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Financial Needs & Requirements vary from person to person.
While choosing your investment product, don’t be a copycat.
Select an Investment Product that is best suited to your Personal Financial Needs and Requirements.
So that you can attain your Financial Goals in the long run.
To fulfil your need for Long-Term Life Coverage with Limited Premium Paying Term, SBI has a plan called the SBI Life – Smart Bachat Plan.
In this detailed analysis, let us find out whether this plan will suit your Investment Plan or not.
Table of Contents:
1.)What is SBI Life Smart Bachat Plan?
2.)Features of the SBI Life Smart Bachat Plan
3.)Plan Options of the SBI Life Smart Bachat Plan
4.)Eligibility Criteria for the SBI Life Smart Bachat Plan
5.)Benefits under the SBI Life Smart Bachat Plan
- Maturity Benefit for both Options
- Death Benefit for both Options
- Accidental Death and Total Permanent Disability (AD&TPD) Benefit (applicable only for Option B)
6.)The Grace Period, Reduced Paid-Up & Revival of the SBI Life Smart Bachat Plan
7.)Free Look-Up Period of the SBI Life Smart Bachat Plan
8.)Surrendering the SBI Life Smart Bachat Plan
9.)Advantages of the SBI Life Smart Bachat Plan
10.)Disadvantages of the SBI Life Smart Bachat Plan
11.)Research Methodology
12.)SBI Life Smart Bachat Plan – IRR Analysis
13.)SBI Life Smart Bachat Plan Vs. Other Investments Products
14.)Final Verdict on the SBI Life Smart Bachat Plan
What is SBI Life Smart Bachat Plan?
It is an Individual, Non-Linked, Participating Life Insurance Savings Product with Limited Premium Payment Term (LPPT).
With this plan you can safeguard your family’s future along with meeting your investment needs wisely.
It also provides you with additional flexibility to choose your Premium Paying Term & Policy Term at your convenience.
Features of the SBI Life Smart Bachat Plan
- This product comes with two plan options
Option A: Endowment option
Option B: Endowment option with in-built Accidental Death and Total Permanent Disability (AD&TPD) Benefit. - Convenience of choosing the Premium Payment Term – 6, 7, 10 and 15 years.
- Life cover throughout the policy term i.e., even after the end of the Premium Payment Term
- Depending on your financial goal, you can choose your policy term, ranging from 12 to 25 years.
- Premium waiver is available under option B.
Plan Options of the SBI Life Smart Bachat Plan
The SBI Life Smart Bachat Product offers two options to choose from depending on your financial requirement. The option once chosen cannot be changed.
Option A: Endowment Option – This option offers the benefits of Wealth Creation through Simple Reversionary Bonuses and Life Cover throughout the Policy Term. You will get Basic Sum Assured along with the Vested Simple Reversionary and Terminal Bonuses, if any, on Maturity.
Option B: Endowment Option with in-built AD&TPD Benefit – In addition to the benefits as explained under Option A, this option provides you with a Benefit in case of Accidental Death or Accidental Total Permanent Disability of the life assured during the policy term.
Eligibility Criteria for the SBI Life Smart Bachat Plan
The basic design and the workings of this are given at a glance below;
|
Age at Entry |
Minimum Option A: 6 Years; Option B: 18 years |
Maximum: 50 years |
|
Maximum Age at Maturity |
65 years |
|
|
Basic Sum Assured (BSA) |
Minimum: 1,00,000 |
Maximum: No Limit |
|
Policy Term & Premium Payment Term Combinations Available |
Premium Paying Term (years) |
Policy term |
|
|
6 |
12-25 years |
|
|
7 |
12-25 years |
|
|
10 |
15-25 years |
|
|
15 |
20-25 years |
|
Premium Frequency |
Yearly, Half-yearly, Quarterly or Monthly
|
|
|
Premium Frequency Loading |
Half-Yearly: 51.00% of annualised premium |
|
|
Premium (applicable for both options) |
Minimum |
Maximum – Based on the Sum Assured |
Benefits under the SBI Life Smart Bachat Plan
Maturity Benefit for both Options
On survival till the end of the policy term, Basic Sum Assured + Vested Simple Reversionary Bonuses + Terminal Bonus, if any, is paid to the policyholder.
Death Benefit for both Options
On the death of the life assured during the policy term, the nominee/beneficiary/legal heir is entitled to get a higher A or B
- A – Sum Assured on Death + Vested Simple Reversionary Bonuses + Terminal Bonus, if any. Where Sum Assured on death will be higher than Basic Sum Assured or 10 times the annualized premium
- B – 105% of the total premiums received up to the date of death.
Accidental Death and Total Permanent Disability (AD&TPD) Benefit (applicable only for Option B)
In case of Accidental Death of the life assured during the policy term
An additional amount equivalent to the Basic Sum assured would be payable in lumpsum as an AD&TPD Benefit PLUS
Death benefit as explained under ‘Death Benefit for both Options’
The policy will terminate and no further benefits will be payable
In case of Accidental Total and Permanent Disability of the life assured during the policy term
AD &T PD Benefits would be payable in lumpsum
All future premiums would be waived off AND
The base policy continues till surrender, death or maturity, whichever is earlier.
AD&TPD Benefits will be lower of (a) and (b):
- Basic Sum assured
- 50,00,000 subjects to the condition that the total sum assured under this benefit on all your individual policies with SBI Life put together should not exceed `50,00,000
This cap shall apply for Accidental Death and Accidental Total and Permanent Disability put together.
The Grace Period, Reduced Paid-Up & Revival of the SBI Life Smart Bachat Plan
Grace Period
The SBI Life Smart Bachat Plan offers a Grace Period of 30 days from the premium due date for yearly/half-yearly/quarterly premium payment frequencies and a Grace Period of 15 days for monthly premium payment frequencies.
Reduced paid-up
The SBI Life Smart Bachat Policy will acquire a paid-up value only if premiums have been paid for at least the first 2 full years.
The Sum Assured paid on death or maturity of paid-up policies will be reduced in the proportion of the number of premiums paid to the total number of premiums actually payable under the policy.
Revival
You have the option to revive a lapsed or paid-up policy within 5 consecutive years from the date of the first unpaid premium.
Free Look-Up Period of the SBI Life Smart Bachat Plan
In the event that the policyholder is not satisfied with the terms and conditions of the SBI Life Smart Bachat Policy, he/she can return the policy within 15 days for policies sourced through any channel other than Distance Marketing and electronic policies.
The Free Look-Up Period will be extended up to 30 days for policies sourced through Distance Marketing and electronic policies, from the date of receipt of the policy document.
Surrendering the SBI Life Smart Bachat Plan
The SBI Life Smart Bachat Policy will acquire a surrender value only if premiums have been paid for at least the first 2 full years.
On surrender, the higher of the Guaranteed Surrender Value (GSV) and Special Surrender Value (SSV) is payable.
The Guaranteed Surrender Value (GSV) will be equal to GSV factors multiplied by the total premiums paid plus the surrender value of vested bonuses, if any. Special Surrender Value will be arrived at by multiplying Paid-up Value (PUV) on maturity with SSV factors.
Advantages of the SBI Life Smart Bachat Plan
- Loans will be available only after the policy acquires surrender value and will be limited to a maximum of 90% of the surrender value.
- Discounts on high Sum Assured are available.
- Accidental Death (AD) or Accidental Total Permanent Disability (ATPD) is an in-built feature in plant option B.
- There is a wide range of premium paying term & policy term options available to choose from.
- Tax benefit as per Sec 80C & Sec 10 (10D).
Disadvantages of the SBI Life Smart Bachat Plan
- Plan option once chosen can’t be changed.
- Since it is a participating policy, the benefits may vary depending on the bonus rate declared each year.
- The Lock-in period is 2 years for Loan/Surrendering.
You can refer to the SBI Life Smart Bachat Policy Brochure for more information.
Research Methodology
The SBI Life Smart Bachat Plan has both guaranteed & non-guaranteed benefits.
In order to understand the policy better let us work out the cash flow & find out the internal rate of return for an illustration (taken from the portal).
This helps you to estimate the profitability in terms of investment.
SBI Life Smart Bachat Plan – IRR Analysis
Let us assume that a 35-year-old male opts for the SBI Life Smart Bachat Plan.
The Sum Assured is ₹ 15 lakhs, the Premium Paying Term is 15 years & the Policy Term is 20 years.
The Annual Premium is ₹ 86,190.
He chooses Plan Option A: Endowment.
|
Age |
35 years Male |
|
Basic Sum Assured |
₹ 15,00,000 |
|
Policy Term |
20 years |
|
Premium Paying Term |
15 years |
|
Annualised Premium |
₹ 86,190 |
|
Plan |
Option A: Endowment |
Under option A: Endowment, the maturity benefit is receivable at the end of the policy term with a bonus (if any).
The assumed rates of returns @4% and @8% p. a. They are only illustrative scenarios & are assumed constant during the bonus accrual period, whereas the actual bonus could vary, depending on the investment experience of the Company.
These are not guaranteed and they are not higher or lower limits of returns. Returns are dependent on several factors including future investment performance
|
|
|
At 4% p.a. |
At 8% p.a. |
||
|
Age |
Year |
Annualised Premium / Maturity Benefit |
Death Benefit |
Annualised Premium / Maturity Benefit |
Death Benefit |
|
35 |
1 |
-86,190 |
15,00,000 |
-86,190 |
15,00,000 |
|
36 |
2 |
-86,190 |
15,00,000 |
-86,190 |
15,00,000 |
|
37 |
3 |
-86,190 |
15,00,000 |
-86,190 |
15,00,000 |
|
38 |
4 |
-86,190 |
15,00,000 |
-86,190 |
15,00,000 |
|
39 |
5 |
-86,190 |
15,00,000 |
-86,190 |
15,00,000 |
|
40 |
6 |
-86,190 |
15,00,000 |
-86,190 |
15,00,000 |
|
41 |
7 |
-86,190 |
15,00,000 |
-86,190 |
15,00,000 |
|
42 |
8 |
-86,190 |
15,00,000 |
-86,190 |
15,00,000 |
|
43 |
9 |
-86,190 |
15,00,000 |
-86,190 |
15,00,000 |
|
44 |
10 |
-86,190 |
15,00,000 |
-86,190 |
15,00,000 |
|
45 |
11 |
-86,190 |
15,00,000 |
-86,190 |
15,00,000 |
|
46 |
12 |
-86,190 |
15,00,000 |
-86,190 |
15,00,000 |
|
47 |
13 |
-86,190 |
15,00,000 |
-86,190 |
15,00,000 |
|
48 |
14 |
-86,190 |
15,00,000 |
-86,190 |
15,00,000 |
|
49 |
15 |
-86,190 |
15,00,000 |
-86,190 |
15,00,000 |
|
50 |
16 |
0 |
15,00,000 |
0 |
15,00,000 |
|
51 |
17 |
0 |
15,00,000 |
0 |
15,00,000 |
|
52 |
18 |
0 |
15,00,000 |
0 |
15,00,000 |
|
53 |
19 |
0 |
15,00,000 |
0 |
15,00,000 |
|
54 |
20 |
0 |
15,00,000 |
0 |
15,00,000 |
|
55 |
|
18,45,000 |
|
28,80,000 |
|
|
|
|
|
|
|
|
|
|
IRR |
2.72% |
|
6.09% |
|
The IRR under the 4% scenario is 2.72% which is lower than a Bank’s Savings account interest rate.
The IRR under the 8% scenario is 6.09% which is lower than the Bank’s FD Rate of Interest. For a long-term investment, this return won’t help to combat inflation.
So, at the end of the Policy Term, the Maturity Benefit will not suffice to meet your Financial Goals.
SBI Life Smart Bachat Plan Vs. Other Investments Products
Let us do an analogy between SBI Life Smart Bachat Plan & other investment products to see which is better in terms of return, liquidity & other aspects.
For this comparison, let us assume an annual cash flow of ₹ 86,190 i.e., similar to the above illustration.
This amount could be invested for your Financial Goals & also for Life Cover.
SBI Life Smart Bachat Plan Vs. Pure Term Insurance + PPF/ELSS
For Life Cover, Pure Term Insurance could have opted.
For investment, investors with a high-risk appetite can choose the ELSS Mutual Fund & those who are risk-averse can choose PPF.
The Premium for a Sum Assured of ₹ 15 lakhs would cost ₹ 12,390 with a Limited Premium Paying Term of 10 years & the Policy Term is 20 years.
In the previous illustration, the Premium Paying Term is 15 years.
But, here for Pure Term Insurance, the Premium Paying Term is 10 years.
In the first 10 years, the amount left after paying the Premium is invested in PPF/ELSS.
In the next 5 years, the whole amount is utilised for PPF / ELSS investment.
|
Pure Term Insurance Policy |
|
|
Basic Sum Assured |
₹ 15,00,000 |
|
Policy Term |
20 years |
|
Premium paying term |
10 years |
|
Annualised Premium |
₹ 12,390 |
|
The amount left for investment |
₹ 73,800 |
The ELSS Maturity Proceeds are subject to Capital Gains Tax.
We have taken the Post-Tax Maturity Value.
The Tax Calculation is given below.
|
|
|
Term Insurance + PPF |
Term insurance + ELSS |
||
|
Age |
Year |
Term Insurance Premium + PPF |
Death Benefit |
Term Insurance Premium + ELSS |
Death Benefit |
|
35 |
1 |
-86,190 |
15,00,000 |
-86,190 |
15,00,000 |
|
36 |
2 |
-86,190 |
15,00,000 |
-86,190 |
15,00,000 |
|
37 |
3 |
-86,190 |
15,00,000 |
-86,190 |
15,00,000 |
|
38 |
4 |
-86,190 |
15,00,000 |
-86,190 |
15,00,000 |
|
39 |
5 |
-86,190 |
15,00,000 |
-86,190 |
15,00,000 |
|
40 |
6 |
-86,190 |
15,00,000 |
-86,190 |
15,00,000 |
|
41 |
7 |
-86,190 |
15,00,000 |
-86,190 |
15,00,000 |
|
42 |
8 |
-86,190 |
15,00,000 |
-86,190 |
15,00,000 |
|
43 |
9 |
-86,190 |
15,00,000 |
-86,190 |
15,00,000 |
|
44 |
10 |
-86,190 |
15,00,000 |
-86,190 |
15,00,000 |
|
45 |
11 |
-86,190 |
15,00,000 |
-86,190 |
15,00,000 |
|
46 |
12 |
-86,190 |
15,00,000 |
-86,190 |
15,00,000 |
|
47 |
13 |
-86,190 |
15,00,000 |
-86,190 |
15,00,000 |
|
48 |
14 |
-86,190 |
15,00,000 |
-86,190 |
15,00,000 |
|
49 |
15 |
-86,190 |
15,00,000 |
-86,190 |
15,00,000 |
|
50 |
16 |
0 |
15,00,000 |
0 |
15,00,000 |
|
51 |
17 |
0 |
15,00,000 |
0 |
15,00,000 |
|
52 |
18 |
0 |
15,00,000 |
0 |
15,00,000 |
|
53 |
19 |
0 |
15,00,000 |
0 |
15,00,000 |
|
54 |
20 |
0 |
15,00,000 |
0 |
15,00,000 |
|
55 |
|
29,28,178 |
|
51,54,141 |
5,00,000 |
|
|
|
|
|
|
|
|
|
IRR |
6.21% |
|
10.45% |
|
|
ELSS Tax Calculation |
|
|
Maturity Value after 20 years |
₹ 55,85,829 |
|
Less |
|
|
Purchase Price |
₹ 11,68,950 |
|
Long-Term Capital Gains |
₹ 44,16,879 |
|
Exemption Limit |
₹ 1,00,000 |
|
Taxable LTCG |
₹ 43,16,879 |
|
Tax Paid on LTCG |
₹ 4,31,688 |
|
Maturity Value after Tax |
₹ 51,54,141 |
The PPF investment with Pure Term Insurance yields an IRR of 6.21%.
The ELSS investment & Pure Term Insurance yields an IRR of 10.45%.
ELSS IRR is an inflation-beating return. Also, you have a liquidity advantage.
On inferring the IRR calculation, it is evident that investing separately for life goals would be beneficial.
You can choose an Investment Product based on your time horizon & Risk appetite.
Final Verdict on the SBI Life Smart Bachat Plan
SBI Life Smart Bachat Plan is a Traditional Participating Life Insurance Plan.
It is designed to provide Life Cover as well as Savings and Investment Opportunities to the Policyholder.
The SBI Life Smart Bachat Plan offers a premium waiver benefit (option B) in case of the policyholder’s total and permanent disability.
In such cases, the future premiums are waived, but the policy cover continues.
It is a long-term investment product, but the returns are not convincing to invest. Also, there is no liquidity in this product. On the whole, it will not help you to fulfil your financial needs & requirements in the long run.
Alternatively, you can buy Pure Term Insurance for life cover where you get high coverage at a reasonable premium.
You can invest in a Diversified Investment Portfolio for corpus accumulation without clubbing it with Insurance Products.
You can consult a Certified Financial Planner who can help you in assessing your current financial position & draft a custom-made Financial Plan.
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