Good or Bad? A Detailed Review

Aviva Signature Guaranteed Income Plan is an individual Non-Linked, Non-Participating Savings Life Insurance Plan.

This life insurance plan not only helps you with the savings but also provides financial protection to your loved ones in case of unfortunate death during the Aviva Signature Guaranteed Income Plan Policy Term.

You can align your investments with your key financial goals by choosing any one of the 4 options.

• Assured returns through interim payouts and a lump sum at maturity
• Flexible payout options, including Early Income, Deferred Income, or Lump Sum
• Multiple premium payment choices to suit your needs
• Guaranteed additions throughout the policy tenure
• Loyalty bonuses awarded at the time of policy maturity

What are the plan options and benefits of the Aviva Signature Guaranteed Income Plan?

Death benefit

In case of death during the Aviva Signature Guaranteed Income Plan Policy Term, the highest of the following amounts shall be paid as a death benefit

• Death Sum Assured, plus accrued Guaranteed Additions, if any OR
• 105% of the Total Premiums Paid

In case of death during the last policy year of the policy term, the highest of the following amounts shall be paid as a death benefit

• Death Sum Assured, plus accrued Guaranteed Additions, if any OR
• 105% of the Total Premiums Paid
• Maturity Benefit (including Loyalty Addition)

Survival benefit

There is no survival benefit payable under this Option

Maturity benefit

On survival of the life insured till the maturity date, Guaranteed Maturity Sum Assured (GMSA), along with accrued guaranteed additions plus Loyalty Addition, is payable as a lump sum.

Loyalty Addition = Guaranteed Maturity Sum Assured X [Premium Payment Term/100 + Policy Term/200].

Guaranteed Maturity Sum Assured= GMSA Scale x Annualised Premium x Premium Payment Term

Death benefit

In case of death during the Aviva Signature Guaranteed Income Plan Policy Term, the highest of the following amounts shall be paid as a death benefit

• Death Sum Assured, plus accrued Guaranteed Additions, if any OR
• 105% of the Total Premiums Paid

In case of death during the last policy year of the Aviva Signature Guaranteed Income Plan policy term, the highest of the following amounts shall be paid as a death benefit

• Death Sum Assured, plus accrued Guaranteed Additions, if any OR
• 105% of the Total Premiums Paid
• Commuted Value of the Guaranteed Income (including Loyalty Addition)

In case of death during the Payout Period, the Guaranteed Income shall be payable to the nominee for the remaining period of the Payout Period.

Nominee can take a commuted value of all future Guaranteed Income (including instalments of Loyalty Addition, if any), as a lump sum anytime during the Payout Period.

Survival benefit

There is no survival benefit payable under this Option

Maturity benefit

On survival of the life insured till the maturity date, Guaranteed Maturity Sum Assured (GMSA), along with Loyalty Addition, is paid out as a series of fixed Guaranteed Income over the payout period.

The payout period shall be 10 years for a Limited Premium Policy and 25 years for a Single Premium Policy.

The Guaranteed Income will start one year after the end of the policy term and thereafter payable at the end of each year during the Payout Period.

Guaranteed Income = (Guaranteed Maturity Sum Assured + Loyalty Addition) ÷ Payout Period

Loyalty Addition = Guaranteed Maturity Sum Assured X [Premium Payment Term/100 + Policy Term/200].

Guaranteed Maturity Sum Assured= GMSA Scale x Annualised Premium x Premium Payment Term

Death benefit

In case of death during the Aviva Signature Guaranteed Income Plan Policy Term, the highest of the following amounts shall be paid as a death benefit

• Death Sum Assured, plus accrued Guaranteed Additions, if any OR
• 105% of the Total Premiums Paid

In case of death during the last policy year of the policy term, the highest of the following amounts shall be paid as a death benefit

• Death Sum Assured, plus accrued Guaranteed Additions, if any OR
• 105% of the Total Premiums Paid
• Maturity Benefit (including Loyalty Addition) plus Survival Benefit

Survival benefit

Guaranteed Income is payable annually in arrears. The first payment shall start from the 2nd policy anniversary and thereafter on each policy anniversary till the maturity date.

Guaranteed Income = Guaranteed Income Factor X Annualised Premium

Maturity benefit

On survival of the life insured till the maturity date, Guaranteed Maturity Sum Assured (GMSA), along with accrued guaranteed additions plus Loyalty Addition, is payable as a lump sum.

Loyalty Addition = Guaranteed Maturity Sum Assured X [Premium Payment Term/100 + Policy Term/200].

Guaranteed Maturity Sum Assured= GMSA Scale x Annualised Premium x Premium Payment Term

Death benefit

In case of death during the Aviva Signature Guaranteed Income Plan Policy Term, the highest of the following amounts shall be paid as a death benefit

• Death Sum Assured, plus accrued Guaranteed Additions, if any OR
• 105% of the Total Premiums Paid

In case of death during the last policy year of the Aviva Signature Guaranteed Income Plan policy term, the highest of the following amounts shall be paid as a death benefit

• Death Sum Assured, plus accrued Guaranteed Additions, if any OR
• 105% of the Total Premiums Paid
• Maturity Benefit (including Loyalty Addition) plus Survival Benefit

Survival benefit

Guaranteed Income is payable annually in arrears. The first payment shall start from one year after the end of the premium payment term and thereafter on each policy anniversary till the maturity date.

Guaranteed Income = Guaranteed Income Factor X Annualised Premium

Maturity benefit

On survival of the life insured till the maturity date, Guaranteed Maturity Sum Assured (GMSA), along with accrued guaranteed additions plus Loyalty Addition, is payable as a lump sum.

Loyalty Addition = Guaranteed Maturity Sum Assured X [Premium Payment Term/100 + Policy Term/200].

Guaranteed Maturity Sum Assured= GMSA Scale x Annualised Premium x Premium Payment Term

Grace Period

The Grace Period for the payment of the Premium shall be 30 days is allowed for payment of Yearly, Half-yearly, and Quarterly Premiums and 15 days for monthly payments.

Lapsed Policy

If the due Premium of the first Policy Year has not been paid before the expiry of the Grace Period, then the Aviva Signature Guaranteed Income Plan Policy will lapse without acquiring any benefit

Paid-up Policy

If all due Premiums of the first Policy Year have been paid provided the Policy has completed the first Policy Year and any subsequent due Premium is not paid before the expiry of the Grace Period, the Policy will become a Paid-Up Policy with reduced benefits

Revival

The Aviva Signature Guaranteed Income Plan Policyholder will have five years from the date of the First Unpaid Premium (FUP) to revive the Policy (Revival Period) by paying all due Premiums along with interest on delayed Premiums.

The policyholder has the option to review the terms and conditions of the Aviva Signature Guaranteed Income Plan Policy.

If he disagrees with any of those terms and conditions, he has the option to return the Policy within 30 days from the date of receipt of the Policy Document.

The policy can be surrendered by the Policyholder anytime during the Aviva Signature Guaranteed Income Plan Policy Term after completion of the first Policy Year provided one full-year Premium has been received.

Surrender Value payable will be greater of the Guaranteed Surrender Value and Special Surrender Value.

• You can customise your benefits based on your cash flow needs.
• All the benefits under the plan are guaranteed
• Avail a loan of up to 80% of the policy’s Surrender Value.

• The chosen option at the time of policy inception cannot be altered during the policy term.
• The sum assured may be insufficient to adequately cover your family’s future financial needs.
• The plan offers relatively lower returns compared to other investment options.
• The benefits under the plan are non-guaranteed, as they include bonuses.

From a liquidity perspective, the Aviva Signature Guaranteed Income Plan provides guaranteed survival or maturity benefits in instalments over a specified period.

Evaluating the plan’s returns in percentage terms, specifically through Internal Rate of Return (IRR) analysis, helps in assessing its effectiveness.

For instance, consider a 35-year-old male investing ₹1,00,000 annually in the plan with a premium payment term of 15 years and a policy term of 30 years under Plan Option 1: Signature Investor.

The policy provides a lump sum maturity benefit of ₹59.62 lakhs, including loyalty additions.

These benefits are guaranteed, resulting in an IRR of 6.04% as per the Aviva Signature Guaranteed Income Plan maturity calculator, which is lower than typical debt instrument returns.

This analysis excludes survival benefits; choosing an option with survival payouts would result in even lower returns.

Given the long-term investment period of 30 years, such returns are inadequate, particularly when accounting for inflation, which increases the cost of future goals.

As a result, the Aviva Signature Guaranteed Income Plan may lead to a shortfall in the required corpus to meet your objectives. Additionally, the sum assured in this plan is relatively low, further diminishing its appeal.

The IRR analysis shows that investing in the Aviva Signature Guaranteed Income Plan may not be a favourable option for achieving your financial goals.

The returns from the Aviva Signature Guaranteed Income Plan struggle to keep up with inflation over the long term. For improved returns and greater liquidity, consider separating your insurance and investment needs. Here’s an alternate investment strategy to explore.

By allocating the same premium amount of ₹1 lakh annually, you can ensure adequate insurance coverage while building a robust investment corpus:

1. Insurance Coverage:

Opt for a pure-term life insurance policy with a sum assured of ₹11 lakhs. This costs an annual premium of ₹14,600 for a 30-year policy term with a 10-year premium payment term.

2. Investment Allocation:

The remaining ₹85,400 can be invested for wealth accumulation.

– For the first 10 years, after paying the insurance premium, the surplus is invested.

– In the next 5 years, the entire ₹1 lakh is directed toward investments.

The investment choice depends on your risk appetite:

Low-Risk Option: Investing in PPF yields a maturity value of ₹6.57 lakhs with an IRR of 6.57%.

High-Risk Option: Investing in ELSS, assuming historical equity returns, yields a pre-tax maturity value of ₹2 crores. After deducting capital gains tax, the post-tax maturity value is ₹1.77 crores, with an IRR of 10.87%.

Separating insurance and investment proves to be a more efficient strategy. Traditional insurance plans often offer limited coverage and modest returns.

In contrast, combining a pure-term policy with tailored investments like PPF or ELSS ensures better financial outcomes, enabling you to meet your goals more effectively.

The Aviva Signature Guaranteed Income Plan combines savings investment with life insurance coverage, offering the flexibility to choose from four plan options based on your cash flow requirements.

While it encourages regular saving habits, the plan falls short in delivering higher returns and providing adequate insurance coverage.

The sum assured is insufficient to meet a family’s basic financial needs, and the returns analysis reveals below-average performance on the savings component and it also has a high agent commission.

As a result, the plan offers limited value and is not an ideal choice for addressing both insurance and investment needs.

A more effective approach is to secure your family’s future with a Pure-Term Life Insurance Policy while investing separately to achieve financial goals.

This strategy ensures financial resilience during challenging times and maximises the potential of your investments.

When it comes to financial advice, are Quora, Facebook, and Twitter the final word?

Diversifying your portfolio across asset classes is crucial for long-term success. If you face difficulties in building a well-rounded investment portfolio, consulting a Certified Financial Planner can provide valuable guidance for a seamless and effective financial journey.