SBI Life Smart Future Choices Plan Review: Is It a Smart Investment Choice?
To meet your Financial Dreams, you need a Strong Financial Plan.
It includes choosing Right Products for Investment.
Will SBI Life Smart Future Choices Plan be one of your Right Investment Choices?
This detailed review helps you to find out whether SBI Life Smart Choices Plan is the Right Investment Choice for your Investment Portfolio or not.
1.)What is SBI Life Smart Future Choices Plan?
2.)Features of the SBI Life Smart Future Choices Plan
3.)Benefit Options of the SBI Life Smart Future Choices Plan
4.)Benefits under the SBI Life Smart Future Choices Plan
5.)The Grace Period, Lapse & Paid-Up Policies, Revival of the SBI Life Smart Future Choices Plan
6.)Free Look-Up Period of the SBI Life Smart Future Choices Plan
7.)Surrendering the SBI Life Smart Future Choices Plan
8.)Advantages of the SBI Life Smart Future Choices Plan
9.)Disadvantages of the SBI Life Smart Future Choices Plan
10.)Research Methodology
11.)SBI Life Smart Future Choices Plan – IRR Analysis
12.)SBI Life Smart Future Choices Vs. Other Investment Choices
13.)Final Verdict on the SBI Life Smart Future Choices Plan
It is an Individual, Non-Linked, Participating, Life Insurance Savings Product. It is curated especially for High Net-worth Individuals.
The SBI Life Smart Future Choices Plan allows you to choose Benefit pay-outs in Lump Sum or as flexible payments.&n
Additionally, you can also avail of regular Cash Bonus payouts to meet your financial needs at the various stages of your life.
With this option, you enjoy a Lump sum maturity benefit at the end of the policy term along with life cover throughout the policy term, provided your SBI Life Smart Future Choices Policy is still in force and the policyholder survives till the end of their policy term.
On opting for the Flexi Choice option, you will be eligible to get;
There are no Survival Benefits payable under the Classic Choice option.
Under Flexi Choice Option, you will be eligible to get two benefit pay-outs of 10% of Basic Sum Assured each at specified intervals.
You can defer one or both survival benefits, as per your financial requirement.
The deferred survival benefit along with applicable interest can be taken anytime during the remaining policy term in full or will be paid at the death of the life assured/surrender/maturity.
On survival till the end of the policy term, the following will be payable in lumpsum:
Guaranteed Sum Assured on Maturity + Accumulated Deferred Cash Bonuses if any + Terminal bonus if declared.
Guaranteed Sum Assured on Maturity will be based on age, premium payment term and policy term you have opted for.
Guaranteed Sum Assured on Maturity +Accumulated survival benefits, if any, + Accumulated Deferred Cash Bonuses, if any+ Terminal bonus, if declared.
The guaranteed Sum Assured on Maturity will be equal to 80% of the Basic Sum Assured.
On Death of the life assured during the policy term the following will be payable:
Higher of A or B, where:
Where Sum Assured on Death is 11 times of annualized premium
If the policyholder has opted for Flexi Choice, then in addition to the above benefit, Accumulated Survival Benefit, if any, will also be paid.
To take Cash Bonus as and when declared: The Cash Bonus(es) for the first policy year and second policy year (if declared) shall be payable at the end of the second policy year with interest, provided the policy is in force.
From the third policy year onwards, the cash bonus (if declared) is payable at the end of every subsequent policy year.
To defer the payment of Cash Bonuses: You also have the option of deferring the cash bonus (if declared).
The accumulated deferred cash bonus can be paid to the policyholder in lumpsum on request at any point of time during the policy term or at the death of the life assured / Surrender / Maturity.
Accumulated deferred cash bonus is the deferred cash bonus accumulated along with applicable interest.
A Grace Period of 30 days will be provided by SBI Life from the premium due date will be allowed for the payment of yearly and half-yearly premiums to the policyholder.
The Grace Period by SBI Life will be reduced to 15 days for policyholders who opted for monthly premiums.
The SBI Life Smart Future Choices Policy acquires paid-up benefits only if full premiums have been paid for at least the first two consecutive policy years.
The SBI Life Smart Future Choices Policy shall lapse without acquiring paid-up benefits if less than the first two full consecutive years of premiums have not been paid by the life assured and any subsequent premiums have not been paid.
If premiums are not paid within the grace period and the policy is not surrendered, the policy may be revived for full benefits within a revival period of 5 consecutive years from the date of the first unpaid premium.
If you disagree with any of the terms and conditions of the SBI Life Smart Future Choices Plan, you have the option to return the policy within 15 days of the date of receipt of the policy.
The Free Look-Up Period will be extended up to 30 days for policies sourced from Distance Mode and electronic policies.
The policy acquires Surrender Value only if at least the first 2 full policy years’ premiums have been paid.
The policyholder may surrender an in-force policy or paid-up policy anytime during the policy term.
On surrender, the higher of the Guaranteed Surrender Value (GSV) or the Special Surrender Value (SSV) will be paid.
Accumulated Survival Benefit, if any and Accumulated Deferred Cash Bonus, if any, will also be added to the Surrender Value.
You can read the SBI Life Smart Future Choices Policy Brochure for more details.
After analysing the basic details of the Plan, it is not easy to decide whether to include SBI Life Smart Future Plan in your Investment Portfolio or not.
Numerical analysis is the bedrock of investment analysis. So, let us figure out the internal rate of return for this policy. The results can be compared with other investment returns.
Let us assume that a 35-Year-Old Male opts for this SBI Life Smart Future Choices Plan with an Annual Premium of ₹ 1,50,000.
He opts for Classic Option & defers the Cash Bonus as well. The Sum Assured is ₹ 22,23,000, the Policy Term is 20 years & the Premium Paying Term is 15 years.
| Age | 35 |
| Basic Sum Assured | ₹ |
| Policy Term | 20 |
| Premium paying term | 15 |
| Annualised Premium | ₹ |
The assumed Rates of Returns @4% and @8% p.a. respectively, are only illustrative scenarios & assumed constant during the bonus accrual period, whereas actual bonus could vary, depending on the investment experience of the Company.
These Rates of Returns are not guaranteed and they are no higher or lower limits of returns.
|
|
| At | At | ||
| Age | Year | Annualised | Death | Annualised | Death |
| 35 | 1 | -1,50,000 | 22,23,000 | -1,50,000 | 22,23,000 |
| 36 | 2 | -1,50,000 | 22,23,000 | -1,50,000 | 22,23,000 |
| 37 | 3 | -1,50,000 | 22,23,000 | -1,50,000 | 22,23,000 |
| 38 | 4 | -1,50,000 | 22,23,000 | -1,50,000 | 22,23,000 |
| 39 | 5 | -1,50,000 | 22,23,000 | -1,50,000 | 22,23,000 |
| 40 | 6 | -1,50,000 | 22,23,000 | -1,50,000 | 22,23,000 |
| 41 | 7 | -1,50,000 | 22,23,000 | -1,50,000 | 22,23,000 |
| 42 | 8 | -1,50,000 | 22,23,000 | -1,50,000 | 22,23,000 |
| 43 | 9 | -1,50,000 | 22,23,000 | -1,50,000 | 22,23,000 |
| 44 | 10 | -1,50,000 | 22,23,000 | -1,50,000 | 22,23,000 |
| 45 | 11 | -1,50,000 | 22,23,000 | -1,50,000 | 22,23,000 |
| 46 | 12 | -1,50,000 | 22,23,000 | -1,50,000 | 22,23,000 |
| 47 | 13 | -1,50,000 | 22,23,000 | -1,50,000 | 22,23,000 |
| 48 | 14 | -1,50,000 | 22,23,000 | -1,50,000 | 22,23,000 |
| 49 | 15 | -1,50,000 | 22,23,000 | -1,50,000 | 22,23,000 |
| 50 | 16 | 0 | 22,23,000 | 0 | 22,23,000 |
| 51 | 17 | 0 | 22,23,000 | 0 | 22,23,000 |
| 52 | 18 | 0 | 22,23,000 | 0 | 22,23,000 |
| 53 | 19 | 0 | 22,23,000 | 0 | 22,23,000 |
| 54 | 20 | 0 | 22,23,000 | 0 | 22,23,000 |
| 55 |
| 31,02,007 |
| 39,79,173 |
|
|
|
|
|
|
|
|
|
| IRR | 2.46% |
| 4.35% |
|
Under the assumed rate of 4% scenario, the IRR is 2.46% & under the assumed rate of 8% scenario, the IRR is 4.35%.
This rate is far below any Debt Instrument Return.
It is evident from our above IRR analysis, you get a better return by investing in a Bank FD compared to investing in the SBI Life Smart Future Choices Plan.
You have better liquidity options in other Debt Instruments which is missing in the SBI Life Smart Future Choices Plan.
The returns from this SBI Life Smart Future Choices Policy are not sufficient to keep up with inflation, which can reduce the real value of the policy payout.
The life cover provided by this SBI Life Smart Future Choices Policy is also limited compared to a Pure Term Insurance Policy.
To fulfil your Life’s Financial Goals, you need the Right Investment Product that suits your Time Horizon & Risk Appetite.
SBI Life Smart Future Choices Plan is a Long-Term Investment but the returns from the policy are poor for a long-term investment.
Now, let us find out what would be the returns if we invest the same amount of ₹ 1,50,000 in other investment alternatives.
SBI Life Smart Future Choices Plan is an Endowment Policy. So, we can utilise the Premium for Life Cover & Investment.
A Pure Term Insurance Policy for a Sum Assured of ₹ 25 lakhs would cost ₹ 21,000. The Policy Term is 20 years & the Premium Paying Term is 10 years. After paying the Pure Term Insurance Premium, the balance could be utilised for investment purposes.
| Pure Term Insurance Policy |
|
| Basic Sum Assured | ₹ |
| Policy Term | 20 |
| Premium Paying Term | 10 |
| Annualised Premium | ₹ |
| Amount Left for Investment | ₹ |
In the earlier illustration, the Premium Paying Term is for 15 years, but here for a Pure Term Insurance Policy, it is 10 years. In the next 5 years, the whole amount ₹ 1,50,000 could be utilised for investment.
We have chosen one Debt Instrument (PPF) & one Equity Instrument (ELSS) for our comparison.
The following table gives you the IRR calculation for the given cash flow.
|
|
| Term | Term | ||
| Age | Year | Term | Death | Term | Death |
| 35 | 1 | -1,50,000 | 25,00,000 | -1,50,000 | 25,00,000 |
| 36 | 2 | -1,50,000 | 25,00,000 | -1,50,000 | 25,00,000 |
| 37 | 3 | -1,50,000 | 25,00,000 | -1,50,000 | 25,00,000 |
| 38 | 4 | -1,50,000 | 25,00,000 | -1,50,000 | 25,00,000 |
| 39 | 5 | -1,50,000 | 25,00,000 | -1,50,000 | 25,00,000 |
| 40 | 6 | -1,50,000 | 25,00,000 | -1,50,000 | 25,00,000 |
| 41 | 7 | -1,50,000 | 25,00,000 | -1,50,000 | 25,00,000 |
| 42 | 8 | -1,50,000 | 25,00,000 | -1,50,000 | 25,00,000 |
| 43 | 9 | -1,50,000 | 25,00,000 | -1,50,000 | 25,00,000 |
| 44 | 10 | -1,50,000 | 25,00,000 | -1,50,000 | 25,00,000 |
| 45 | 11 | -1,50,000 | 25,00,000 | -1,50,000 | 25,00,000 |
| 46 | 12 | -1,50,000 | 25,00,000 | -1,50,000 | 25,00,000 |
| 47 | 13 | -1,50,000 | 25,00,000 | -1,50,000 | 25,00,000 |
| 48 | 14 | -1,50,000 | 25,00,000 | -1,50,000 | 25,00,000 |
| 49 | 15 | -1,50,000 | 25,00,000 | -1,50,000 | 25,00,000 |
| 50 | 16 | 0 | 25,00,000 | 0 | 25,00,000 |
| 51 | 17 | 0 | 25,00,000 | 0 | 25,00,000 |
| 52 | 18 | 0 | 25,00,000 | 0 | 25,00,000 |
| 53 | 19 | 0 | 25,00,000 | 0 | 25,00,000 |
| 54 | 20 | 0 | 25,00,000 | 0 | 25,00,000 |
| 55 |
| 51,12,644 |
| 89,94,044 | 5,00,000 |
|
|
|
|
|
|
|
|
| IRR | 6.24% |
| 10.47% |
|
The ELSS maturity proceeds are subject to Capital Gains Tax. Here we have taken the Post Maturity Value. The ELSS Tax Calculation is given below:
| ELSS Tax Calculation |
|
| Maturity value after 20 years | 97,55,605 |
| Less |
|
| Purchase price | 20,40,000 |
| Long-term capital gains | 77,15,605 |
| Exemption limit | 1,00,000 |
| Taxable LTCG | 76,15,605 |
| Tax paid on LTCG | 7,61,560 |
| Maturity value after tax | 89,94,044 |
The IRR for Pure Term Insurance along with PPF investment is 6.24% & the IRR for Pure Term Insurance along with ELSS investment is 10.47% (Post-Tax).
These numbers add evidence to the point that investing separately for your Life’s Financial Goals is always the best choice.
SBI Life Smart Future Choices Plan is a Comprehensive Investment-Cum-Insurance Plan that provides Two Benefit Plan Options to the Policyholder along with Life Cover.
The plan also offers flexibility in terms of Premium Payment & Policy Terms. It allows you to defer the cash bonus.
After the analysis, we would like to conclude that both from an investment perspective & from a life cover perspective, the SBI Life Smart Future Choices Plan will not be beneficial to you.
While an endowment policy may provide a combination of life cover and savings benefits, it is important to consider the potential return before investing in such a policy.
It is advisable to carefully evaluate your Financial Needs and Investment Goals before deciding on the best Investment Product for you.
You can consult with your Financial Advisor to curate the perfect Financial Plan best suited to your Financial Goals to achieve better results.
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