2. What are the benefits of the SBI Life Smart Wealth Builder Plan?

It offers some guaranteed additions at various points in the policy term. Guaranteed Additions are paid from the end of the 10th policy year starting from @ 5% and increasing every 5 years. No Policy Administration fees for the first 5 years for Regular and Limited Premium Payment Term (LPPT) plans. Tax Benefits: You may be eligible for Income Tax Benefits/Exemptions under India's current income tax regulations, which are subject to change at any time.

SBI Life Smart Wealth Builder Plan [Review of Benefits, Features, and Returns]

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Are you considering buying SBI Life Smart Wealth Builder Plan?

However, you are not sure…

In this case, you have landed in the right place.

This article will help you gain the required insight regarding this plan.

In this article, we have not only included the benefits of this policy but also the limitations it brings with it.

In this SBI Life Smart Wealth Builder Review, we will also speak about some of the key aspects of this Plan and try to answer the question, should you buy it?

So let’s begin the honest and detailed review of this plan with the key features and eligibility conditions of this Plan.

7.) SBI Life Smart Wealth Builder Plan: Benefits
8.) SBI Life Smart Wealth Builder Plan: Drawbacks
9.) Comparison of SBI Life Smart Wealth Builder Plan against Term Insurance + PPF
10.)Comparison of SBI Life Smart Wealth Builder Plan against ELSS Mutual Fund:
11.) SBI Life Smart Wealth Builder Plan: Good or Bad?
12.) How to Surrender/cancel Your SBI Life Smart Wealth Builder Plan?

Surrendering During the First 5 years
Surrendering After the First 5 years

13.) Conclusion

SBI Life Smart Wealth Builder: Key Features and Eligibility

SBI Life Smart Wealth Builder is a Unit-Linked Insurance Plan (ULIP) with premium payment options in regular/limited/single mode.

ULIP offers the dual benefit of Insurance and Investment.

The table below shows the different eligibility criteria for different plan types and other features of the SBI Life Smart Wealth Builder plan.

Other Features of SBI Life Smart Wealth Builder Plan

It offers some guaranteed additions at various points in the policy term.
Guaranteed Additions are paid from the end of the 10th policy year starting from @ 5% and increasing every 5 years.
Life insurance coverage during the duration of the policy.
No Policy Administration fees for the first 5 years for Regular and Limited Premium Payment Term (LPPT) plans.

From the 11th year onwards, there is no Premium Allocation Charge.
Flexibility: 11 different Fund Options provide more investment options.
From the 6th policy year onwards, the Sum Assured can be increased or decreased.
Tax Benefits: You may be eligible for Income Tax Benefits/Exemptions under India’s current income tax regulations, which are subject to change at any time.

SBI Life Smart Wealth Builder: Fund Options

SBI Life Smart Wealth Builder Fund offers 11 investment opportunities to choose from with two free switches in a policy year.

These funds range in risk from low-risk bond funds to high-risk pure equity funds. The table below lists the various funds available under the SBI Life Smart Wealth Builder Plan.

SBI Life Smart Wealth Builder Plan: Review of Benefits

Since SBI Life Smart Wealth is a ULIP policy, the policy benefit is either death benefit or maturity (read survival) benefit.

a) SBI Smart Wealth Builder Review of Death Benefit

On the unexpected demise of the policyholder, while the policy is still active, the beneficiary or nominee will get the highest of the following:

Fund Value as on the date of death notification or
Basic sum assured minus APW (Applicable Partial Withdrawals), or

105% of total premiums received up to the date of death minus APW

The nominee or beneficiary (legal heir) can choose between 2 alternatives for receiving death benefits.

Receive death benefit as a lump sum or
In installments over 2 to 5 years as yearly, half-yearly, quarterly, or monthly payouts as required under the “settlement option.” (During the settlement term, the policyholder is responsible for the investment risk in the investment portfolio.)

b) SBI Smart Wealth Builder Review of Maturity Benefit:

In case of insured survive till the end of the tenure or maturity, the fund value will be paid in a lump sum

Or else, the maturity benefit can be taken in installments through the settlement option.

Besides providing financial protection against death, this product also pays out a tax-free lump sum in case you become mentally or physically incapacitated.

Let’s look into the maturity benefits of SBI Life Smart Wealth Builder with the help of an example, to analyze its effectiveness.

SBI Life Smart Wealth Builder Returns (IRR) Review

We have seen that the SBI Life Smart Wealth Builder offers 11 different funds for investors to choose from.

Let’s use an example to illustrate how equity funds have the potential to deliver higher returns.

Let us assume you buy the SBI Life Smart Wealth Builder plan with a policy term of 30 years and invest ₹50,000 per annum. In the first scenario, you’re 100% exposed to the debt fund and in the second scenario, you’re 100% exposed to the equities fund under this plan.

The SBI Life Smart Wealth Builder policy brochure forecasts that your premiums will likely generate an annual return of between 4% (debt) and 8% (equity).

Policy returns at a 4% gross annual return:

If the policy generates a 4% gross annual return, then the actual annual rate of return will be as shown in the table below:

Policy returns at an 8% gross annual return:

If the policy generates an 8% gross annual return, then the actual annual rate of return will be as shown in the table below:

From the official SBI Life Calculator page, the maturity benefit illustration for the SBI Life Smart Wealth Builder plan suggests that the policyholder will earn a maturity benefit of ₹21,74,877 @ 4% assumed gross rate and ₹42,95,463 8% assumed gross rate.

When the various charges charged by the policy are taken into account, the actual annual return rate in the hands of the policyholder is only.

2.26% out of 4% gross annual return in a debt fund
6.01% out of 8% gross annual return in an equity fund

For a long-term investment of 30 years, and considering the equity risk, an IRR return rate of 2.26% or 6.01% is below average and unimpressive.

Charges in SBI Life Smart Wealth Builder Plan

ULIPs are generally not recommended as they come with high charges and have seen a lower-than-average return in the past decade.

Like any other ULIP, the SBI Life Smart Wealth Builder plan comes with a range of charges hidden under its benefits.

Here is the list of different charges of the SBI Life Smart Wealth Builder Plan that may affect your returns.

1.) Premium Allocation Charge:

This charge will be deducted from Premiums as they are paid before unit allocation and will be as follows:

2.)Policy Administration Charge:

We will levy policy administration charges based on the rates listed below:

3.)Fund Management Charges (FMC):

Every year of the policy term, the policy levies a predetermined percentage of the fund value as a fund management charge. For each fund category, the rate of FMC varies. The table below highlights the FMC for each of the funds:

The FMC for all funds, except for the Discontinued Policy Fund, would be limited at 1.35%. We may revise these charges subject to prior approval from IRDAI.

4.) Discontinuance Charge:

Discontinued policies have assessed a charge based on a percentage of the fund’s value over time. For different policy options, this percentage varies from year to year. There is no discontinuance charge for the 5th policy year.

For single premium:

For Limited premium:

Date of Discontinuance of the Policy shall be the date on which the Company receives notice from the Policyholder that the Policy is being discontinued, or the date on which the grace period expires, whichever is earlier.

5.) Mortality Charge

Mortality charges are deducted on the first business day of each policy month from Fund Value by way of cancellation of units.

Mortality charges will be based on your age and Sum at Risk at the time of charge deduction.

6.) Switching Charge

A charge of `100 is applicable for every switch, more than two free switches in the same policy year during the policy term or settlement period, and are recovered by deducting `100/- from the switch amount.

The free switch cannot be carried over to the following policy year if it is not used during the current policy year.

7.) Partial Withdrawal Charge

A charge of `100 is applicable for every partial withdrawal over one free artial withdrawal in the same policy year.

The amount will be recovered by way of the cancellation of units. The free unused partial withdrawal cannot be carried over to the next insurance year.

The Partial Withdrawal Charges will be limited to Rs. 500 per transaction. Charges, on the other hand, would be subject to IRDAI clearance.

All the above charges except Premium Allocation Charges and Mortality Charges are subject to revision with prior approval of IRDAI. Premium Allocation and Mortality Charges are guaranteed for the duration of the policy.

Let’s analyze the benefits and drawbacks of this plan to help you decide whether you should buy it or not.

SBI Life Smart Wealth builder: Benefits

It provides life insurance coverage throughout the tenure.
It offers some guaranteed additions at various points in your policy term.

There are no premium allocation charges from the 11th policy year.
For the first five policy years, there are no policy administration fees.
It allows partial withdrawal from the 6th policy year. One free partial withdrawal for each policy year.
You get an Income tax benefit on the premium paid as per Section 80C and on claims under Section 10(10D) of the Income Tax Act.

SBI Life Smart Wealth Builder: Drawbacks

We noticed a few findings that are not in favor of SBI Life Smart Wealth builder when analyzing this plan.

ULIPs have a 5-year lock-in period during which they do not provide any liquidity.
The policyholder is allowed to surrender the policy after 5 completed years. If surrendered before 5 years, the fund value net of discontinuation charge will be credited to the Discontinued Policy Fund where it will earn a minimum of 4% p.a. growth. After completion of 5 years, the fund value in the Discontinued Policy fund as of that date will be paid to the policyholder.

The actual premium is not invested fully. After deducting the premium allocation charge, Policy administration charge & mortality charge the balance amount is invested in the fund.
Apart from the above-mentioned charges, fund manager charges are deducted until the closure of the policy (selling of all units).
Discontinuance charges will be levied while reviving the policy.
The policy will not be eligible for any loan

To get a deeper understanding of this plan, it’s always a good idea to compare the returns from this ULIP Plan to those from other similar plans.

Comparing SBI Life Smart Wealth Builder Against PPF

Let’s assume, instead of buying this policy, you choose to invest in Public Provident Fund (PPF) and buy a term insurance plan for life cover.

This investment in PPF you do for meeting your financial goals.

The term insurance plan will give you the same insurance coverage that you will get under your SBI Life Smart Wealth Builder policy but at a much lesser premium charge.

A Public Provident Fund is an Indian savings scheme introduced in 1968 by the Reserve Bank of India for the general public.

The PPF account is a long-term, low-risk investment and the interest earned on these investments is tax-free.

Let’s compare your returns when you invest in the Bond fund of the SBI Smart Wealth Builder plan vs your returns while investing in PPF and Term Insurance Policy.

So what will be your return if you invest ₹50,000 annually for the next 30 years in PPF and Term Insurance?

Find out in the table below.

In comparison with the bond fund of SBI Smart Wealth Builder, the maturity amount of PPF is higher.

Moreover, the returns are completely tax-free and virtually risk-free. Whereas, the performance of the SBI Life Smart Life Builder Plan is not guaranteed, and depends on the fund performance or the fund manager’s performance day in and day out.

PPF does not offer life cover like SBI Life Smart Wealth Builder Plan. You can, however, acquire a term insurance plan for the same sum assured but at a much lower price.

If you are a person with no or lesser risk tolerance then you should consider PPF with a Term Insurance plan before going for SBI Life Smart Wealth Builder Plan.

Comparing SBI Life Smart Wealth Builder Against ELSS Mutual Fund

Since the SBI Life Smart Wealth Builder plan is a ULIP policy, it will be only fair to compare its return against another Equity investment along with a Term Insurance Plan.

ELSS Mutual Fund is, once again, solely an investment vehicle. It does not offer life cover like SBI Life Smart Wealth Builder Plan.

However, you can buy a term insurance plan for the same life cover.

So let’s consider the same investment of ₹50,000 annually for the same term of 30 years as we did with the SBI Life Smart Wealth Builder plan. Let us assume a very conservative 12% CAGR for the ELSS mutual fund.

And more importantly, the investment risk level is the same as SBI Life Smart Wealth Builder Plan, since both are market-linked investments.

From the above table, we have seen that the Equity Fund of the SBI Life Smart Wealth Builder plan, has the highest probability of giving a return of only ₹45.09 lakh.

But for the same investment in Term insurance and ELSS Fund, an investor will receive almost ₹1.07 Cr at the end of the 30th year.

In comparison with ELSS Fund, there is a huge difference in the maturity amount. The difference is approximately ₹61.7 lakh.

Thus, the combination of ELSS Mutual Fund + Term Insurance is a better option than SBI Life Smart Wealth Builder Plan for a risk-tolerant investor.

However, it’s true that despite the ₹1.5lakh exemption u/s 80C, the return from the ELSS Mutual Fund is not entirely tax-free.

So how much difference does LTCG tax make in the ELSS Mutual Fund Returns?

Post-Tax Return from ELSS Mutual Fund:

The post-tax return from the ELSS Mutual Fund is ₹97.7lakhs.

We can see that even after the deduction of 10% LTCG Tax, the ELSS return is still approximately ₹52 lakhs more than the SBI Life Smart Wealth Builder plan.

The SBI Life Smart Wealth Builder Plan and the ELSS Mutual Fund have the same risk and very similar tax implications. However, even an average-performing ELSS fund after deducting the LTCG Tax outperforms the ULIP.

Thus, the combination of ELSS Mutual Fund + Term Insurance is a better option than SBI Life Smart Wealth Builder Plan for a risk-tolerant investor.

SBI Life Smart Wealth Builder Plan: Good or Bad?

After considering the charges and returns of this plan and comparing the alternative options in all the aspects, it is now evident why you shouldn’t be going for this plan.

We have already seen better alternatives for both investors with no or lesser risk tolerance as well as for investors with higher risk tolerance.

It is now wise for any investor to go for one of the below options:

PPF with Term Insurance Plan for a conservative investor.
ELSS Mutual Fund along with Term Insurance Plan is a better alternative for a risk-tolerant and disciplined investor.

Consider this, the SBI Life Smart Wealth Builder Plan is a long-term commitment of at least 5 years. Even if you decide to discontinue your policy, your investments will be transferred to the Discontinued Policy Fund, where you will earn a minimum of 4% each year. If you have already bought the SBI Life Smart Wealth Builder plan, you may want to consider surrendering it. However, you should always contact a financial or investment advisor to determine the best approach for your needs.

How to Surrender/cancel your SBI Life Smart Wealth Builder Plan?

What are the conditions applied while surrendering your SBI Life Smart Wealth Builder Plan?

Will there be any kind of surrender charges?

Let us understand this in the following 2 cases.

If surrender is requested within the first 5 years of the policy,

The lock-in condition applies.
Your Fund Value will be transferred to the ‘Discontinued Policy Fund’ once any applicable discontinuance charges have been deducted.
On this Fund, you will earn a minimum guaranteed interest rate of 4% p.a. or as prescribed by the prevailing regulation.

The Discontinued Policy Fund’s Fund Management Charge will be deducted. No other charge will be deducted.
Risk coverage will be revoked.
The Fund Value will be payable on the 1 working day of the 6 policy year and the policy will terminate.

If the surrender is requested any time after completion of 5 policy years, then the Fund Value will be paid immediately and the policy will terminate.

Procedure to surrender/cancel your SBI Life Smart Wealth Builder Plan:

If a policyholder decides to surrender his/her life insurance policy, the reason(s) for surrender must be provided. Also, the surrender form must be submitted together with the necessary documents to the nearest SBI Life Insurance Branch. Necessary documents are as follows –

Original policy documents
Canceled cheque with the policyholder’s name on it

In case the canceled cheque does not have a pre-printed name, account number, or a new account is mentioned on the cheque, then the passbook copy/bank statement having the pre-printed name and the account number is required
ID proof (PAN Card, Aadhaar Card, Passport, Driving License, Voters ID)
Policy surrender or cancellation form
Contact details

Conclusion

SBI Life Smart Privilege plan seems to be an attractive ULIP policy for an unadvised investor.

Therefore, before investing in any of the attractive policies in the market, investors should always have a conviction about that investment.

The purpose of this SBI Life Smart Wealth Builder plan review is to help you find that conviction before you make any investment decision. After analyzing the alternatives of this plan, it has now become evident that this ULIP Policy is neither an eligible Insurance plan nor an eligible Investment Plan.

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