Tata AIA Life Insurance Smart Value Income Plan: An In-depth & Insightful Review

Have you as an investor have taught about long-term financial security and financial stability?

Do you think investing in an insurance plan might serve this purpose?

So, let’s find out if investing in Tata AIA Life Insurance Smart Value Income Plan help you attain financial stability to help you achieve your family’s financial dreams.

Table of Contents:

1.) What is Tata AIA – Smart Value Income Plan?
2.) What are the Features of Tata AIA – Smart Value Income Plan?
3.) Eligibility Criteria of Tata AIA Life Insurance Smart Value Income Plan
4.) Benefits under the Tata AIA – Smart Value Income Plan

• Death Benefit
• Surfival Benefit
• Maturity Benefit

5.) Grace Period, Lapse, Paid-up & Revival of Tata AIA Life Insurance Smart Value Income Plan
6.) Free Look period of Tata AIA – Smart Value Income Plan
7.) Surrendering Tata AIA – Smart Value Income Plan
8.) Advantages of Tata AIA – Smart Value Income Plan
9.) Disadvantages of Tata AIA – Smart Value Income Plan
10.) Research Methodology
11.) IRR of Tata AIA Life Insurance Smart Value Income Plan
12.) Tata AIA Life Insurance Smart Value Income Vs Other Investment Products
13.) TAIA – Smart Value Income Plan vs. Term Insurance + ELSS
14.) Final Verdict on Tata AIA Smart Value Income Plan

What is Tata AIA – Smart Value Income Plan?

It is an individual, non-linked, participating life insurance savings plan. It gives you a life cover and the option of choosing and receiving a cash bonus (if declared) till you reach 100 years of age.

As a policyholder, you will be given two choices you can either opt to receive a cash bonus each year (if declared), or you can take care of your financial commitments or accumulate these cash bonuses (if declared).

The accumulated cash bonuses will be given at the company-declared interest rate, which will help create a bigger corpus to lead a stress-free life.

What are the Features of Tata AIA – Smart Value Income Plan?

• Two Sum Assured options – Under Single Pay: Sum Assured-I & Sum Assured-II.
• Sum Assured – I: Death Benefit Multiple of 10 times Single Premium.
• Sum Assured – II: Death Benefit Multiple based on entry age.
• Two Plan options – Plan option 1 & Plan option 2.
• Plan Option 1: Choice of receiving cash bonus (if declared) as early as from the 1st month in your Sub-wallet.
• Plan option 2: Accumulate cash bonus (if declared) till the end of the policy term and receive a hefty lump sum amount at maturity.
• Multiple options to choose from as your Policy Term & Premium Payment Term.
• Life Protect Feature – You can skip premium cover if you need to postpone premium payment due to loss of income and/or unemployment. The life cover continues even in such cases.

Eligibility Criteria of Tata AIA Life Insurance Smart Value Income Plan

Let us look at the eligibility criteria for this plan to better understand the working of this plan at a glance below;

Plan Parameters	Minimum	Maximum
Age at Entry (years)	30 days	Payment Option –	Maximum Entry Age
		Limited Pay	65
		Regular Pay	65
		Single Pay ‘Sum Assured-I’	45
		Single Pay ‘Sum Assured-II’	65
Age at Maturity (years)	18	Payment Option	Whole Life	Other than Whole Life
		Limited Pay	100	85
		Regular Pay	NA	85
		Single Pay ‘Sum Assured-I’	NA	65
		Single Pay ‘Sum Assured-II’	NA	85
Policy Term (PT) (years)	Payment Option	Whole Life	Other than Whole Life
			Minimum	Maximum
	Limited Pay	100-Entry age	20	50
	Regular Pay	NA	10	30
	Single Pay	NA	10	50
Premium Payment Term (PPT) (years)	Payment Option	Minimum	Maximum
	Limited Pay	5	12
	Regular Pay	Same as policy years
	Single Pay	1
Minimum Premium	Single/Limited/Regular Pay:  24,000 p.a.
Premium Payment Mode	Single/ Annual/ Half-yearly/ Quarterly/ Monthly
Cash bonus pay-out frequency	Annual / Half-yearly / Quarterly / Monthly
Plan Option	Option 1 – Cash Bonus & Option 2 – Accumulating Cash Bonus

Benefits under the Tata AIA – Smart Value Income Plan

Death Benefit:

On the death of the Life Insured for an in-force policy when all due premiums have been paid during the policy term, the Death Benefit will be: 

Sum Assured on Death plus Balance in Sub-wallet (in case of Option 1) or Accumulated Cash Bonus (in case of Option 2) plus Interim Bonus (if any) plus Terminal Bonus on Death (if declared).

Survival Benefit: 

Tata AIA may declare a Regular Bonus rate annually in advance starting from the first policy year, expressed as a % of Annualized/Single Premium. 

The policyholder would be eligible to receive Cash Bonus until his death or the end of his policy term, whichever is earlier.

Maturity Benefit:

At the end of the Policy Term, the Maturity Benefit will be: 

Sum Assured on Maturity plus Balance in Sub-wallet (in case of Option 1) or Accumulated Cash Bonus (in case of Option 2) plus Terminal Bonus on Maturity (if declared).

Grace Period, Lapse, Paid-up & Revival of Tata AIA Life Insurance Smart Value Income Plan

Grace period:

A grace period of 15 days is provided for policyholders under the monthly mode and 30 days for policyholders using other modes of payment.

Lapse:

On discontinuance of the payment of the premium during the first 2 policy years, it will lapse at the end of the grace period and no further benefits shall be paid to the policyholder.

Reduced Paid-Up:

On discontinuance of the payment of premium any time after the payment of the first 2 years’ premium, the policy will be made into a Reduced Paid-up at the end of the grace period.

All the benefits will be reduced proportionately.

Revival:

If a premium is in default beyond the Grace, it may be revived, within five years after the due date of the first unpaid premium and before the date of maturity by the policyholder.

Free Look period of Tata AIA – Smart Value Income Plan

If the policyholder is not satisfied with the terms & conditions of the Tata AIA Smart Value Income plan, then it can be returned/cancelled.

The policyholder will get a refund of the premium after the charges get deducted.

The free look period is 15 days if the policy is purchased directly. It will be extended up to 30 days in case it was purchased in distance mode. 

Surrendering Tata AIA – Smart Value Income Plan

A Single Pay policy will acquire surrender value immediately on payment of the Single Premium.

A Regular/Limited Pay policy shall acquire a surrender value provided at least after the first 2 full years’ Premiums have been paid.

The surrender Value shall be higher than the Guaranteed Surrender Value (GSV) and Special Surrender Value (SSV)

Advantages of Tata AIA – Smart Value Income Plan

• Under the various premium payment options, you can choose a policy term of up to 100 years or else you can choose a limited period of 10 to 50 years.
• The survival benefit will be paid out on survival of Life assured till the end of the policy term.
• Flexibility is available to the policyholder to choose their Premium Payment Modes.
• The policyholder has the option to receive the Cash bonus in hand or a Sub-Wallet.
• Riders can be attached to the base policy at any time or on the policy anniversary during the policy term. 
• Loan option is available with 80% of the surrender value.
• The Premium Offset feature is available both in Regular or Limited Pay. 
• If the cash bonus value is higher than the premiums to be paid, the excess amount will be paid out to the policyholder. I it is lower, then you will have to pay the remaining premiums.

Disadvantages of Tata AIA – Smart Value Income Plan

• All the cash bonuses and terminal bonuses are non-guarantee benefits. So, these bonuses are not uniform all through the policy years.
• The survival benefit (Cash Bonus) will not be sufficient to meet any big-ticket expenses.
• The lock-in period is 2 years for loan & surrender.
• The sum assured is too low. In case of death, the death benefit may not be sufficient to meet any future goals.

For further details, you can read the Tata AIA Life Insurance Smart Value Income Plan Brochure in detail

Research Methodology

So far, we have seen the features & the policy options of the Tata AIA Smart Value Income Plan.
To decide the suitability of this plan to your requirements, we need to know its cash flow in detail.
This will help us figure out the Internal Rate of Return (IRR) of Tata AIA – Smart Value Income Plan.
Let us probe this plan with the help of an illustration.

IRR of Tata AIA Life Insurance Smart Value Income Plan

Let us conduct a detailed analysis of the Internal Rate of Return (IRR) of the Tata AIA Life Insurance Smart Value Income Plan to provide us with better insight.
Below is an example assumption of two policyholders using both plan options 1 & 2 to figure out the end outcome and which is better.

Male	30 years		Male	30 years
Basic Sum Assured	12,50,000		Basic Sum Assured	12,50,000
Annualised Premium	1,00,000		Annualised Premium	1,00,000
Premium Paying term	8 years		Premium Paying term	8 years
Policy term	40 years		Policy term	40 years
Plan option	Option 1: Cash bonus		Plan option	Option 2: Accumulated Cash bonus

 

The above illustration showcases both the options that are available in this plan. All the metrics are the same except the cash bonus option.

		Option1: Cash Bonus
		At 4% p.a.		At 8% p.a.
Age	Year	Annualised premium / Maturity benefit	Death benefit	Annualised premium / Maturity benefit	Death benefit
30	1	-84,500	12,50,000	-69,000	12,50,000
31	2	-84,500	12,50,000	-69,000	12,50,000
32	3	-84,500	12,50,000	-69,000	12,50,000
33	4	-84,500	12,50,000	-69,000	12,50,000
34	5	-84,500	12,50,000	-69,000	12,50,000
35	6	-84,500	12,50,000	-69,000	12,50,000
36	7	-84,500	12,50,000	-69,000	12,50,000
37	8	-84,500	12,50,000	-69,000	12,50,000
38	9	15,500	12,50,000	31,000	12,50,000
39	10	15,500	12,50,000	31,000	12,50,000
40	11	15,500	12,50,000	31,000	12,50,000
41	12	15,500	12,50,000	31,000	12,50,000
42	13	15,500	12,50,000	31,000	12,50,000
43	14	15,500	12,50,000	31,000	12,50,000
44	15	15,500	12,50,000	31,000	12,50,000
45	16	15,500	12,50,000	31,000	12,50,000
46	17	15,500	12,50,000	31,000	12,50,000
47	18	15,500	12,50,000	31,000	12,50,000
48	19	15,500	12,50,000	31,000	12,50,000
49	20	15,500	12,50,000	31,000	12,50,000
50	21	15,500	12,50,000	31,000	12,50,000
51	22	15,500	12,50,000	31,000	12,50,000
52	23	15,500	12,50,000	31,000	12,50,000
53	24	15,500	12,50,000	31,000	12,50,000
54	25	15,500	12,50,000	31,000	12,50,000
55	26	15,500	12,50,000	31,000	12,50,000
56	27	15,500	12,50,000	31,000	12,50,000
57	28	15,500	12,50,000	31,000	12,50,000
58	29	15,500	12,50,000	31,000	12,50,000
59	30	15,500	12,50,000	31,000	12,50,000
60	31	15,500	12,50,000	31,000	12,50,000
61	32	15,500	12,50,000	31,000	12,50,000
62	33	15,500	12,50,000	31,000	12,50,000
63	34	15,500	12,50,000	31,000	12,50,000
64	35	15,500	12,50,000	31,000	12,50,000
65	36	15,500	12,50,000	31,000	12,50,000
66	37	15,500	12,50,000	31,000	12,50,000
67	38	15,500	12,50,000	31,000	12,50,000
68	39	15,500	12,50,000	31,000	12,50,000
69	40	15,500	12,50,000	31,000	12,50,000
70	41	12,88,000	12,50,000	20,12,000	12,50,000
	IRR	3.23%		6.30%

		Option 2: Accumulated Cash Bonus
		At 4% p.a.			At 8% p.a.
Age	Year	Annualised premium / Maturity benefit		Death benefit	Annualised premium / Maturity benefit	Death benefit
30	1	-1,00,000	12,50,000		-1,00,000	12,50,000
31	2	-1,00,000	12,50,000		-1,00,000	12,50,000
32	3	-1,00,000	12,50,000		-1,00,000	12,50,000
33	4	-1,00,000	12,50,000		-1,00,000	12,50,000
34	5	-1,00,000	12,50,000		-1,00,000	12,50,000
35	6	-1,00,000	12,50,000		-1,00,000	12,50,000
36	7	-1,00,000	12,50,000		-1,00,000	12,50,000
37	8	-1,00,000	12,50,000		-1,00,000	12,50,000
38	9	0	12,50,000		0	12,50,000
39	10	0	12,50,000		0	12,50,000
40	11	0	12,50,000		0	12,50,000
41	12	0	12,50,000		0	12,50,000
42	13	0	12,50,000		0	12,50,000
43	14	0	12,50,000		0	12,50,000
44	15	0	12,50,000		0	12,50,000
45	16	0	12,50,000		0	12,50,000
46	17	0	12,50,000		0	12,50,000
47	18	0	12,50,000		0	12,50,000
48	19	0	12,50,000		0	12,50,000
49	20	0	12,50,000		0	12,50,000
50	21	0	12,50,000		0	12,50,000
51	22	0	12,50,000		0	12,50,000
52	23	0	12,50,000		0	12,50,000
53	24	0	12,50,000		0	12,50,000
54	25	0	12,50,000		0	12,50,000
55	26	0	12,50,000		0	12,50,000
56	27	0	12,50,000		0	12,50,000
57	28	0	12,50,000		0	12,50,000
58	29	0	12,50,000		0	12,50,000
59	30	0	12,50,000		0	12,50,000
60	31	0	12,50,000		0	12,50,000
61	32	0	12,50,000		0	12,50,000
62	33	0	12,50,000		0	12,50,000
63	34	0	12,50,000		0	12,50,000
64	35	0	12,50,000		0	12,50,000
65	36	0	12,50,000		0	12,50,000
66	37	0	12,50,000		0	12,50,000
67	38	0	12,50,000		0	12,50,000
68	39	0	12,50,000		0	12,50,000
69	40	0	12,50,000		0	12,50,000
70	41	25,10,478	12,50,000		96,09,599	12,50,000
	IRR	3.18%			7.01%

The above tables denote the IRR based on its assumed investment return of 4% p.a. and 8% p.a respectively. Under both options, the IRR of this does not provide the policyholder withinflation-beatingg returns in the long term. 

The IRR ranges between 3% & 7%. This rate of return will not be sufficient to fulfil your family’s financial dreams. These returns are not favourable in the long term. Moreover, the Sum Assured guaranteed on the death of the policyholder is also very meagre compared to other policies in the market.

Tata AIA Life Insurance Smart Value Income Vs Other Investment Products

So, as an investor or as a policyholder we have to look at some other alternatives to get a better return on our investments.

Let us assume a similar cash flow as in the illustration of Option 2: Accumulated cash bonus.

The Annual premium of Rs. 1 lakh can be invested in a pure term life insurance policy & the balance amount can be utilised for accumulating the corpus for our financial life goals.

Let us look at how this strategy might fare by investing in other alternative investment options.

Tata AIA – Smart Value Income Plan vs. Term Insurance + ELSS

Let us assume Ram considers buying a Pure Term Insurance Policy and investing in ELSS with a similar cash outflow of Rs.1 lakh for the same period of 8 years as an investment.

The annual premium for Pure Term Insurance is Rs. 28,000

So, he allocates the remaining amount of Rs. 72,000 to invest in ELSS mutual fund.

The assumption for Comparison: 

Annual cash outflow: Rs. 1 lakh (28,000+72,000)

Sum assured: Rs. 12,50,000

Premium paying term: 8 years

The premium for pure term insurance (5 Years): Rs. 28,000

Balance amount invested in ELSS: Rs. 72,000

The annual premium amount of Rs. 28,000 for the pure term is paid in the first 5 years. The balance amount of Rs. 72,000 will be invested in the Mutual Fund ELSS fund.

As in the illustration for Tata AIA – The smart value Income plan has a premium paying term of 8 years, in the last 3 years the full amount of Rs. 1 lakh will be invested in the ELSS fund.

Option 2: Accumulated Cash Bonus
		At 4% p.a.		At 8% p.a.		Term insurance + ELSS
Age	Year	Annualised premium / Maturity benefit	Death benefit	Annualised premium / Maturity benefit	Death benefit	Term Insurance premium + ELSS	Death benefit
30	1	-1,00,000	12,50,000	-1,00,000	12,50,000	-1,00,000	12,50,000
31	2	-1,00,000	12,50,000	-1,00,000	12,50,000	-1,00,000	12,50,000
32	3	-1,00,000	12,50,000	-1,00,000	12,50,000	-1,00,000	12,50,000
33	4	-1,00,000	12,50,000	-1,00,000	12,50,000	-1,00,000	12,50,000
34	5	-1,00,000	12,50,000	-1,00,000	12,50,000	-1,00,000	12,50,000
35	6	-1,00,000	12,50,000	-1,00,000	12,50,000	-1,00,000	12,50,000
36	7	-1,00,000	12,50,000	-1,00,000	12,50,000	-1,00,000	12,50,000
37	8	-1,00,000	12,50,000	-1,00,000	12,50,000	-1,00,000	12,50,000
38	9	0	12,50,000	0	12,50,000	0	12,50,000
39	10	0	12,50,000	0	12,50,000	0	12,50,000
40	11	0	12,50,000	0	12,50,000	0	12,50,000
41	12	0	12,50,000	0	12,50,000	0	12,50,000
42	13	0	12,50,000	0	12,50,000	0	12,50,000
43	14	0	12,50,000	0	12,50,000	0	12,50,000
44	15	0	12,50,000	0	12,50,000	0	12,50,000
45	16	0	12,50,000	0	12,50,000	0	12,50,000
46	17	0	12,50,000	0	12,50,000	0	12,50,000
47	18	0	12,50,000	0	12,50,000	0	12,50,000
48	19	0	12,50,000	0	12,50,000	0	12,50,000
49	20	0	12,50,000	0	12,50,000	0	12,50,000
50	21	0	12,50,000	0	12,50,000	0	12,50,000
51	22	0	12,50,000	0	12,50,000	0	12,50,000
52	23	0	12,50,000	0	12,50,000	0	12,50,000
53	24	0	12,50,000	0	12,50,000	0	12,50,000
54	25	0	12,50,000	0	12,50,000	0	12,50,000
55	26	0	12,50,000	0	12,50,000	0	12,50,000
56	27	0	12,50,000	0	12,50,000	0	12,50,000
57	28	0	12,50,000	0	12,50,000	0	12,50,000
58	29	0	12,50,000	0	12,50,000	0	12,50,000
59	30	0	12,50,000	0	12,50,000	0	12,50,000
60	31	0	12,50,000	0	12,50,000	0	12,50,000
61	32	0	12,50,000	0	12,50,000	0	12,50,000
62	33	0	12,50,000	0	12,50,000	0	12,50,000
63	34	0	12,50,000	0	12,50,000	0	12,50,000
64	35	0	12,50,000	0	12,50,000	0	12,50,000
65	36	0	12,50,000	0	12,50,000	0	12,50,000
66	37	0	12,50,000	0	12,50,000	0	12,50,000
67	38	0	12,50,000	0	12,50,000	0	12,50,000
68	39	0	12,50,000	0	12,50,000	0	12,50,000
69	40	0	12,50,000	0	12,50,000	0	12,50,000
70	41	25,10,478	12,50,000	96,09,599	12,50,000	3,72,03,047	12,50,000
	IRR	3.18%		7.01%		11.01%

The Term Insurance +ELSS combo will provide you with a corpus of Rs. 3.72 crores & an IRR of 11%. This corpus accumulated will help you achieve your life’s financial goals with ease. 

Even in the best-case scenario which is at the rate of 8%, Tata AIA – Smart Income plan will just leave you with Rs. 1 crore at the end of 40 years. 

The Pure Term Insurance + ELSS combo will yield you 3 times the Tata AIA corpus.

Final Verdict on Tata AIA Smart Value Income Plan

Tata AIA Smart Value Income Plan offers its investors with dual benefits of life insurance coverage along with a cash bonus.

But as per our analysis, the annual cash bonus that we get from the Tata AIA Life Insurance Smart Value Income Plan will not be sufficient enough to meet our family’s financial expenses. 

Since this cash bonus is not guaranteed, there could also be a shortfall as even the accumulated cash bonus option score below the average rate of return. 

Through our research, it is evident that Tata AIA – Smart Value Income Plan does not provide adequate life cover & also fails to help us achieve our financial goals.

Investing in a Pure Term Insurance policy with adequate life cover will help protect your family financially in case of your absence. And for investment purposes, it would be better to choose a financial plan that caters to your Financial Goals and Risk Appetite.