Max Life Smart Wealth Plan.

Smart. Wealth.

Is this insurance policy really the smartest way to create wealth?

How can you take an informed decision, whether you should invest in this insurance policy or not?

To make the decision making easy for you, this is our honest Max Life Smart Wealth Plan Review.

Table of Contents:

• Features of Max Life Smart Wealth Plan
• Max Life Smart Wealth Lumpsum Plan Review
• Max Life Smart Wealth Short term Income Plan Review
• Max Life Smart Wealth Long-term Income Plan Review
• Max Life Smart Wealth Whole Life Income Policy Review
• Max Life Smart Wealth Plan: Should you buy?
• Surrendering your Max Life Smart Wealth Plan
• Conclusion

This article explains the key aspects, benefits and returns of Max Life Smart Wealth Plan.

By the end of this article, you will be able to take more informed decision regarding whether you should invest in this plan or not.

Features of Max Life Smart Wealth Plan

Max Life Smart Wealth Plan is savings plus insurance plan from Max Life Insurance. A savings plus insurance plan means that it has features of both a savings plan and a life insurance plan.

The Investment Side of Max Life Smart Wealth Plan:

You invest certain amount every year in this plan. At the time of the maturity of the plan, you will get a lumpsum amount or periodic income for the investments that you made in the plan during its term.

The Insurance Side of Max Life Smart Wealth Plan:

If during the term of the plan you die, your dependents will get life insurance like payment from the plan. This payment is meant to ensure that they are compensated for the loss of income because of your unfortunate and untimely death.

Product Nature of Max Life Smart Wealth Plan:

Max Life Smart Wealth Plan is a non-linked product. Non-linked product means that it does not invest in stocks or the stock market. Being a non-linked product, Max Smart Wealth Plan gives you assured, guaranteed returns.

Max Life Smart Wealth Plan Option:

There are four plans option in Max Life Smart Wealth Plan.

Investors can choose as per their need.

i) Lumpsum plan.

ii) Short-Term Income Plan.

iii) Long-Term Income Plan.

iv) Whole Life Income Policy.

Let’s understand and analyse the returns and benefits of each of these plan options in this Max Life Smart Wealth Plan Review.

1. Max Life Smart Wealth Lumpsum Plan Review

Under this plan you will receive a fixed sum at the time of maturity of the plan. So you will invest a fixed amount every month or year into the plan during the term of the plan. At the time of maturity, you will get a fixed amount. This fixed amount will include the periodic (monthly or yearly) investments of your savings that you made in the plan. It will also include a return over this fixed amount for the investments that you made in the plan.

The added benefit is that if you die any time during the term of the policy your dependents or family members will get a lumpsum amount as life insurance benefit. This amount will be the higher of 11 times the sum of all premiums that you had to pay on the policy or 105% of total premiums that you had paid till the time of your death or the amount that you chose as the one that your dependents should get in the event of your death.

Analysis of Max Life Smart Wealth Lumpsum Plan Returns:

The lumpsum amount that you will get in case of the policy term being up to 12 years will be calculated as follows: 110% * annualized premium that you pay * premium payment term.

So suppose you pay 5 premiums totaling ₹. 1,00,000 for a policy that matures at the end of 12 years. Then the lumpsum amount that you will receive under this variant will be:

110%*100000*5= 5,50,000.

So you get 550000 as guaranteed sum on maturity. On closer analysis you will see that in 12 years you make a total return of:

(550000 – 500000)/ 500000 = 10%.
In case the policy term is for 15 years or 16 years, then the guaranteed sum that you will get at the end of the policy term will be: 140%* annualized premium* premium payment term.

In case the policy term is 20 years, the guaranteed sum that you will get at the end of the policy term will be: 160% * annual premium* premium payment term.
You will make an internal rate of return (IRR) of just 0.80% [(550000/500000)^(1/12)-1]. The IRR is also the annual return that you will make on this investment.

An IRR of 0.8% is extremely low for a long-term investment. You will get higher returns even if you invest in a completely risk free asset, such as a government bond or PPF.

The Max Life Smart Wealth Lumpsum Plan is not so smart option after all.

2. Max Life Smart Wealth Short Term Income Plan Review

If you choose this plan of Max Life Smart Wealth Plan, then you will get a periodic income for a short period of time after the maturity of this product. This income can be monthly, quarterly, six monthly, or annually depending on what you choose.

There are many options under this plan in terms of the period for which you will get the income.

• Guaranteed period income for 6 years.
• Guaranteed income for 8 years.
• Guaranteed income for 10 years.
• Guaranteed income for 12 years.

The amount of income that you will get will depend on the periodic savings that you put into this plan and the length for which you put these savings. This plan too has life insurance benefit. If you die during the policy term of this plan, your dependents or family members will get a lumpsum amount as life insurance payment. This amount will be the higher of 11 times the sum of all premiums that you had to pay on the policy or 105% of total premiums that you had paid till the time of your death or the amount that you chose as the one that your dependents should get in the event of your death.

Analysis of Max Life Smart Wealth Short-term Income Plan Returns:

If you are a 35-year-oldmale and take this policy for a period of 13 years and pay annual premium of ₹1, 00,000 every year for 12 years, then you will get annual income of ₹2,00,860 for 12 years after the end of the policy term of 13 years.

The IRR that you will get is mere 5.1% per annum.

It is much higher than the Lumpsum Plan. Yet, it is still much lesser return compared to the 7.1% of the Govt. of India guaranteed PPF returns.

3. Max Life Smart Wealth Long Term Income Plan Review

Under the long- term income plan of Max Life Smart Wealth Plan there are two options. There is a guaranteed income plan where you will get guaranteed income for 30 years after the end of the policy term of the plan. There is also a plan where you will get guaranteed income for 25 years after the maturity of the term of your plan. The amount of income that you will get will depend on the periodic savings or premiums that you choose to make into this plan.

Like in other plans you will get the life insurance benefit under this plan too. In case you unfortunately die during the term of this plan, your dependents will get a lumpsum amount as life insurance benefit. This amount will be the higher of 11 times the sum of all premiums that you had to pay on the policy or 105% of total premiums that you had paid till the time of your death or the amount that you chose as the one that your dependents should get in the event of your death.

Analysis of Max Life Smart Wealth Long-term Income Plan Returns:

Suppose you are a 35-year-old male.

You buy this policy for 11 years with a premium payment term of 10 years. You pay annual premium of ₹1,00,000 for 10 years in this plan. At the end of 11 years your policy will mature. From 12th year onwards you will start getting annual income of ₹92000. This annual income you will get up to 36th year. This means that you will get annual income for a period of 25 years. Your Internal Rate of Return (IRR) will be just 4.9%.

It is the third Max Life Smart Wealth policy plan, and the one with a long payout period. But even with a long payout period, it offers returns only at a rate of 4.9%. It is even lesser than the Max Life Smart Wealth Short-term plan option return rate.

4. Max Life Smart Wealth Whole Life Income Policy Review

Under this plan you can insure yourself and one other person, such as your spouse.

The policy will keep on giving lifetime income until the death of both of you.

Also, at the time of the death of the last surviving of the two persons for which life insurance cover has been taken, a lumpsum amount will be paid to the nominee or the surviving members of your family.

This lumpsum amount will be higher of 1.25 times the single premium you had to pay on the policy or the lumpsum amount that you agreed to at the time of taking the policy.

Analysis of Max Life Smart Wealth Whole Life Income Plan Returns:

Suppose you are a 50-year-old married male.

You take this whole life income policy. You take a joint life insurance cover with your spouse as part of this policy.

Your wife is 45 years old. You invest ₹50,00,000 in this policy. Premium payment term of this policy that you have taken is one. This means that you pay the entire premium of ₹50,00,000 in one go (premium amount and term can vary depending on the policy you take).

The term of the policy that you have taken is 5 years. From 6th year onwards you will get income of ₹3,83,000 annually.

This annual income payment will continue till the death of both you and your wife.

After the death of both of you, the single premium of ₹50,00,000 that you paid at the time of taking the policy will be returned to the nominee as life insurance benefit.

Now, the average life expectancy in India currently is around 70 years.

If we assume that both you and your wife die when each of you turn 70 years old, this policy will pay income for 20 years. Your wife is 45 years now. The policy will start paying income 5 years from now. She will be 50 then. She will live till 70. She will also be the last of you two to die.

Your IRR from this policy is around 5.9% per annum. And it is the highest return rate of all the Max Life Smart Wealth Plan options.

Still, 5.9% IRR is a below par average for such a long term of investments. In comparison, even the Govt. of India assured PPF offers far better returns at 7.1% interest rate as of Q1 2021.

Comparison of Max Life Smart Wealth Plan vs PPF

Among the four plans of Max Life Smart Wealth Plan, the highest IRR is of whole life income policy.

Its IRR is 5.9%.

Let’s compare this IRR to the annual return of Public Provident Fund (PPF)—that is, if you invested the same amount in PPF instead of Max Life Smart Wealth Whole Life Income Policy.

The prevailing annual interest rate on PPF currently is 7.1%. You will earn guaranteed returns at 7.1 % annual interest rate in PPF in comparison to just 5.9% interest rate in Max Life Smart Wealth Plan’s whole life income policy.

The much interesting part is that, you can take a portion of the money and buy a term insurance plan before investing in PPF.

Advantages of PPF + Term Insurance Combination:

i) Higher Life Cover with Term Insurance Plan

ii) Still Higher Returns From PPF on Maturity

It is one of the best approach to satisfy your life insurance policy and investment needs. By keeping your insurance policy and investments separate, you have superior flexibility and control over your finances.

Comparison of Max Life Smart Wealth Plan Vs ELSS Mutual Fund

PPF + Term Insurance is ideal for conservative investors with low risk appetite.

But you have an even better investment strategy if you have a better risk tolerance.

But I should remind you, investment risk tolerance is not an inherited trait. It is a learnable trait—much like a skill.

Your other better option is the ELSS Mutual Fund + Term Life Insurance Policy combination.

If you had put this money in an equity linked mutual fund (ELSS), the average CAGR would be 12%.

You can see that the return is almost twice than the Max life Smart Wealth Plan.

It is often even more than 12% CAGR, depending upon the performance that particular mutual fund scheme.

However, ELSS mutual funds are much volatile investment instruments and its returns are not guaranteed like PPF. Its returns are dependent on returns of the broader stock market.

Hence, it is a must to assess your investment risk tolerance level before choosing to invest in ELSS Mutual Funds.

But, you can always approach a Certified Financial Advisor. They can assess your investment risk tolerance level and help you make the right decision.

Max Life Smart Wealth Plan: Should You Buy?

The definite answer is NO!

Max Life Smart Wealth Plan is neither smart nor wealth creating for the investors.

The argument can be given that this Max Life Smart Wealth Plan also offers life insurance benefit. But you can get these exact life insurance benefit at much lower annual premiums by buying a term insurance plan.

The savings that you make on the life insurance premiums by buying a term insurance plan, and not Max Life Smart Wealth Plan can be invested in a PPF account or ELSS mutual fund.

You can thus make higher returns on your savings than what you will make by investing in Max Life Smart Wealth Plan.

Surrendering Your Max Life Smart Wealth Plan

It is very apparent that the Max Life Smart Wealth Plan is neither smart nor creates wealth for you.

No smart investor would buy the Max Life Smart Wealth Plan.

But what if you already have bought this Plan?

Surrendering Max Life Smart Wealth Plan: Free-Look Period

Free look period of any life insurance policy is 15 days.

This means that after buying the plan, you will have 15 days to return the policy, if you are not satisfied with its terms and conditions, on reviewing it. Your premium amount will be returned minus any expense Max Life incurred on underwriting, such as the cost of any medical examination.

Surrendering Max Life Smart Wealth Plan: After Free-Look Period

In case your free look period has ended, and you want to surrender it now, you just need to call at Max Life Smart Wealth Plan.

They will provide you with a surrender form. You have to fill the necessary details and submit it.

The surrender value of your policy will include all the premiums that you have paid till the time of surrender, after deducting the relevant expenses that they have incurred in managing your policy.

See the table below for the Guaranteed Surrender Value calculation of Max Life Smart Wealth Plan.

You may not be sure whether it is financially a better decision to surrender or not.

But as a general rule, it is always good to surrender your policy in the early years when you have a better alternate investment options.

This way you can earn more if you invest the money that you get from surrendering the policy, in PPF or ELSS. You will be able to recover any loss that you incurred because of surrendering your Max Life Smart Wealth policy before maturity.

If you are concerned about the complications in surrendering the policy, approach a Certified Financial Advisor. They can give you the financially sound advice based on your financial situation and requirements.

For more surrender value and other details about the Max Life Smart Wealth Plan, you can download the Max Life Smart Wealth Plan Brochure PDF.

Conclusion

Max Smart Life Wealth Plan is a below par product.

It is not the right choice for life insurance nor investments. And you have seen the calculation in solid numbers.

The return it offers are lower than the returns offered by PPF and ELSS mutual funds. The insurance cover can be replaced by any term insurance policy at much lower premiums.

Never fall for any financial products that will not make your financial life better in any way.

Always look for better options, do your own research and make a sound financial decision.

If you are someone who would rather prefer a professional Certified Financial Planner’s advice, you are at the right place.

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