Wealth builder for the long term

Investors with a high risk profile can consider Bajaj Allianz Life Goal Assure

New-age unit-linked insurance plans (ULIPs) have been gaining some attention, given their lower cost structure, better fund performance and higher tax benefit compared with mutual funds.

Buying ULIPs online is also relatively cheaper. Their expense structure is as low as that of direct plans of mutual funds.

While ULIPs offer policy-holders a life cover and a return on investment through equity and fixed-income instruments, you need to note that they do not offer any liquidity during the first five years.

Bajaj Allianz Life Goal Assure is an online ULIP that has come up with competitive features.

The plan scores over other online ULIPs on fund performance and tailor-made portfolio strategies.

 

 

 

On maturity, the plan will give the fund value. On the death of the insured during the policy term, the fund value, or 105 per cent of total premiums paid, or sum assured, whichever is higher, will be paid.

Fund options

Bajaj Allianz Life Goal Assure offers eight fund options for investors with different risk profiles.

They are: Equity Growth Fund II — a large-cap fund that allocates around 90 per cent in equity; Accelerator Mid-Cap Fund II — an equity fund that invests in a mix of large- and mid-cap stocks; Pure Stock Fund II — a multi-cap equity fund that allocates 75-100 per cent in equity and follows ethical investment strategy of avoiding investment in gambling, liquor and tobacco stocks; Pure Stock Fund — a multi-cap equity fund that allocates 60-100 per cent in equity and follows ethical investment strategy; Asset Allocation Fund II — a balanced fund that allocates 40-90 per cent in equity and the rest in debt papers; Bluechip Equity Fund — a large-cap fund that invests primarily in Nifty 50 stocks; Bond Fund — a pure debt fund that invests in G-Secs and highest-rated debt papers; and Liquid Fund — invests in short-term debt instruments.

Portfolio strategies

The plan offers four investment portfolio strategies: investor selectable portfolio strategy — you can invest in any of the above said eight funds as you desire; wheel of life portfolio strategy — premium is invested based on the number of years to maturity across five fund options; trigger-based portfolio strategy — the value of equity fund in excess of thrice the value of the bond fund is transferred to a liquid fund to secure the gains; and auto transfer portfolio strategy — systematic transferring from bond fund and liquid fund to any fund of your choice every month.

Unlimited free switches is allowed among funds and portfolio strategies (barring trigger-based portfolio) during the policy term.

Our take

Data from Capitaline show that the equity funds offered by Bajaj Allianz Life have been chart-toppers across periods and beaten their respective benchmarks and peers since launch. For instance, Bajaj Allianz Life Pure Stock Fund has delivered a compounded annualised return of 20.2 per cent in the five-year time-frame.

During the same period, ULIP funds in the large-cap category clocked 16 per cent returns, while large-cap mutual funds delivered 14.9 per cent.

The attractive feature is that the plan returns all the mortality charges along with the maturity benefit that are collected from you during the policy term.

It also offers a ‘fund booster’ on completion of 10, 15 and 20 years at 20, 40 and 60 per cent, respectively, of the annual premium. There is also a loyalty addition (only when the premium is ₹5 lakh or above) at the end of 10, 15 and 20 years, to the tune of 0.5, 1 and 1.5 per cent of the premium, respectively.

The plan provides the maturity benefit in instalments over a period of five years with additional 0.5 per cent in each due instalment.

There is no premium allocation charge. However, the plan levies a policy administration charge — ₹400 per annum, increasing 5 per cent every year (subject to a maximum of ₹6,000). The fund management charge is 1.25-1.35 per cent for equity funds and 0.95 per cent for debt funds.

The net yield under the plan for a gross return of 8 per cent, assuming a term of 20 years and an annual premium of ₹10 lakh, comes to 6.79 per cent. This is more or less equal to that of other online ULIPs.

Long-term investors with a high risk profile can consider this ULIP and choose equity fund options.

But, you may have to check if the insurance cover the plan provides is adequate enough. Else, take a separate term insurance policy.

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