I am investing ₹24,000 per year in Tata AIA Life Assure 21 years Money Saver Plan. I started this policy last year. I would like to know if this is a sensible policy to have. If not, how should I exit this and what should I buy instead?
- Ronojoy Sircar
The non-disclosure of expenses by such plans makes them unattractive as a long term option. Tata AIA Life Assure 21 years Money Saver Plan is a participating money back plan. It does not disclose its expenses or charges, just like its peers. This plan pays a guaranteed coupon of 10% on Sum Assured every 3 years from the 3rd policy anniversary.
The maturity benefit includes:
- Final coupon of 40% of Sum Assured,
- Guaranteed Loyalty Addition of 10% of Sum Assured
- Compound Reversionary and Terminal Bonuses
The death benefit includes:
- Sum Assured
- Guaranteed Loyalty Addition of 10% of Sum Assured, and
- ompound Reversionary and Terminal Bonuses
The major drawback of such plans is the lack of transparency. The bonuses declared under the policy are not too satisfactory either. Till date, the maximum bonus declared by the company under this plan was 5 per cent that too in year 2002. The latest annual bonus declared was 3.75% only. We suggest you discontinue and surrender this plan.
A combination of pure term insurance and mutual fund investment would suit you better. You can buy term plans such as Bharti AXA Life eProtect or Aviva i-Life. Check the policy premium for your age and select the one which suits you. A term plan is the cheapest and best form of life insurance. It pays a benefit only upon death of policyholder. There is no maturity value. Therefore it comes at an extremely low premium. Keep your investments simple and do not buy complicated policies. You did not mention your age and financial goals so it is difficult to suggest a specific mutual fund. But if you are young, you can make a start with good large and mid-cap funds such as ICICI Pru Dynamic, HDFC Equity, Quantum Long Term Equity and so on. Invest systematically.