Listen to this articleDo you agree that our life is full of uncertainties? What is essential to protect your loved ones from uncertainties? Yes! It is a Life insurance plan.
But, is just protection enough? How can life insurance alone fulfill our family goals?
Presenting Shriram Life Early Cash Plan, a policy that combines life insurance protection with a cash bonus payable throughout the policy term. Shriram Life Insurance markets this plan by assuring that you do not need to compromise on day-to-day responsibilities while pursuing your big goals. How true is this statement?
Will buying the Shriram Life Early Cash plan be a good or bad decision to fulfill your dreams? Let us review this Shriram Life Early Cash plan with the pros(advantages) and cons(disadvantages), along with detailed illustrations.
Let’s get started!
Table of Contents
1.What is the Shriram Life Early Cash Plan?
2.What are the Features of the Shriram Life Early Cash Plan?
3.Who is eligible for the Shriram Life Early Cash Plan?
4.Review of Benefits in detail under Shriram Early Cash
5.Grace period; Lapse and Paid-up Value and Revival of Shriram Life Early Cash Plan
6.Free Look Period of Shriram Life Early Cash Plan
7.Surrendering Shriram Life Early Cash Plan
8.What are the Advantages of the Shriram Life Early Cash Plan?
9.What are the Disadvantages of the Shriram Life Early Cash Plan?
10.Research Methodology of Shriram Life Early Cash Plan
- Benefit Illustration -– IRR(Internal Rate of return i.e. Interest rate) Analysis of Shriram Life Early Cash Plan
11.Shriram Life Early Cash Plan vs Other Investment Products
- Shriram Life Early Cash Plan Vs. Pure Term + ELSS
- Shriram Life Early Cash Plan Vs. ICICI Pru Cash Advantage Plan
- Shriram Life Early Cash Plan Vs. Canara HSBC Life Insurance Alpha Wealth
12.Shriram Life Early Cash Plan vs Other Investment Products – Review Conclusion
13.Final verdict on Shriram Life Early Cash Plan – Good or Bad Investment Option?
1.What isthe Shriram Life Early Cash Plan?
Shriram Life Early Cash Plan is a non-linked, participating, individual savings life insurance plan. It provides the twin benefits of insurance and savings. It offers a cash bonus from the first policy anniversary itself.
Please refer to the official brochure of Shriram Life Early Cash Plan for more policy details.
2.What are the Features of the Shriram Life Early Cash Plan?
- Multiple premium payment modes are available. Pay premiums yearly, half-yearly, quarterly, or even monthly.
- It provides you with an annual assured cash bonus of a minimum of 2% a year.
- The cash bonuses are paid from the 1st Shriram Life Early Cash policy anniversary itself.
- You are provided with two options to receive the cash bonus – Early Cash and Super Growth.
- The premium paid by you is eligible for tax deductions under Section 80C.
3. Who is Eligibile for the Shriram Life Early Cash Plan?
| Minimum | Maximum | |
| Age at Entry | 3 years | 55 years |
| Age at Maturity | 18 years | 70 years |
| Sum Assured | ₹ 1,50,000 | No upper Limit |
|
Policy Term (PT) and Premium Paying Term (PPT)
|
PT | PPT |
| 10 years | 6 years | |
| 12 years | 6/8/10 years | |
| 15 years | 8/10/15 years | |
| 20 years | 10 years |
4. Review of Benefits in detail under the Shriram Life Early Cash Plan
Death Benefit – Review
In case of death of the life assured during the Shriram Life Early Cash policy term, provided the policy is in force,
- Death Sum assured plus
- Accumulated Cash Bonuses, if declared plus
- Terminal Bonus, if declared
will be paid to the nominee or beneficiary and the policy will be terminated.
“Death Sum Assured” is defined as the highest of
- 10 times the Annualized Premium for ages up to 50 years / 7 times the Annualized Premium for ages above 50 years or
- 105% of Total Premiums received till the date of death.
The Death Benefit will be at least 105% of Total Premiums received till the date of death.
Survival Benefit – Review
If the policyholder chooses the Early Cash Option, the annual cash bonus declared will be paid as regular income at the end of every policy year, throughout the Shriram Life Early Cash policy term. The minimum Cash Bonus payable is guaranteed at 2% of the Sum Assured p.a. This benefit is not available if the Shriram Life Early Cash policyholder chooses the Super Growth option.
Maturity Benefit – Review
In case of survival of the life assured up to the end of the Shriram Life Early Cash policy term provided the policy is in force, the Basic Sum Assured plus accumulated cash bonuses if any plus terminal bonus if declared will be paid.
5.Grace period; Lapse and Paid-up Value and Revival of the Shriram Life Early Cash Plan
Grace period:
A grace period of 30 days is allowed for payment of due premium for non-monthly modes and 15 days for monthly modes.
Lapse and Paid-up Value:
In case a full-year premium has not been paid, and the premium due is not paid till the end of the grace period, the policy will lapse, and no benefits will be payable under the policy.
If you discontinue paying your premiums but have paid at least one year’s premium in full, your policy will get converted into a paid-up policy. Under paid-up policy, all your benefits (i.e. Death Benefit and Maturity Benefit) will reduce proportionately.
Revival:
The lapsed Shriram Life Early Cash policy or a paid-up policy can be revived within the revival period of five years from the date of the first unpaid premium.
6. Free Look Period of Shriram Life Early Cash Plan
If the Shriram Life Early Cash policyholder disagrees with any of those terms or conditions, then he has the option to return the policy within a period of 30 days beginning from the date of receipt of the policy document, whether received electronically or otherwise.
7. Surrendering the Shriram Life Early Cash Plan
On surrendering the policy, you will receive Surrender Value, which is higher of the Special Surrender Value (SSV) or the Guaranteed Surrender Value (GSV).
Your policy will acquire a Guaranteed Surrender Value after all due premiums for at least two full years have been paid. Your policy acquires Special Surrender Value after completion of first policy year only if at least first full policy year’s premium(s) has been paid.
8. What are the Advantages of the Shriram Life Early Cash Plan?
- It provides comprehensive cover which can be further extended using riders.
- As the entry age is just three years, this savings life insurance plan also financially protects minors.
- The plan offers flexibility in terms of premium payments and policy terms.
- The maximum loan allowable is 80% of the surrender value.
- Cash bonuses can be deferred and allowed to accumulate.
9.What are the Disadvantages of the Shriram Life Early Cash Plan?
- Cash bonus rates may vary from year to year and will affect the cash flow.
- The cash bonus is often utilised for discretionary expenses.
10. Research Methodology of the Shriram Life Early Cash Plan
Before investing in any product, understanding the cash flow and calculating the potential returns are two important aspects. The cash flow pattern under Shriram Life Early Cash Plan is either you can receive the survival benefit yearly or it can be received along with the maturity benefit. The next step is estimating the Internal Rate of Return. Let us work out IRR for the benefit illustration given in the Shriram Life Early Cash Policy Brochure.
Benefit Illustration – IRR(Internal Rate of Return i.e. Interest rate) Analysis of the Shriram Life Early Cash Plan
A 30-year-old male opts for Shriram Life Early Cash plan for a sum assured of ₹ 10 Lakhs. The Shriram Life Early Cash policy term is 20 years and the premium paying term is 10 years. The annualised premium is 1,20,030. He chooses the Super Growth option (Accumulate cash bonus).
| Male | 30 years |
| Sum Assured | ₹ 10 Lakhs |
| Policy Term | 20 years |
| Premium paying term | 10 years |
| Annualised Premium | ₹1,20,030 |
For the purpose of illustrations, the rate of investment returns has been assumed as 4% p.a. and 8% p.a. The actual returns may vary.
|
At 4% p.a. |
At 8% p.a. |
||||
|
Age |
Year |
Annualised premium / Maturity benefit |
Death benefit |
Annualised premium / Maturity benefit |
Death benefit |
|
30 |
1 |
-1,20,030 |
10,00,000 |
-1,20,030 |
10,00,000 |
|
31 |
2 |
-1,20,030 |
10,00,000 |
-1,20,030 |
10,00,000 |
|
32 |
3 |
-1,20,030 |
10,00,000 |
-1,20,030 |
10,00,000 |
|
33 |
4 |
-1,20,030 |
10,00,000 |
-1,20,030 |
10,00,000 |
|
34 |
5 |
-1,20,030 |
10,00,000 |
-1,20,030 |
10,00,000 |
|
35 |
6 |
-1,20,030 |
10,00,000 |
-1,20,030 |
10,00,000 |
|
36 |
7 |
-1,20,030 |
10,00,000 |
-1,20,030 |
10,00,000 |
|
37 |
8 |
-1,20,030 |
10,00,000 |
-1,20,030 |
10,00,000 |
|
38 |
9 |
-1,20,030 |
10,00,000 |
-1,20,030 |
10,00,000 |
|
39 |
10 |
-1,20,030 |
10,00,000 |
-1,20,030 |
10,00,000 |
|
40 |
11 |
0 |
10,00,000 |
0 |
10,00,000 |
|
41 |
12 |
0 |
10,00,000 |
0 |
10,00,000 |
|
42 |
13 |
0 |
10,00,000 |
0 |
10,00,000 |
|
43 |
14 |
0 |
10,00,000 |
0 |
10,00,000 |
|
44 |
15 |
0 |
10,00,000 |
0 |
10,00,000 |
|
45 |
16 |
0 |
10,00,000 |
0 |
10,00,000 |
|
46 |
17 |
0 |
10,00,000 |
0 |
10,00,000 |
|
47 |
18 |
0 |
10,00,000 |
0 |
10,00,000 |
|
48 |
19 |
0 |
10,00,000 |
0 |
10,00,000 |
|
49 |
20 |
0 |
10,00,000 |
0 |
10,00,000 |
|
50 |
18,06,673 |
31,18,148 |
|||
|
IRR |
2.65% |
6.25% |
|||
At a 4% scenario, the final maturity benefit including the accumulated cash bonus is ₹ 18.06 Lakhs. The IRR calculation for the 4% scenario results in 2.65%. At the 8% scenario, the final maturity benefit including the accumulated cash bonus is ₹ 31.18 Lakhs. The IRR calculation for the 8% scenario results in 6.25%. Both these rates are lower than the inflation rate.
Here in this illustration super growth option is chosen. That means instead of receiving a yearly cash bonus, it is deferred and received at the end of the Shriram Life Early Cash policy term. If you receive a yearly cash bonus, the IRR will be even lower than the calculated figures.
11. Shriram Life Early Cash Plan vs Other Investment Products – Review
Comparing Shriram Life Early Cash Plan with other investment products will give you better insights. In order to work out a comparison analysis, we shall use the figures in the benefit illustration. For the same annualised premium, we shall look for both life cover and investment avenues.
i.Shriram Life Early Cash Plan Vs. Pure Term + ELSS
A pure term policy for the sum assured of ₹ 10 lakhs would cost ₹ 5,200. The Policy term is 20 years and the premium paying term is 10 years. In general, it is advisable to have adequate life cover including all your life goals and liabilities.
Life Insurance Premium is paid out first and the balance is utilised for investment. Here, the balance amount of ₹ 1,14,830 is invested in ELSS.
| Pure Term Life Insurance Policy | |
| Sum Assured | ₹ 10 Lakhs |
| Policy Term | 20 years |
| Premium paying term | 10 years |
| Annualised Premium | 5,200 |
| Investment | ₹1,14,830 |
|
Term insurance + ELSS |
|||
|
Age |
Year |
Term Insurance premium + ELSS |
Death benefit |
|
30 |
1 |
-1,20,030 |
10,00,000 |
|
31 |
2 |
-1,20,030 |
10,00,000 |
|
32 |
3 |
-1,20,030 |
10,00,000 |
|
33 |
4 |
-1,20,030 |
10,00,000 |
|
34 |
5 |
-1,20,030 |
10,00,000 |
|
35 |
6 |
-1,20,030 |
10,00,000 |
|
36 |
7 |
-1,20,030 |
10,00,000 |
|
37 |
8 |
-1,20,030 |
10,00,000 |
|
38 |
9 |
-1,20,030 |
10,00,000 |
|
39 |
10 |
-1,20,030 |
10,00,000 |
|
40 |
11 |
0 |
10,00,000 |
|
41 |
12 |
0 |
10,00,000 |
|
42 |
13 |
0 |
10,00,000 |
|
43 |
14 |
0 |
10,00,000 |
|
44 |
15 |
0 |
10,00,000 |
|
45 |
16 |
0 |
10,00,000 |
|
46 |
17 |
0 |
10,00,000 |
|
47 |
18 |
0 |
10,00,000 |
|
48 |
19 |
0 |
10,00,000 |
|
49 |
20 |
0 |
10,00,000 |
|
50 |
62,92,650 |
||
|
IRR |
10.96% |
||
The final maturity proceeds from the ELSS fund are subject to capital gains tax. The pre-tax value is ₹ 70.09 Lakhs. The post-maturity value is ₹ 62.92 lakhs. Refer to the tax calculation below. The IRR calculation for Pure term life insurance premium and ELSS investment results in 10.96%.
|
ELSS Tax Calculation |
|
|
Maturity value after 20 years |
70,09,700 |
|
Purchase price |
11,48,300 |
|
Long-Term Capital Gains |
58,61,400 |
|
Exemption limit |
1,25,000 |
|
Taxable LTCG |
57,36,400 |
|
Tax paid on LTCG |
7,17,050 |
|
Maturity value after tax |
62,92,650 |
Investing separately ensures better returns and liquidity. The returns in this alternate strategy are higher than the inflation rate. This empowers you to fulfill your goals in the future. Shriram Life Early Cash plan lacks in terms of returns and liquidity.
ii.Shriram Life Early Cash Plan Vs. ICICI Pru Cash Advantage Plan
Let’s see some features of the ICICI Pru Cash Advantage Plan
- Life insurance during the duration of the policy.
- You can choose to pay premiums for five, seven, or ten years.
- Following the premium payment term (PPT), the payout term begins immediately.
Read the complete review of the ICICI Pru Cash Advantage Plan.
iii. Shriram Life Early Cash Plan Vs. Canara HSBC Life Insurance Alpha Wealth
Let’s see some features of Canara HSBC Life Insurance Alpha Wealth Plan
- For a set amount of time or the duration of the policy, pay the premiums all at once.
- Life insurance during the duration of the policy.
- Based on your stage of life, you can select from three different plan options: Alpha Invest Plus, Alpha Premium Plus, and Alpha Life Plus.
Read the complete review of the Canara HSBC Life Insurance Alpha Wealth Plan.
12. Shriram Life Early Cash Plan Vs. Other Investment Products – Review Conclusion
After a thorough and detailed analysis of all other alternate investment options for the Shriram Life Early Cash Plan. It is very clear that the combination of insurance and investment will not work and the best alternative is to take pure life cover and invest the remaining amount in ELSS.
13. Final verdict on Shriram Life Early Cash Plan – Good or Bad Investment Option?
Shriram Life Early Cash plan offers survival benefits in the form of a cash bonus. The cash bonus rates are non-guaranteed. So, year after year you can’t rely on this benefit. You can’t earmark the cash bonus for any specific expenses. This hits your cash flow badly. High Agent Commission also reduces the overall return.
Even if you accumulate a cash bonus and receive it at maturity, there is no added benefit. Shriram Life Early Cash Plan is a traditional life insurance policy with survival and maturity benefits. Accumulating corpus under this plan is not advisable, as the rate of return is lesser than the inflation rate. Clubbing insurance with investment is the major reason for poor returns.
Have an adequate life insurance policy to protect your loved ones. And invest separately based on your life goals. Analyse your personal risk tolerance before choosing investment products. If you need guidance in creating a diversified investment portfolio, consult an Professional investment advisor instead of amateurs on social media sites like Quora, Facebook, Twitter etc.
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