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Table of Content:
2.) What is SBI Life eWealth Insurance Plan?
3.) Plan Options in SBI Life eWealth Insurance plan
4.) Fund Details of SBI Life eWealth Insurance Plan
5.) Features of SBI Life eWealth Insurance Plan
6.) Benefits of SBI Life eWealth Insurance Plan
7.) Who is eligible for the SBI Life eWealth Insurance plan?
8.) Charges of SBI Life eWealth Insurance Plan
- Premium Allocation Charge
- Policy Administration Charge
- Fund Management Charges
- Discontinuance Charge
- Partial Withdrawal Charge
- Mortality Charge
- Medical expenses on revival
9.) Research Methodology of SBI Life eWealth Insurance Plan
10.) SBI Life eWealth Insurance Plan: Example with Illustration
11.) IRR of SBI Life eWealth Insurance Plan
12.) The SBI Life eWealth Insurance Plan vs. PPF + Term Insurance
13.) SBI Life eWealth Insurance Plan vs. ELSS + Term Insurance
14.) Advantages of SBI Life eWealth Insurance Plan
15.) Disadvantages of SBI Life eWealth Insurance Plan
16.) Surrender/Cancel during the free look period
17.) Surrender/Cancel during the lock-in period
18.) Surrender/Cancel after the lock-in period
19.) Final Verdict of SBI Life eWealth Insurance Plan
Introduction:
The SBI Life eWealth Insurance plan is a ULIP that promises to enhance your wealth in a simple manner.
It gives us life protection and the freedom to manage investments.
Apart from insurance cum investment combination, it claims to offer security, affordability, flexibility, simplicity, and liquidity.
Even though the SBI Life eWealth Insurance plan seems to be a genuine investment option, do you think it can help you create long-term wealth?
Here is the review of the SBI Life eWealth Insurance plan, which can help you to decide whether it is suitable for your investment portfolio or not.
What is SBI Life eWealth Insurance Plan?
SBI Life eWealth Insurance Plan is a ULIP that offers twin benefits of insurance coverage and investment. It offers market-linked returns and AAA (Automatic Asset Allocation) feature.
As the Policy Term advances, the Automatic Asset Allocation function reduces equity allocations while increasing debt/money market instrument allocations. The units are allotted based on the unit price for the funds. The Fund Value is the total value of units held in all Unit-linked Funds.
There are two options available under the SBI Life eWealth Insurance Plan.
- Growth Plan
- Balanced Plan
Plan Options in SBI Life eWealth Insurance plan:
Growth plan:
Balanced Plan:
Fund Details of SBI Life eWealth Insurance Plan:
Features of SBI Life eWealth Insurance Plan:
- It gives life coverage and market-related returns.
- Worry-free investment through Automatic Asset Allocation.
- Based on your risk profile, you can choose between a Growth plan and Balanced Plan.
- Premium starts from Rs. 2, 000 onwards.
- There is no premium allocation charge. So, it can help you to increase your fund value.
- There is no liquidity till the end of the lock-in period of five years.
- Tax benefits.
Benefits of SBI Life eWealth Insurance Plan:
Death Benefit:
If the policyholder died in an unfortunate event, then the nominee or the legal heir will get the highest of the following as death benefit.
- The fund value
- Sum assured exclude the partial withdrawal if any
- 105% of the premium paid
Maturity Benefit:
At the end of the policy term, the policyholder will get the fund value as lumpsum.
Who is eligible for the SBI Life eWealth Insurance plan?
Charges of SBI Life eWealth Insurance Plan:
Premium Allocation Charge:
There is no Premium Allocation Charge in the SBI Life eWealth Insurance plan.
Policy Administration Charge:
Rs. 45 will be deducted every month till the end of the policy term.
Fund Management Charges:
This charge will be deducted from the relevant fund before calculating NAV daily. This charge will be a fixed percentage of the fund.
Discontinuance Charge:
A fixed percentage will be deducted from your annual premium or fund value.
Partial Withdrawal Charge:
Every policy year, you can avail of one free partial withdrawal after the lock-in period. But, if you want to withdraw more than one time in the same policy year, then you have to pay Rs. 100 for every partial withdrawal.
Mortality Charge:
It will be deducted on the first day of every policy month from the fund value.
Medical expenses on revival:
If there are any medical expenses, they will be borne by the policyholder.
Research Methodology of SBI Life eWealth Insurance Plan:
Till now, we have come across all the important details of the SBI Life eWealth Insurance plan. These details can help us to draw an outlook of the SBI Life eWealth Insurance plan. But, they did not help us to decide whether we have this insurance plan in our investment portfolio or not. So, now, let’s see how this plan works and compare it to other investments, whether it can help us to achieve our financial goals or not.
SBI Life eWealth Insurance Plan: Example with Illustration:
IRR of SBI Life eWealth Insurance Plan:
Now, let’s calculate the IRR of the SBI Life eWealth Insurance plan, by using the online return calculator provided by them.
Here let’s take,
Annual contribution: Rs. 1, 00, 000
Policy Term: 20 years
In the worst-case scenario, let’s take the assumed gross return as 4%.
Then,
As you can see in the above return calculator illustration, in the worst-case scenario, the SBI Life eWealth Insurance plan gives us an IRR of 2.54%. At the end of the policy term, it gives us a maturity benefit of Rs. 26, 28, 874 and in an unfortunate death, the nominee will get the death benefit of Rs. 10, 00, 000.
Now, let’s see the IRR for the best-case scenario.
Here let’s take the assumed gross return as 8%.
Then,
As you can see in the above illustration, in the best-case scenario, the SBI Life eWealth Insurance plan gives us an IRR of 6.48%. At the end of the policy term, it gives us Rs. 41, 23, 248 as Maturity Benefit. If the policyholder passes away in an unfortunate event, then the nominee will get Rs. 10, 00, 000 as a death benefit.
Here for 20 years, it creates an illusion that makes you think that it gives you a double return. But, here you must remember one thing. This SBI Life eWealth Insurance plan is a ULIP which means it has risk in its portfolio.
So, after taking a risk, it gives you a return that is lower than risk-free investments.
Let me explain.
Now, let’s take PPF as a risk-free investment and compare it with SBI Life eWealth Insurance Plan.
The SBI Life eWealth Insurance Plan vs. PPF + Term Insurance:
Let’s take the annual contribution as Rs. 1, 00, 000
Annual Premium for Term Insurance: Rs. 5, 500
Tenure: 20 years
Sum Assured: Rs. 1, 00, 00, 000
Investment in PPF: Rs. 94, 500
Investment return: 7.10% without risk
So, here PPF gives us an IRR of 6.62%. This is higher than the SBI Life eWealth Insurance plan without taking a risk. After 20 years, it gives us Rs. 41, 94, 722 as investment return.
Now, let’s compare the SBI Life eWealth Insurance plan with other investment that has risk in its portfolio.
SBI Life eWealth Insurance Plan vs. ELSS + Term Insurance:
Let’s take the annual contribution as Rs. 1, 00, 000
Annual Premium for Term Insurance: Rs. 5, 500
Tenure: 20 years
Sum Assured: Rs. 1, 00, 00, 000
Investment in PPF: Rs. 94, 500
The assumed rate of return: 12% with risk
As you can see in the above illustration, compare to the SBI Life eWealth Insurance plan, ELSS gives us an IRR of 10.93% after taking the risk.
At the end of the 20 years, it gives us Rs. 70, 62, 427 as investment return.
Advantages of SBI Life eWealth Insurance Plan:
- This SBI Life eWealth Insurance plan does not offer bonuses but instead provides market-linked returns.
- The SBI Life eWealth Insurance plan includes Automatic Asset Allocation, which manages the policy holder’s investments automatically to optimize profits.
- Partial withdrawals are permitted from the 6th policy year onwards.
- The minimum partial withdrawal amount is Rs. 5,000, and the maximum is 15% of the Fund Value as of the withdrawal request date.
- There are no premium allocation charges, which increases the value of your fund.
- The Automatic Asset Allocation (AAA) function minimizes equity exposure as it approaches maturity, so helping to safeguard gains created by market volatility in later years.
- Affordability – with monthly premiums beginning at Rs. 2000
Disadvantages of SBI Life eWealth Insurance Plan:
- Option (Growth or Balanced) selected at policy initiation cannot be modified later during the policy duration.
- Partial withdrawals are not permitted if the Fund Value is decreased to less than 50% of the total premiums paid as a result of the withdrawal.
- During the first five years of the policy term, the Unit Linked Insurance Products do not provide any liquidity.
- Policyholders will not be able to renounce or withdraw funds invested in Unit Linked Insurance Products in full or in part until the end of the fifth year.
- The SBI Life eWealth plan advertises the dual benefits of life insurance coverage and wealth creation, yet neither is completely useful.
- The product does not permit top-up premiums.
Now, let’s see how to surrender/cancel the SBI Life eWealth Insurance Plan.
Surrender/Cancel during the free look period:
If you are not satisfied with the terms and conditions of the SBI Life eWealth Insurance plan, then you can return the policy by stating your reason during the free look period. You will be refunded after deducting the charges.
This free look period is 30 days from the date of purchasing the policy.
For more details, you can read the SBI Life eWealth Insurance Plan brochure here!
Surrender/Cancel during the lock-in period:
If you want to surrender the policy during the lock-in period, then you will get a 4% interest rate per annum as per the regulations.
The fund value will be payable on the 1st day of the 6th policy term, after deducting the charges.
Surrender/Cancel after the lock-in period:
You will be refunded the fund value immediately after deducting the relevant charges.
Final Verdict of SBI Life eWealth Insurance Plan:
“Investment is an asset or item that is purchased with the hope that it will generate income or appreciate in the future.”
The SBI Life eWealth Insurance plan is creating an illusion that seems to be increasing your wealth. But, in reality, it is not.
On the investment side, after taking the risk, this SBI Life eWealth Insurance plan gives us a return that is lower than risk-free investments. On the other hand on the insurance side, it also provides less life coverage compare to pure term insurance. So, after analyzing all the factors, it is not worth investing your money in SBI Life eWealth Insurance Plan for the long term.
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