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TATA AIA Fortune Guarantee Plus is a traditional endowment plan. It claims to provide financial protection to your family by providing a guaranteed regular income for the long term.
But how guaranteed are these payouts?
Will the regular payout can help you to manage your financial situation after your retirement?
Here, let’s do in-depth research on TATA AIA Fortune Guarantee Plus and discover whether it is a fortune to buy this plan or not.
Table of Content:
1.) What is TATA AIA Fortune Guarantee Plus?
2.) Features of TATA AIA Fortune Guarantee Plus
3.) Eligibility of TATA AIA Fortune Guarantee Plus
4.) TATA AIA Fortune Guarantee Plus: Premium Paying Term and Policy Term
5.) Benefits of TATA AIA Fortune Guarantee Plus
6.) Additional Benefits of TATA AIA Fortune Guarantee Plus
7.) How to cancel/surrender the TATA AIA Fortune Guarantee Plus?
8.) Advantages of TATA AIA Fortune Guarantee Plus
9.) Disadvantages of TATA AIA Fortune Guarantee Plus
11.) IRR of TATA AIA Fortune Guarantee Plus
12.) Final Verdict on TATA AIA Fortune Guarantee Plus
What is TATA AIA Fortune Guarantee Plus?
TATA AIA Fortune Guarantee Plus is an individual, non-participating and non-linked savings plan.
TATA AIA Fortune Guarantee Plus plan says that it can protect your future financially through the guaranteed pay-out option. This guaranteed income plan offers you both life protection and savings features.
The TATA AIA Fortune Guarantee Plus gives the option to choose between a single premium option and a regular premium option.
Now let us see the features of TATA AIA Fortune Guarantee Plus.
Features of TATA AIA Fortune Guarantee Plus:
- Flexibility to choose between regular income or regular income with inbuilt critical illness benefits.
- Flexibility to receive the guaranteed benefit from 20 to 45 years.
- Return of premium at the end of the income period.
- Option to receive the guaranteed income annually or monthly.
- Option to choose single life option under single premium payment option.
- Option to choose your premium payment term.
- Option to choose additional riders.
- Tax benefit.
Eligibility of TATA AIA Fortune Guarantee Plus:
Plan Options:
Option-1
Regular Income
Option-2
Regular Income with an inbuilt Critical Illness Benefit
Here Option-1 is available on POS.
| Plan Parameters | Minimum | Maximum | |
| Age at Entry | Other than POS: | 60 years (for all options) | |
| Option 1: 1 year | |||
| Option 2: 18 years | |||
| For POS: | |||
| Option 1: 1 year | |||
| Option 2: Not Available | |||
| Age at Maturity | Other than POS: | Other than POS: | |
| Option 1: 18 year | Option 1: 77 year | ||
| Option 2: 23 years | Option 2: 70 years | ||
| For POS: | For POS: | ||
| Option 1: 18 year | Option 1: 65 year | ||
| Option 2: Not Available | Option 2: Not Available | ||
| Basic Sum Assured | Single pay: | Other than PoS: No Limit | |
| Single Life – 50,000 | |||
| Joint Life – 6,250 for First death | |||
| and 50,000 for Second death | For PoS: Corresponding to a maximum Death Benefit of R 25 lakhs | ||
| Regular/Limited pay: 24,000 Death Benefit Multiple | |||
| Premium | Single Pay – 5,000 | Other than PoS: subject to the Board Approved Underwriting Policy (BAUP) | |
| Limited Pay /Regular Pay – 24,000 p.a. | For PoS: Corresponding to a maximum Death Benefit of R 25 lakhs | ||
| Premium Payment Mode | Single / Annual / Half-yearly / Quarterly / Monthly | ||
| Income Mode | Annual and Monthly | ||
| Coverage | Single Life (for Single/Limited/Regular Pay) | ||
| Joint life (for Single pay only) | |||
TATA AIA Fortune Guarantee Plus: Premium Paying Term and Policy Term:
| Premium Paying term | Policy Term | Income Period | |
| Option 1 – Regular Income | 20, 25, 30, 35, 40 & 45 years Policy term + Income period range 25 – 50 years | ||
| Single pay | 1 year | 5 years | |
| Regular pay | 5 to 12 years | Same as PPT | |
| Limited pay | 5 | 06 – 10 years | |
| 6 | 07 – 11 years | ||
| 7 | 08 – 12 years | ||
| 8 | 09 – 13 years | ||
| 9 | 10 – 14 years | ||
| 10 | 11 – 15 years | ||
| 11 | 12 – 16 years | ||
| 12 | 13 – 17 years | ||
| Option 2 – Regular Income with an inbuilt Critical Illness benefit | |||
| Regular pay | 5 & 10 years | Same as PPT | 30 years for 5 pay 25 years for 10 pay |
Benefits of TATA AIA Fortune Guarantee Plus:
Maturity Benefit:
1.) Guaranteed Annual Income:
Once the completion of the Premium Payment Term, the policyholder will receive the Guaranteed Annual Income till the end of the income period. The policyholder has the option to choose the Income Frequency.
2.) Return of Premium Benefit:
After the completion of all the premiums, the Return of the Premium will be paid to the policyholder at the end of the policy term.
The option to receive the commuted value of the future Guaranteed Annual Income plus the Return of Premium Benefit in the form of a lump sum, discounted at 7.50% per year, is available to the policyholder or the nominee/legal heir(s) of the life insured(s), as applicable, at any time during the Income Period.
Death Benefit:
If the policyholder passes away, unfortunately, then the nominee or the legal heir of the policyholder will get the highest of the following as life assured.
- 1.25 X Single Premium or 10 X Annualized Premium (excluding the discount)
- 105% of the total premium paid
- Basic Sum Assured
Critical Illness Benefit:
This benefit is available only for Regular Income with an inbuilt Critical Illness option.
Following a diagnosis of any of the covered Major Critical Illnesses on the life of the Insured, it shall be payable beginning at the end of the policy year (for yearly income frequency).
The coverage will remain in effect and all upcoming premiums will not be required.
The insured person must have never before had the diagnosis in their lifetime.
The plan includes coverage for 40 diseases.
You can read the TATA AIA Fortune Guarantee Plus brochure here for more details.
Additional Benefits of TATA AIA Fortune Guarantee Plus:
Grace Period:
- For monthly mode, it is 15 days.
- For yearly, half-yearly, and quarterly modes, it is 30 days.
Revival:
If the policy is not surrendered after the grace period, then the policy can be revived within the 5 years of the first unpaid premium before maturity.
How to cancel/surrender the TATA AIA Fortune Guarantee Plus?
Cancelling/Surrendering during the free look period:
If the policyholder is not satisfied with the features of TATA AIA fortune Guarantee Plus, then the policyholder can cancel the policy by proving the written statement to the company.
The policyholder will get a refund of the premium after deducting the charges.
The free look period is 15 days if the policy is purchased directly. It will be extended up to 30 days if the policy is purchased through distance mode.
Cancelling/Surrendering after the freelook period:
During the policy term, based on the premium-paying term as described below, the policy shall accrue a surrender value.
1.) For Single Premium Option:
The Surrender Benefit is payable any time during the policy term.
2.) For Regular Premium Option:
The policy can be surrendered after the completion of the two premium terms.
The higher the Guaranteed Surrender Value (GSV) or Special Surrender Value shall be the surrender value payable.
Guaranteed Surrender Value = GSV Factor * Total Premiums Paid
Advantages of TATA AIA Fortune Guarantee Plus:
- You can maintain a consistent cash flow in this plan.
- The policy is further improved by the available riders.
- At the end of the income period, the premium is returned.
- Single, regular or limited pay premium terms that are flexible.
- Tax benefits according to the relevant tax laws.
- Choice of Income Period between 20 and 45 Years
- In terms of IRR, this plan offers an advantage over other annuity / yearly pay-out programs that are offered on the market.
Disadvantages of TATA AIA Fortune Guarantee Plus:
- For loans and surrenders, the lock-in period is two years.
- The policy has a 90-day waiting period.
- The pay-out for each year is a fixed one. The rate of inflation is not considered.
Research Methodology:
Now, we have seen all the necessary details that we need to know about TATA AIA Fortune Guarantee Plus.
Now let’s see whether this plan can help us to create long-term wealth or not by calculating the IRR of TATA AIA Fortune Guarantee Plus.
Then let us compare TATA AIA Fortune Guarantee Plus with other investments to see which gives us a better return in the long term.
IRR of TATA AIA Fortune Guarantee Plus:
Case: I
| Entry Age: 35 Years | Annualized Premium: 1,00,000 |
| Gender: Male | Basic Sum Assured: 12,00,000 |
| Premium Paying Term: 10 Years | Premium Frequency: Annual |
| Policy Term: 10 Years | Plan Option: Regular Income |
| Income Term: 25 Years (From 11th Year to 35th Year) The Policy Maturity date is at the end of the Policy Term | Income Mode: Annual |
Now, let us calculate the IRR by using the online calculator provided by TATA AIA Fortune Guarantee Plus.
|
Case 1 |
|||
|
Age |
Year | Annualized Premium/
Maturity Benefit |
Death Benefit |
|
36 |
1 | 1,00,000 |
12,00,000 |
|
37 |
2 | -1,00,000 |
12,00,000 |
|
… |
… | … |
… |
|
45 |
10 | -1,00,000 |
12,00,000 |
|
46 |
11 | 95,120 | |
|
47 |
12 |
95,120 |
|
| … | … | … | |
|
69 |
34 |
95,120 |
|
|
70 |
35 |
10,95,120 |
|
|
IRR |
6.58% |
||
As you can see in the above illustration, at the end of the policy term, we can get an IRR of 6.58% in case-I. After 35 years, we can get Rs. 10,95,120 as a maturity benefit and Rs. 12,00,000 as a death benefit.
Case-II
| Entry Age: 35 Years | Annualized Premium: 1,00,000 |
| Gender: Male | Basic Sum Assured: 12,00,000 |
| Premium Paying Term: 10 Years | Premium Frequency: Annual |
| Policy Term: 10 Years | Plan Option: Regular Income with an inbuilt Critical Illness benefit |
| Income Term: 25 Years (From 11th Year to 35th Year) The Policy Maturity date is at the end of the Policy Term | Income Mode: Annual |
| Scenario I: No Critical Illness till Maturity |
|
Case 2 |
|||
| Age | Year | Annualized Premium/
Maturity Benefit |
Death Benefit |
|
36 |
1 | 1,00,000 | 12,00,000 |
| 37 | 2 | -1,00,000 |
12,00,000 |
|
… |
… | … | … |
| 45 | 10 | -1,00,000 |
12,00,000 |
|
46 |
11 | 96,760 | |
| 47 | 12 |
96,760 |
|
|
… |
… | … | |
| 69 | 34 |
96,760 |
|
|
70 |
35 | 10,96,760 | |
| IRR |
6.67% |
||
In case-II, we get an IRR of 6.67% at the end of the policy term. After 35 years, we get Rs. 10,96,760 as maturity benefit and Rs. 12,00,000 as a death benefit.
| Case Scenario | IRR (Internal Rate of Return) | Maturity Benefit | Death Benefit |
| Case-I | 6.58% | Rs. 10 lacs | Rs. 12 lacs |
| Case-II | 6.53% | Rs. 10 lacs | Rs. 12 lacs |
As you can see, in TATA AIA Fortune Guarantee Plus, we get an investment return that is equal to bank FDs and it may not give you the adequate purchasing power and an inflation-beating return for the long term.
TATA AIA Fortune Guarantee Plus vs. Other Investments:
As an alternative to TATA AIA Fortune Guarantee Plus, you can invest the money in various investments that can give you a better investment return.
For a risk-free investment, you can choose PPF or RBI bonds for the long term.
Since PPF has matured at 15 years, you can invest your money in PPF for 15 years with a 7.10% interest rate and then you can reinvest the money in RBI Bonds or a 70:30 ratio in equity and debt.
Or
You can choose Mutual Funds.
For instance, let’s take ELSS.
Overall Contribution: Rs. 1,00,000
Term Insurance:
Sum Assured: Rs. 12,00,000
Annual Premium: Rs. 5,500
Tenure: 10 years
ELSS Contribution: Rs. 94,500
Assumed Rate of Return: 12% with investment risk
Then,
|
Term Insurance + ELSS |
|||
|
Age |
Year | Term Insurance Premium + ELSS |
Death Benefit |
|
36 |
1 | 1,00,000 | 12,00,000 |
|
37 |
2 | -1,00,000 |
12,00,000 |
|
… |
… | … | … |
| 45 | 10 | -1,00,000 |
12,00,000 |
|
46 |
11 | 96,760 | |
| 47 | 12 |
96,760 |
|
|
… |
… | … | |
| 69 | 34 |
96,760 |
|
|
70 |
35 | 46,20,860 | |
| IRR |
8.84% |
||
After 10 years, we can get Rs. 17,76,122 as a post-tax return.
You can reinvest the money for the remaining 25 years at a return of 8% in hybrid funds or on a combination of equity mutual funds and debt mutual funds at 30:70 ratio and can withdraw Rs. 96,760 per annum.
If then, at the end of the 35 years, you can Rs. 45,24,100 as investment return.
| Case Scenario | IRR (Internal Rate of Return) | Maturity Benefit | Death Benefit |
| Case-I | 6.58% | Rs. 10 lacs | Rs. 12 lacs |
| Case-II | 6.53% | Rs. 10 lacs | Rs. 12 lacs |
| ELSS + Hybrid Funds (Post-tax) | 8.84% | Rs. 45 lacs | Rs. 12 lacs |
Here as a result, compared to TATA AIA Fortune Guarantee Plus, we get a better investment return in other investments for the long term.
Final Verdict on TATA AIA Fortune Guarantee Plus:
After our detailed analysis, we can see that ELSS can give you a better return compared to TATA AIA Fortune Guarantee Plus. So, the TATA AIA Fortune Guarantee Plus did not give us a good long-term return
Shortly, you can get a better return on PPF, RBI Bonds, and Mutual Funds. As for term insurance, you can choose pure term insurance that can give you high life coverage at a low cost.
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Is the return tax free that we get annually
Yes.