Product Review. HDFC Life’s new term policy comes with frills

HDFC Life has launched a new life insurance policy. Called ‘C2P 3D Plus’, the product is a newer version of HDFC Life’s flagship Click2Protect (C2P), an online term insurance product. The flexibility offered in deciding the pay-out from the policy is a highlight.

There are four different plans with a total of nine choices under HDFC Life’s C2P 3D Plus. (3D stands for Death, Disability and Disease).

The first one is a basic ‘Protection’ plan with three options — Life, 3D Life and Extra Life. Under the ‘Life’ option, one can choose to get the sum assured either on death or on diagnosis of a terminal illness. Premium waiver on total permanent disability following an accident is available. In the ‘3D life’ option, the premium is waived on diagnosis of a critical illness in addition. In the ‘extra life’ option, you get the benefits of the life option plus an additional sum assured on death due to accident.

The second is the ‘Protection with Income’ plan. Under the basic ‘Income’ option, in addition to the lumpsum on death (or terminal illness), there is also a regular flow of income guaranteed to the nominee.

Under the ‘Income Replacement’ option in this plan, you have to give an indicative annual income. The company then assumes a 10 per cent growth on that every year. On death (or terminal illness) during the policy term, the nominee gets paid an amount equivalent to the policyholder’s then annual income as lumpsum. From then on, from the year after the death, the nominee gets a regular income till the end of the policy period. This income will keep growing at the rate of 10 per cent every year. Both the options waive off future premiums on permanent total disability of the policyholder following any accident. They don’t have the premium waiver benefit for critical illness though.

The third is the ‘Return of Premium’ plan. This pays the premiums back to the policyholder if he survives the policy period. There is no premium waiver for critical illness. However, for total permanent disability, premiums will be waived and, the premium paid so far will be refunded on maturity.

The last is the ‘Whole Life Protection’ plan. Here, the policy continues till the policyholder survives and the sum assured is paid on death. There is premium waiver for total permanent disability. If you go for the ‘3D life long protection’ option here, you will also get the benefit of premium waiver on critical illness.

Features such as premium waiver on accidental disability and critical illness are offered by a few other players in the market, including ICICI Prudential Life and Bajaj Allianz Life. But flexibility in structuring the pay-outs, option for return of premium on maturity and a whole life cover are industry first features.

The premium of the basic ‘life’ option (under ‘protection’ plan) for a sum assured of ₹1 crore for a 35-year-old male will be about ₹11,500. The premium of similar products in the market is around ₹12,500-plus. As the sum assured goes up, the gap widens, making this new product far cheaper.

In most other term plans in the market, the sum assured is payable either as lumpsum or in equal instalments. Also, the existing policies in the market do not offer any flexibility on the time period for the pay-outs. By design, the pay-outs stop in the 10th year after death. Further, in the ‘income’ option of most life policies, the rate of increase in income is fixed by the insurance companies. C2P 3D Plus offers more flexibility in these areas. Under the basic ‘income’ option of the ‘Protection with income’ plan, you get a lumpsum on death plus a regular payout to the nominee. You can decide on the payout amount and the rate at which it needs to increase. The pay-outs can continue for a maximum of 20 years. Premium will vary as per your choices.

Barring the two options mentioned above, most other choices offered don’t make the cut. In the ‘Income Replacement’ option, the lumpsum on death will just be equal to one year’s income of the insured. This may not be enough in case any liabilities of the insured need to be settled. The‘Return of Pemium’ plan is expensive though there is the satisfaction that you will get back the premium on survival.

The ‘whole life protection’option under a term cover is novel but expensive. Other whole life plans in the market are endowment policies where returns are poor — about 4-4.5 per cent. Under the whole life cover here, if death occurs in the initial years after the end of the policy term, returns may be around 6 per cent. But the longer you survive, the lower the returns.

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