you will be given a grace period/Notice Period to pay off your premium.

The grace period will be 30 days for Yearly, Half-yearly, and quarterly mode, and 15 days for monthly mode.

Still, if you don’t pay the premium within the grace period, then the Kotak Platinum will give you 3 options.

  • Revive the policy within 2 years.
  • You can choose to withdraw without risk.
  • Convert the policy into paid-up with Reduced Paid-Up Basic Sum Assured (available after lock-in period).

The policy will consider discontinued if

  • The policyholder did not pay and the policyholder did not choose the option of revival by the end of the Notice Period
  • The policyholder chooses the option to discontinue the policy

Discontinue during lock-in period of 5 years:

After discontinuance charges, the Fund Value of the policy will be credited to the Discontinued Policy Fund. 

The funds would be accumulated at a minimum interest rate set by the Insurance Regulatory and Development Authority of India (IRDAI) (currently 4% p.a.) and used during the discontinuation period. 

Except in the case of death, where it would be paid out immediately, the proceeds of the terminated policy will be repaid only after the five-year lock-in period or the revival period (if the option to revive the policy was accepted), whichever comes first.

Discontinue after a lock-in period of 5 years:

If you opt to revive the policy within 2 years, then your investment will be forced with risk cover.

If you don’t opt for any option during the Notice Period or decided on a complete withdrawal, then the Fund Value will be paid and the policy will be terminated.

If you covert the policy to paid-up with a reduced paid-up and continue without premium till the end of the policy term. All charges will be applicable during these periods. For more details, you can read the terms and conditions of the Kotak Platinum Plan Brochure here.

How to Cancel/Surrender Kotak Platinum Plan during Free Look in Period?

If you are surrendering the policy within the first 15 days, then you can take advantage of the free look-in period.

You will be allowed a refund of the non-allocated premium plus charges set by the cancellation of units.

Plus you will be refunded the fund value at the date of cancellation after deducting proportionate risk charges, stamp duty, cost of medical examination if any, and other expenses following IRDAI  Regulations, 2000. 

The Free Look period is also applicable to the policy Riders. 

Final Verdict of Kotak Platinum Plan-ULIP Review:

So, if we evaluate the Kotak Platinum Plan with its advantages and disadvantages, this plan will be a disadvantage for you.

Also, compare to other investment plans, it is advisable to ignore Kotak Platinum plan. If you don’t want to take any risk, then you can choose PPF + Term Insurance combination.

If you want to take risk in your investment portfolio, then you can choose Mutual Fund + Term Insurance combination for a better result.  
If you have any comments or questions, write them in the comment box below.

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