Insurance Uncovered

I have a plan — Smart Future Plan — in Canara HSBC OBC Insurance Company. For this, I have been paying a premium of ₹26,000 per year for the last two years. The policy term is 15 years. What are the benefits under the plan and how much will I get on maturity? And, if I cancel now, what is the process and when I will receive the money?

Sriram Chauhan

Smart Future Plan from Canara HSBC OBC is a unit-linked insurance plan (ULIP). A ULIP is a combo-product that offers life insurance and a market-linked investment.

If you do not want to continue the plan, you can stop paying premium. But given that it is a ULIP, there is a five-year lock-in, and you can’t exit now.

Since you have had the policy for two years, you have to wait for another three years to take out the funds. Partial withdrawal is allowed in the policy, but only from the sixth year.

You can surrender the policy. However, if you do so before the end of five years, the surrender value (which is fund value less surrender charges) will be transferred to the ‘discontinued policy fund’ which will earn an interest of 4 per cent as per cent IRDAI regulations. The proceeds of the discontinued policy will be paid to you only after completion of the fifth policy year.

How much money you will get on maturity of the plan depends on the performance of the funds in which your money has been invested. You can check their performance on the company’s website. The policy works thus: You keep paying the premium every year. The amount net of expenses gets invested in a mix of debt and equity, as chosen by you. With time, the corpus of the fund grows. In the untoward event of your death, the policy will pay the sum assured or fund value, whichever is higher, to your nominee.

Had you chosen the ‘disability’ feature by paying additional premium, the insurance company will waive all future premiums on the policy, but the life cover will continue.

On survival, till the end of the policy term, this plan, like other ULIPs, will pay the fund value.

It is suggested that you do not hurry to exit the plan now, unless your funds are performing very badly. If you exit now, after five years, you will not get much of the invested amount on hand, as a chunk of it will be eaten away by charges.

In the sixth year, you can exit if you wish too, as there are many new attractive ULIPs now with very little outgo on charges. They also have more competitive features — refund of the mortality charge (as in the case of Bajaj Allianz Goal Assure), a fund management charge of just 1.25 per cent for equity (Max Online Savings Plan) and a return booster by providing loyalty addition (Edelweiss Tokio Life Wealth Plus).

 

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