Edelweiss Tokio Life Wealth Secure Plus - A new ULIP with greater flexibility
21 January 2020
Are you looking for tax-saving investments? Insurance is among your key options. There is a new ULIP on the block — Edelweiss Tokio Life’s Wealth Secure+, which can save you tax and at the same time get you market-linked returns.
Unit-linked insurance products (ULIPs) are insurance-and-investment combo plans. While long-term capital gains in equity are taxed, in insurance plans including ULIPs, they remain tax-exempt provided the sum assured is at least 10 times the annual premium.
Wealth Secure+ has some industry-first features which make it a plan worth considering.
What’s on offer?
Edelweiss Tokio Life’s Wealth Secure+ offers three options for life cover. One option is where the life cover is available on the individual’s life; the second is where you and your spouse can together take a joint life cover; and the third is to have the policy continue even after your death for the benefit of the child.
Once you choose between the three options, you have to decide on the premium and the premium payment mode — monthly, quarterly, semi-annual or annual.
The minimum annual premium is ₹12,000 if the premium payment term is more than 10 years (if less than 10 years, the minimum premium is ₹24,000). The sum assured in this policy is 7-10 times the annual premium. You can choose to pay the premium all through the policy term or limit it to five years. The maximum maturity age is 60 years if the premium payment term is 10 years or more; if less than 10 years, the maximum maturity age is 70 years. You can choose a policy term of 5-25 years. If you want whole-life cover, then the policy term is 100 minus your age.
On the death of the policyholder, the higher of the two — sum assured or fund value — is paid and the policy is terminated. If you have chosen for the policy to continue after your death to benefit your child, the sum assured is paid in one lump-sum to the nominee and the policy is continued with; no future premiums will be required.
If you survive till the maturity of the policy, the fund value along with loyalty and booster additions is paid out to you.
You can take the maturity proceeds as one lump-sum or per the chosen settlement option (between one to five years as a yearly, half-yearly, quarterly or monthly payout).
Investment features
There are three different types of additions in this policy that will enhance returns.
One is the Loyalty Addition, which is applicable from the sixth policy year till the end of the premium paying term. It is 0.15 per cent of the last 12 months’ average of daily fund value.
The second is the Booster Addition, which is added at the end of the 10th policy year, and every fifth policy year thereafter. If the premium payment term is 10 years or more, booster additions will be equal to 2.25 per cent of the last 60 months’ average of daily fund value.
Finally, there’s the Maturity Addition, which is equal to 2 per cent of the last 60 months’ average of daily fund value and is added only at maturity (available only for premium payment terms greater than or equal to 10 years).
On the investment front, there are two options to choose from — a) Life Stage & Duration Based Strategy, and b) Self-Managed Strategy.
Under the first option, it is ensured that as your age increases, your money is moved from the equity-oriented fund (Equity Large Cap Fund) to the debt-oriented one (Bond Fund).
The policyholder can opt in or out of this scheme any time during the policy term. In the Self-Managed Strategy, you can decide to invest your money in your choice of funds in any proportion. There are seven different funds offered — from pure equity and pure debt to combinations of the two. You can switch between funds any number of times free of charge.
Charges
There is no premium allocation charge. The policy administration charge is ₹50 per month during the premium paying term and nil at the end of it. The fund management charge is 1.25 per cent on gilt and 1.35 per cent on equity funds. Switching charges are nil, and there are no charges on partial withdrawals. Surrender charges are in line with what regulator IRDAI allows.
Our take
IRDAI has trimmed charges in ULIPs. The net reduction in yield (difference between gross and net returns) in ULIPs in the market is just 1.3-1.4 per cent. In Wealth Secure+, the net reduction in yield works out to 1.2-1.3 per cent depending on the choice of premium term and policy term.
In ULIPs, however, it is not just the costs that you need to compare — it is also the performance of the funds.
Edelweiss Wealth Secure+ has seven different fund options. The Blue Chip and Gilt funds are new, launched just seven months back, so no track record is available. The Equity Large Cap Fund, launched in 2011, has since inception given an annualised return of 12.9 per cent, against the benchmark Nifty 50’s 9.9 per cent. The Equity Top 250 Fund, too, has reported better performance than the benchmark since inception in 2011. The Equity Mid-Cap Fund has also outperformed the benchmark.
However, the two hybrid funds — Managed Fund and Bond Fund — have underperformed the benchmark in one- and five-year timelines. So, watch out when you take a call on the fund to invest in. That said, note that your returns will get a boost from the ‘additions’ in the plan. Not all ULIPs in the market offer this benefit. For instance, Max Life’s Online Savings Plan doesn’t have loyalty addition.
Another highlight in Wealth Secure+ is that the additions offered are a percentage of the fund value. This is unlike policies such as Bajaj Allianz Life Goal Assure, where the booster addition is a percentage of the premium — the return is fixed. But, in Wealth Secure+, the higher the fund value, the higher the return.
Coming to the product structure, Wealth Secure+ offers more flexibility — be it in choice of premium/policy term or the way you want the settlement, in a lump-sum or instalment, or adding spouse/child to the policy. You can also make partial withdrawals from the policy from the end of the fifth year. The scheme offers a ‘Systematic Withdrawal’ option, where an automated partial withdrawal facility is given.
Also, in the Child plan, on the death of the parent, the value of all future premiums (till end of the premium payment term) is invested in the fund at one go. So, the returns go up significantly. Usually, insurance companies that offer child plans do not invest all the future premiums at one go on the death of the parent — they do it only annually, when the premium is due.
To sum up, Wealth Secure+ is a good option among ULIPs. Its booster additions are relatively high. But note that they come into play only after 10 years. So, if you want to invest long-term, this product is an ideal choice. Wealth Secure+ is fully complaint with Unit Linked Insurance Products Regulations, 2019.
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