Had you ever received a lump sum payment or have lump sum savings?
But you didn’t use that lump amount of money wisely?
However, with the Kotak Single Invest Advantage Plan you wish to fetch more returns in the future.
You’ve probably done some study on this insurance investment plan.
And you’re still waiting for a definitive response.
Your wait is finally over…
In this Kotak Single Invest Advantage Plan review, you will explore some of the key aspects of this plan.
This article will help you make an informed decision on whether this plan is good or bad for your future financial goals.
Table of Contents:
1. Kotak Single Invest Advantage Plan: An Overview
2. Kotak Single Invest Advantage: Plan Eligibility
3. Key Features of Kotak Single Invest Advantage Plan
4. Kotak Single Invest Advantage Plan: Charges
5. Kotak Single Invest Advantage: Review of Benefits
6. Pros of Kotak Single Invest Advantage Plan
7. Cons of Kotak Single Invest Advantage Plan
8. Kotak Single Invest Advantage: Plan: Review of Returns
9. Kotak Single Invest Advantage Plan: Analysis of Returns
10. Kotak Single Invest Advantage Vs Term Plan + RBI Bonds
11. Kotak Single Invest Advantage Plan Vs Term Plan + ELSS Mutual Fund
12. Final Takeaways from the Kotak Single Invest Advantage Plan
13. How to Surrender/Cancel Your Kotak Single Invest Advantage Plan?
Kotak Single Invest Advantage: An Overview
Kotak Single Invest Advantage Plan, allows you to invest once and earn rewards throughout the policy term.
In simple terms it is a single premium ULIP, the Kotak Single Invest Advantage Plan claims to be a hassle-free approach to building wealth for a better future.
It also offers 3 investment strategies to suit your investment objective and also loyalty additions upon the maturity of the plan.
Let’s look at the policy details of Kotak Single Invest Advantage before reviewing the pros and cons of this plan.
Kotak Single Invest Advantage: Plan Eligibility
Major Features of Kotak Single Invest Advantage Plan:
1.) It is a Non-Traditional Unit Linked Plan without a Bonus facility.
2.) Premium needs to be paid in a Lump sum (one-time payment).
3.) The plan will add Loyalty Additions every 5 years starting from the end of the 10th policy year.
The Loyalty Addition will be as a % of the average Fund Value in the immediately preceding three years
4.) Flexibility to choose from 3 Investment Strategies
- Self-Managed Strategy
- Age-Based Strategy
- Systematic Switching Strategy (SSS)
You have the following Fund Options to choose from in proportions of your choice. You can switch mnies amongst these funds using the switch option
Allocation of monies under this strategy will be done between Classic Opportunities Fund and Dynamic Bond Fund.
Systematic Switching Strategy (SSS)
You can opt for the SSS option that can be chosen at the inception only and will be applicable in the first policy year
This option allows you to invest in Money Market Fund and transfer a pre-defined amount every month into any one of the following funds:
- Classic Opportunities Fund
- Frontline Equity Fund
Learn in detail about the key features of this policy – Kotak Single Invest Advantage Policy Brochure.
Kotak Single Invest Advantage Plan: Charges
1. Premium Allocation Charge:
2. Fund Management Charge:
3. Switching charges:
Twelve switches are free in a policy year. For every additional switch thereafter, ₹ 250 will be charged.
4. Partial withdrawal charge:
For each Partial Withdrawal from the Fund Value in a policy year ₹ 250 will be charged. This charge may be increased to a maximum of ` 2,000 subjects to IRDAI approval.
5. Discontinuance Charge:
charges per thousand Sum at Risk* for a healthy individual.
Kotak Single Invest Advantage: Review of Benefits
Considering Kotak Single Invest Advantage is a ULIP, the insurance benefit is either death or maturity (read survival).
The Death Benefit payable in a lump sum in the event of the death of the Life Insured within the policy term will be:
- Basic Sum Assured fewer partial withdrawals if any
- Fund Value in Main Account including Loyalty Additions if any
- 105% of the premium(s) paid up to the time of death
Fund Value including Loyalty Additions will be payable upon Maturity. Maturity proceeds can be taken in either lump sum or as per the Settlement Options.
Settlement Option 1
50% of the proceeds as a lump sum and the balance 50% as regular installments over a period of 5 years
Settlement Option 2
The whole of the proceeds as regular installments over a period of 5 years
Pros of Kotak Single Invest Advantage
- A single premium enables you to enjoy the benefits of investment and insurance throughout the policy term.
- You can sit back and relax while your money remains invested & also Loyalty Additions get added.
- Whatever be your investment style, Kotak Single Invest Advantage offers you investment strategies to match your risk profile, investment objective, and comfort factor.
- It gives you the flexibility to move your investments from one fund to another or switch your strategies, i.e. between Self-Managed Strategy and Age-Based Strategy as per your need and the market conditions.
- Life Insured should specify the mode of the periodic installments, i.e. quarterly/half-yearly/ yearly at the point of pre-settlement notification.
Cons of Kotak Single Invest Advantage
- The lock-in period is 5 years.
- Various charges are levied before the premium gets invested.
- Although there are options to switch between funds, each strategy needs to be provided sufficient time to perform and generate good returns.
- Since it’s a one-time premium paying policy some may forget to check the performance of the fund.
- During the settlement period, the investment risk in the investment portfolio is borne by the Life Insured.
- Life cover and other benefits such as partial withdrawal or switching between the funds are not provided during the settlement period.
Kotak Single Invest Advantage Plan: Review of Returns
Let’s use an example to illustrate if Kotak Single Invest Advantage Plan has the potential to deliver higher returns or not.
Let us assume you buy the Kotak Single Invest Advantage plan for a policy term of 15 years with a single premium of ₹10,00,000 and a sum assured of ₹1,00,00,000.
You have chosen the Self-Managed Strategy with 100% investment in Classic Opportunities Fund which comes with a high-risk return profile.
Classic Opportunities Fund is chosen so that we could calculate the actual returns of this plan in the best-case scenario.
The Kotak Single Invest Advantage policy brochure forecasts that your premiums will likely generate an annual return of between 4% and 8%.
The actual annual rate of return (IRR) with 4% and 8% gross annual return will be as shown in the table below:
The values shown are not guaranteed and they are not upper and lower limits of returns, this table have been shown for explanatory purposes only.
Considering all of the charges charged by the policy, the actual annual return rate in the hands of the policyholder is only.
- 1.55% out of 4% gross annual return
- 5.85% out of 8% gross annual return
Kotak Single Invest Advantage Plan: Analysis of Returns
Have you noticed that our returns are minimal even when assuming the best-case scenario of 8% returns?
- An IRR return rate of 1.55 % or 5.85 % for a 15-year investment, when considering equity risk, is below average and disappointing.
- If you are a conservative and want to invest in the low-risk fund options offered by this plan, your returns will be even lower than this.
- Loyalty Additions are payable only if you complete the lock-in period of 5 years.
- Since Loyalty Additions are based on the age of average fund value, you must stay for a longer period to earn more returns.
- The impact of various charges in this policy is higher than the impact of loyalty Additions.
I believe it is not beneficial to put your time and energy into such a low-return investment.
Is there a better investment?
You are probably already aware of other investment instruments like RBI Bonds and Mutual Funds.
How do they compete against this Kotak Single Advantage plan?
Will it have an impact on your returns?
We will now be looking at both options in a detailed manner to help you decide better.
Kotak Single Invest Advantage Plan Vs Term Plan + RBI Bonds
If you are looking to invest a lump sum amount, RBI Bonds are a better option as they are a safe and secure investment for you than the Kotak Single Advantage Plan.
Assume that instead of purchasing this policy, you decide to invest in the RBI Bonds and purchase a term life insurance plan.
- RBI Bonds are issued by RBI on behalf of the Indian government, making them completely risk-free for any citizen to invest in.
- The term insurance plan will provide you with the same or more insurance coverage than your Kotak Single Invest Advantage policy, but at an outstandingly lower premium.
Let’s compare the difference in returns when investing in the Kotak Single Invest Advantage plan and investing in RBI Bonds and Term Insurance.
So, if you invest a lump sum of Rs.10,00,000 in RBI Bonds and Rs.16,500 in Term Insurance every year for the next 15 years, what will your return be?
Check the table below for the calculation of IRR:
What does the comparison tell us?
As an investor, you obviously want some assurance on your money.
RBI Bonds are a type of fixed income security where the interest paid is exempt from all taxes. This makes them an attractive investment option for those in high tax brackets.
RBI Bonds are available for conservative investors who likes to avoid risks in this situation.
It has the lowest risk because there is no risk of capital loss.
If you are looking to invest a lump sum amount, RBI Bonds can be a more secure and safe option for you than the Kotak Single Advantage Plan.
RBI Bonds provide you with:
- Guaranteed Returns and
- Better assurance from the Indian government
RBI Bonds delivers almost ₹15.12 Lakhs more than the Kotak Single Invest Advantage plan in the form of Guaranteed Returns.
For a conservative investor, RBI Bonds + Term Insurance proves to be a better alternative than the Kotak Single Invest Advantage plan.
But what if you could master risk management?
What if you could work on improving your risk tolerance?
Kotak Single Invest Advantage Plan Vs Term Plan + ELSS Mutual Fund
Since the Kotak Single Invest Advantage plan is a ULIP, it’s only sensible to compare its returns against an Equity investment and a Term Insurance Plan.
Once again, the ELSS Mutual Fund is merely an investment instrument. It does not include life insurance like the Kotak Single Invest Advantage Plan.
For the same life cover, you can get a term insurance plan.
So, let’s invest the same Rs.10,00,000 lump sum investment in ELSS Fund as we did with the Kotak Single Invest Advantage plan for the same 15 years. Let’s assume the ELSS mutual fund has a fairly cautious 12-percent CAGR.
See the table below for actual returns (IRR) from ELSS Fund
Note: Rs.16,500 is contributed towards the term plan every year for the 15 years.
From the above table, we have seen that the Classic opportunities Fund of the Kotak Single Invest Advantage plan, has the highest probability of giving a return of only ₹23.47 lakh.
But for investing the exact lump sum investment in the ELSS Fund, an investor will receive almost ₹53.83 lakhs at the end of the 15th year.
In comparison with the ELSS Fund, there is a vast difference in the maturity amount value. The difference is approximately ₹30.36 lakh.
An IRR of 11.07% from ELSS investment is a sure winner against the best-case scenario of 5.85% IRR from Kotak Single Invest Advantage Plan.
Do you know what’s even better? it offers better liquidity on investments. ELSS Mutual Funds have a lock-in period of only 3 years, whereas the Kotak Single Invest Advantage Plan has a minimum of 5 years.
You only have to learn how to manage risks to become a real investor.
When it comes to life insurance, Term Insurance is the way to go.
Want to choose the best term insurance plan?
Learn how to select the best term insurance plan for you with this cheat sheet.
Thus, the combination of ELSS Mutual Fund + Term Insurance is a better option than the Kotak Single Invest Advantage Plan for a risk-tolerant investor.
Final Takeaways from the Kotak Single Invest Advantage Review
Is Kotak Single Invest Advantage Plan good or bad?
After analyzing the charges and actual returns of this plan, as well as comparing the alternatives in all aspects, it is clear why you should not choose this plan.
This plan seems to be a complicated insurance investment plan with diverse investment strategies, Fund options, and charges.
The plan, which claims to be a hassle-free investment, has been revealed to be a complicated ULIP.
Therefore, It is recommended to invest in simple and transparent products like the following:
- RBI Bonds with Term Insurance Plan for a conservative investor.
- ELSS Mutual Fund along with Term Insurance Plan is the most fitting choice for a risk-tolerant and disciplined investor.
Also, you should avoid buying this plan because the benefits of this plan are not significantly improving your returns.
But what if you have already invested in such a poor choice of ULIP insurance?
If you have, you can still fix this awful investment mistake. Check out,
How to Surrender/Cancel your Kotak Single Invest Advantage Plan?
Surrendering during the free look-in period:
Policyholders have a 15-day free look period from the date they get their policy documents to review them.
The policyholder can surrender/cancel the policy if he or she does not intend to continue with it.
The customer will get the Fund Value plus the unallocated premium minus a proportionate premium for the company’s risk, plus any other fees such as a medical examination or stamp duty charges.
Surrendering after the free look-in period:
In the first five years of a ULIP insurance policy, such as the Kotak Single Invest Plan, there is no liquidity.
However, if a policyholder decides to surrender the policy before the 5 years, the insurance coverage will end and the fund value, less any discontinuance charges, will be transferred to the Discontinued Policy Fund.
The Discontinued Policy Fund shall be credited with a minimum annual interest rate of 3.5 percent, with proceeds due after the fifth policy anniversary. Only the accumulated fund value will be paid to the nominee if the Life Assured dies within this period.
Final Thoughts on Kotak Single Invest Advantage Plan Review
DO NOT INVEST your lump sum money in this Kotak Single Invest Advantage plan if you care about having a bright financial future.
Extremely high charges restrict this insurance policy from generating returns similar to RBI Bonds or Mutual Funds.
REMEMBER if your goal is to reap long-term benefits, you need a Financial Plan, not an insurance plan.
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