Listen to this articleTable of Content:
What is SBI Life Smart Power Insurance Plan?
- Trigger Fund Option of SBI Life Smart Power Insurance
- Smart Fund Option of SBI Life Smart Power Insurance
Features of SBI Life Smart Power Insurance plan
Who can purchase SBI Life Smart Power Insurance Plan?
SBI Life Smart Power Insurance Plan: Plan Options
Investment Funds of SBI Life Smart Power Insurance
- Flexible Option
- Switching Option
- Premium Redirection Option
- Portfolio Transfer Option
- Partial Withdrawals
- Settlement Option
Benefits of SBI Life Smart Power Insurance Plan
Charges of SBI Life Smart Power Insurance Plan
- Premium Allocation Charge
- Policy Administration Charge
- Fund Management Charge
- Discontinuance Charge
- Mortality Charge
- Accelerated Total & Permanent Disability Charge
- Switching Charge
- Premium Redirection Charge
- Partial Withdrawal Charge
- Medical Expenses on Revival
Research Methodology of SBI Life Smart Power Insurance Plan
SBI Life Smart Power Insurance Plan: Analysis with Illustration
IRR of SBI Life Smart Power Insurance Plan
SBI Life Smart Power Insurance Plan vs. PPF + Term Insurance
SBI Life Smart Power Insurance Plan vs. ELSS + Term Insurance
SBI Life Smart Power Insurance Plan: Advantages
SBI Life Smart Power Insurance Plan: Disadvantages
Surrendering/Cancelling SBI Life Smart Power Insurance Plan
Final Verdict of SBI Life Smart Power Insurance (ULIP) plan
Introduction
SBI Life Smart Power Insurance plan which is a ULIP that claims that it can help you to grow your wealth. But will it really help you to increase your wealth in a long term?
Here’s a review of the SBI Life Smart Power Insurance Plan to discover the answer.
What is SBI Life Smart Power Insurance Plan?
SBI Life Smart Power Insurance plan is an individual, Unit Linked Insurance Plan (ULIP).
SBI Life Smart Power Insurance plan gives freedom to manage your own investment as per your requirements. It offers benefits to managing the risk level in your investment portfolio against market volatility.
SBI Life Smart Power Insurance plan offers flexibility to choose between two investment strategy options and multiple fund choices to take care of your needs. SBI Life Smart Power Insurance plan provides a liquidity option after the end of the 5th policy term.
SBI Life Smart Power Insurance has two fund options.
- Trigger Fund Option
- Smart Fund Option
Trigger Fund Option of SBI Life Smart Power Insurance:
Based on the investment philosophy “buy low…sell high”, this option can help to take advantage of the equity market to gain a return.
Smart Fund Option of SBI Life Smart Power Insurance:
In this option, you can choose your own asset allocation from the 10 funds provided by SBI Life Smart Power Insurance Plan.
Features of SBI Life Smart Power Insurance plan:
- Option to choose between Level Cover Option and Increasing Cover Option in two plan options.
- The Inbuilt Accelerated Total & Permanent Disability (TPD) benefit allows you to advance the Policy Benefit to become your Living Benefit.
- Option to choose between two fund options Trigger fund option and Smart Fund Option.
- Flexibility is provided by 2 free switches.
- Liquidity in partial withdrawal.
Who can Purchase SBI Life Smart Power Insurance Plan?
Under both options, the Sum Assured will not exceed Rs. 50, 00, 000
SBI Life Smart Power Insurance Plan: Plan Options
Investment Funds of SBI Life Smart Power Insurance:
Flexible Option:
Switching Option:
Under the Smart investment option in SBI Life Smart Power Insurance, you can switch between the available 10 funds. The minimum switch amount is Rs. 2000 and you don’t have to pay for two switches in the same policy term. But after the third switch onwards, you need to pay Rs. 100 for every switch. Unused switches cannot be carried forward.
Premium Redirection Option:
You can redirect your premium from the 2nd premium term onwards. You can avail of one redirect option free of cost per year among the 10 funds. After that, you need to pay Rs. 100 for every transaction. The unused free transaction cannot be carried forward.
Portfolio Transfer Option:
If you desire, you have the option to change the fund option which you had selected before to the options Trigger Fund and Smart fund. You can write SBI Life at any policy term at least before 2 months of the policy anniversary to change the selected fund option. This option can be used 2 times per annum. You will not be charged for the transfer option.
Partial Withdrawals:
Partial withdrawals are allowed from the 6th policy term onwards. Policyholders can avail of two partial withdrawals free of cost after that they have to Rs. 100 for every withdrawal. The policyholder can withdraw from Rs. 2000 to 15% of the fund value. 4 partial withdrawals are allowed per year. Overall a person can withdraw 10 times during the policy term or 15 times if the policy term exceeds more than 10 years.
Policyholders cannot withdraw if they are reduced to less than 50% of the total premium paid.
Settlement Option:
During the settlement period, the Nominee bores the risk of Investment. The nominee will get the death benefit within 2 to 5 years. It will be paid as yearly, half-yearly, quarterly, or monthly pay-outs as required, from the date of death.
Benefits of SBI Life Smart Power Insurance Plan:
Death Benefit:
If the policyholder passes away, unfortunately, then the nominee or the legal heir will get the highest of the following as death benefit
- Fund Value as on the death of the policyholder
- Basic Sum Assured excludes partial withdrawal
- 105% of the premium term paid
Settlement option:
The nominee or the legal heir can receive the death benefit over 2 to 5 years under the ‘Settlement’ Option as yearly, half-yearly, quarterly, or monthly pay-outs as required, from the date of death.
In-built Option:
If the policyholder becomes permanently disabled due to illness or accident, the policyholder will get paid 100% of the death benefit and the policy will be terminated
Maturity Benefit:
After the end of the SBI Life Smart Power Insurance policy, the policyholder will get the fund value as lumpsum.
Charges of SBI Life Smart Power Insurance Plan:
Premium Allocation Charge:
This charge will be deducted from the premium paid before the allocation of the units.
Policy Administration Charge:
The Policy Administration charge will be deducted from the term of the policy. It will be Rs. 33.33 per month.
This policy administration charge is subject to a cap of Rs. 500 per month.
Fund Management Charge:
A fixed percentage will be deducted from the fund value before calculating NAV.
FMC of all the funds except the discontinuance policy fund will be subject to a cap of 1.35%.
Discontinuance Charge:
This will be charged as a percentage of the annual premium or fund value.
Mortality Charge:
This charge will be deducted from the fund value on the 1st day of each policy month.
Accelerated Total & Permanent Disability Charge:
This charge will be deducted from the fund value on the 1st day of every policy month. It is deducted as Rs. 0.40 per Rs. 1000 sum assured.
Switching Charge:
There are switching is free per policy year. After that, the policyholder needs to pay Rs. 100 for every switch.
The switching charge is subject to a market cap of Rs. 500 per switch.
Premium Redirection Charge:
The policyholder can avail of one redirection free of charge. After that, the policyholder needs to pay Rs. 100 for every redirection. The premium redirection charge is subject to a cap of Rs. 500 per transaction.
Partial Withdrawal Charge:
The policyholder will be charged Rs. 100 after the 2 free partial withdrawals. This Partial withdrawal charge is subject to a cap of Rs. 500.
Medical Expenses on Revival:
These medical expenses will be charged to the policyholder.
Research Methodology of SBI Life Smart Power Insurance Plan:
Now, we have seen all the necessary details that we need to know about SBI Life Smart Power Insurance Plan. Though it seems a genuine plan, still it is not enough to decide whether it is worth to invest or not. So, now let’s see how the SBI Life Smart Power Insurance plan works. After that, let’s analyze compared to other investments, will it really creates long-term wealth or not.
SBI Life Smart Power Insurance Plan: Analysis with Illustration
IRR of SBI Life Smart Power Insurance Plan:
Now, let’s see the IRR (Internal Rate of Return) for the worst-case scenario and best-case scenario.
Investment contribution: Rs. 1, 00, 000 per annum
Premium Term: 20 years
Policy term: 20 years
The assumed gross return in the worst-case scenario is 4%.
As you can see in the above illustration, in the worst-case scenario, the SBI Life Smart Power Insurance plan gives us an IRR of 1.96%.
At the end of the 20 years, the SBI Life Smart Power Insurance plan gives us the maturity benefit of Rs. 24, 66, 399 and the Death benefit of Rs. 10, 71, 790.
Now, let’s see the best-case scenario.
The assumed gross return in the best-case scenario of the SBI Life Smart Power Insurance plan is 8%.
As you can in the above illustration, in the best-case scenario, the SBI Life Smart Power Insurance plan gives us an IRR of 5.89%. At the end of the 20 years, the SBI Life Smart Power Insurance plan gives us the maturity benefit of Rs. 38, 47, 928 and death benefit of Rs. 13, 35, 940.
Compare to other investments this SBI Life Smart Power Insurance plan neither gives us the best outcome that can beat the inflation nor a good insurance coverage.
For more clarification, let’s compare this plan with PPF and see its performance for the same 20 years.
SBI Life Smart Power Insurance Plan vs. PPF + Term Insurance:
Overall contribution: Rs. 1, 00, 000
Tenure: 20 years
Contribution to term insurance:
Sum Assured: Rs. 1, 00, 00, 000
Premium term: Rs. 16, 500
PPF Contribution: Rs. 83, 500
Investment return: 7.10% without taking the risk.
As you can see in the above illustration, PPF gives us an IRR of 5.56%.
At the end of the 20 years, we will get Rs. 37, 06, 447 as investment return.
Now compare to the SBI Life Smart Power Insurance plan, PPF gives us the same investment return without taking the risk.
Now, let’s compare SBI Life Smart Power Insurance Plan with ELSS.
SBI Life Smart Power Insurance Plan vs. ELSS + Term Insurance:
Overall contribution: Rs. 1, 00, 000
Tenure: 20 years
Contribution on term insurance:
Sum Assured: Rs. 1, 00, 00, 000
Premium term: Rs. 16, 500
ELSS Contribution: Rs. 83, 500
Assumed Investment Return: 12% with risk
As you can see in the above illustration, after taking risk, ELSS gives us the IRR of 10.55%. At the end of the 20 years, it gives us Rs. 67, 38, 344 as investment return.
Now, compare to SBI Life Smart Power Insurance Plan, after taking risk, ELSS gives us inflation beating return.
SBI Life Smart Power Insurance Plan: Advantages
- There are two life cover options and a variety of fund options available for you to choose from.
- You can switch between the available 10 funds under the Smart Funds Option.
- You have the choice to choose between the Trigger Fund Option and the Smart Fund Option.
- The candidate has the option to receive the death benefit in instalments.
- During the settlement stage, switches are permitted.
- During the settlement period, no charges will be deducted except FMC and switching charges.
SBI Life Smart Power Insurance Plan: Disadvantages
- The policy holder bears the investment risk in the investment portfolio during the settlement term.
- The lock-in period is 5 years.
- During the first five years of the contract, Unit Linked Insurance products do not provide any liquidity.
- Policyholders will not be able to totally or partially surrender or withdraw funds invested in Unit Linked Insurance Products until the conclusion of the fifth year.
- The premium is invested after different costs have been deducted.
- Even though it is a hybrid insurance/investment product, neither the insurance is adequate nor does the investment serve its goal.
Surrendering/Cancelling SBI Life Smart Power Insurance Plan:
Free look period:
If you are not satisfied with any of the terms and conditions of the SBI Life Smart Power Insurance plan, then you can surrender the policy by returning the policy documents during the free look period.
The free look period is 15 days from the date of purchasing if you purchase it directly and 30 days if you purchase the SBI Life Smart Power Insurance Plan in online mode.
Surrendering after free look period:
You can surrender the policy during any time of the policy term.
Surrendering during lock-in period:
Charges will be deducted based on the terms and conditions.
You will earn a minimum interest rate of 4% in your fund value.
The fund value will be payable on the 1st day of the 6th policy term. For more details, you can read, the SBI Life Smart Power Insurance plan brochure here.
Surrendering after lock-in period:
You will get paid the fund value immediately.
Final Verdict of SBI Life Smart Power Insurance (ULIP) plan:
Like any other ULIP plan, this SBI Life Smart Power Insurance plan is no different from others. Even after taking a risk, it gives us a return that can barely beat inflation.
On the other side, it has a lock-in period of 5 years which offers no liquidity. So, if the policy holder meets any misfortune during this time, he cannot get any benefit.
So, this SBI Life Smart Power Insurance plan does not really help you to grow your wealth in the long term.
If you don’t want to take any risk, then you can choose PPF and Term Insurance combination to create long-term wealth.
Or you can go for ELSS (mutual fund) and term insurance combination to create a long-term wealth after taking a risk.
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