Good or Bad? A Detailed ULIP Review

Bajaj Allianz Life Capital Goal Suraksha Plan is a combination of two individual products named Bajaj Allianz Life Goal Assure II – A Unit- Linked Non-Participating Individual Life Savings Insurance Plan and Bajaj Allianz Life POS Goal Suraksha – A Non-Linked, Non-Participating, Individual, Life Insurance Savings Plan.

• Enjoy life cover throughout the Bajaj Allianz Life Capital Goal Suraksha Plan policy term.
• A portion of your investments provides guaranteed returns.
• Benefit from a Fund Booster at maturity to enhance your returns.
• Receive a refund of mortality charges upon maturity.
• Earn market-linked returns on your investments.
• Choose the flexibility of a limited premium payment term.

Maturity benefits include both guaranteed benefits and non-guaranteed benefits.

The sum Assured on death is paid to the nominee as the death benefit

You have the flexibility to invest your premiums according to your preferences by selecting one or a combination of the funds listed below.

i.) Premium Allocation charges

Nil

ii.) Top-up Premium

1%

iii.) Policy Administration charges

₹ 400 per annum inflating at 5% per annum, subject to a maximum of ₹ 500 per month. The charge will be deducted at each monthly anniversary by the cancellation of units at the prevailing Unit Price.

iv.) Fund Management Charges

v.) Miscellaneous charges

A miscellaneous charge of ₹ 100 per transaction in respect of alteration of premium mode, alteration of premium apportionment, change in portfolio strategy, change in premium paying term or decrease in sum assured shall be charged

Inference from the charges: Bajaj Allianz Life Capital Goal Suraksha Plan imposes multiple charges similar to any other ULIP.

These charges can significantly diminish returns over an extended period, highlighting a notable contrast when compared to investing in other market-related instruments.

• Flexibility to customize the premium payment term and policy duration to match your financial goals.
• Option to choose funds that align with your risk appetite, ensuring personalized investment strategies.

• Only a portion of the benefits is guaranteed.
• Loan facility is not available under this Bajaj Allianz Life Capital Goal Suraksha Plan.
• The sum assured may be insufficient to meet the family’s future financial needs.

Let’s analyse the numbers to evaluate the Bajaj Allianz Life Capital Goal Suraksha Plan. We’ll calculate the Internal Rate of Return (IRR) for this plan and compare it with other market-linked returns to gauge its performance.

Consider a 30-year-old male who opts for this plan, paying an annual premium of ₹1,00,000 for 5 years.

The Bajaj Allianz Life Capital Goal Suraksha Plan policy term is 15 years, with a Sum Assured of ₹1,00,000. Here’s a breakdown of the benefits of the policy:

Guaranteed Benefit at Maturity: ₹5,00,916

Non-Guaranteed Benefits (Illustrative): (the returns indicated at 4% and 8% are illustrative and do not indicate the upper or lower limits of returns under the Policy).

At a 4% return scenario, non-guaranteed benefits amount to ₹3,49,122, making the total maturity benefit ₹8.50 Lakhs, with an IRR of 4.15% as per the Bajaj Allianz Life Capital Goal Suraksha Plan maturity calculator.

At an 8% return scenario, non-guaranteed benefits are ₹35,62,623, bringing the total maturity benefit to ₹10.63 Lakhs, with an IRR of 5.95% as per the Bajaj Allianz Life Capital Goal Suraksha Plan maturity calculator.

While this plan is market-linked, its returns are significantly lower than the inflation rate. This makes it an inefficient option for wealth accumulation over the long term.

Let’s now evaluate returns from alternative market-linked investments. For long-term goals, investments must outpace inflation to build a substantial corpus. By separating life insurance from investments, you can achieve better yields.

A pure-term life insurance policy is a cost-effective option for life cover. For example, a policy with a ₹10 Lakh sum assured costs ₹8,500 annually, payable for 5 years, with a policy term of 15 years.

Compared to the Bajaj Allianz Life Capital Goal Suraksha Plan, where the premium was ₹1,00,000, this approach leaves ₹91,500 annually for investments tailored to your risk appetite.

For High-Risk Investors: Equity investments such as ELSS funds are a viable choice. For Low-Risk Investors: Debt instruments like PPF offer stable returns.

In this analysis, we consider ELSS, a market-linked product. After 15 years, the ELSS investment grows to a pre-tax maturity value of ₹20.22 Lakhs.

Accounting for capital gains tax, the post-tax maturity value is ₹18.42 Lakhs. Combining the pure-term policy and ELSS, the IRR stands at an impressive 10.47% (post-tax).

This comparison highlights that separate investments can deliver inflation-beating returns and greater liquidity.

On the other hand, the Bajaj Allianz Life Capital Goal Suraksha Plan falls short in both return potential and liquidity, making it less effective for wealth accumulation.

The Bajaj Allianz Life Capital Goal Suraksha Plan offers a way to channel savings into the market while providing a portion of the benefits as guaranteed returns.

However, the projected returns are lower than the inflation rate, making it an inefficient choice for long-term wealth accumulation.

In market-linked investments, returns should align with the level of risk. Unfortunately, this plan exhibits a mismatch between risk and return, which can negatively impact your long-term goals and overall financial strategy.

Additionally, the sum assured under this plan is inadequate to secure your family’s financial future, leaving both the insurance and investment aspects unconvincing as a viable option and it also has a high agent commission.

A pure-term life insurance policy is a more suitable choice for ensuring financial protection. By selecting a sum assured based on your liabilities and goals, you can provide sufficient security for your family against unforeseen events.

Pure-term policies also come with affordable premium rates, making them a cost-effective solution.

For wealth accumulation, it is better to build a diversified investment portfolio tailored to your risk appetite, financial goals, and investment horizon.

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

Consulting a Certified Financial Planner (CFP) can help you create a goal-oriented investment plan to achieve better returns and long-term financial stability.