Good or Bad? A Detailed ULIP Review

Aviva Signature Investment Plan – Platinum is a Unit Linked Non-Participating Individual Life Insurance Plan. It provides you with both Security (Sum Assured) and Growth (Fund Value) to support your family in your absence in case of an unfortunate event.

• Provides a dual benefit of the sum assured and fund value payout in case of the policyholder’s demise.
• No allocation charges ensure more of your premium goes directly into investments.
• Offers 8 diverse fund options to suit varying risk appetites.
• Enables easy access to funds through partial withdrawals and systematic partial withdrawals during unforeseen circumstances.
• Includes two tailored saving strategies to adjust your investment between equity and debt funds based on your preferences and life stage.

In case of death of Life Insured, the following amounts shall be paid as death benefit:

• Base Sum Assured and
• Top-Up Sum Assured (if any) and
• Fund Value (Units pertaining to Regular Premium and Top-Up Premium, if any)

Death Benefit shall be at least 105% of the Total Premiums (Regular Premium and Top-Up Premium, if any) received up to the date of death

In case the life insured survives till the maturity date, the following amounts shall be payable on the maturity date as maturity benefit:

• Fund Value of units pertaining to regular premium and
• Fund Value pertaining to Top-up premiums if any

You can invest 100% of your premiums in any of the funds or choose a combination of funds as per your desire.

You can select from 8 funds tailored to different risk profiles, determined by their asset allocation. Ensure the fund you choose aligns with your personal risk tolerance.

Systematic Transfer Plan (STP):

This facility is available if at least 10% of premiums are allocated to Protector Fund-II. This feature will enable automatic switching from Protector Fund-II to Enhancer Fund-II on a weekly or monthly basis, as chosen, during the policy term, except in the last 2 years.

During the last 2 years (i.e., the last 24 months before maturity), the funds will be switched from the Enhancer Fund-II to the Protector Fund-II.

All switches under STP will be free of cost and do not carry any restriction on the minimum switch amount and minimum balance after the switch.

Retire Safe:

Under the Retire Safe strategy, the units in all the funds shall be systematically transferred to the BOND-II Fund from all other existing funds, if any.

The transfer of the units shall be done in 12 quarterly tranches during the last 12 quarters before the maturity date. No switching shall be allowed from the BOND-II fund to any other fund in the last 12 quarters of the Policy Tenure

i.) Premium Allocation Charge

NIL

ii.) Policy Administration Charge

Policy Administration Charge (PAC) will be made by monthly redemption of Units from the policy unit account and is applicable throughout the Aviva Signature Investment Plan – Platinum policy term.

iii.) Fund Management charge

FMC for all Funds other than the Discontinued Policy Fund would be 1.35% per annum. FMC for Discontinued Policy Fund would be 0.50% per annum

iv.) Mortality Charge

It will be applied on the Sum at risk, which is the difference between the amount of death Benefit Payable minus the Fund Value as a deduction of this charge.

v.) Surrender/Discontinuance charge

This charge will be deducted from the policy unit account in case the policy is discontinued within the first 5 years. It is based on the annualised premium, fund value and the year of discontinuance.

vi.) Switching Charge

The first four-unit switches within a Policy Year will be free of charge. On subsequent switches, a fee of ₹250 per switch transaction will be charged.

vi.) Partial Withdrawal/Miscellaneous Charge

NIL

Implication of charges: Unlike other market-linked investment options, certain charges persist throughout the policy term. These ongoing expenses add to the investor’s costs and can gradually diminish overall returns over time.

Grace period

The grace period for payment of the premium shall be 15 days when the Aviva Signature Investment Plan – Platinum policyholder pays the premium monthly and 30 days in all other cases

Discontinuance

Lock-in-period means the period of five consecutive completed years from the date of commencement of the policy.

Policy Discontinuance within the Lock-in-period: the Fund Value will be credited to the Discontinued Policy fund after deducting the applicable discontinuance charges and the risk cover and rider cover, if any, shall cease.

The proceeds of the Discontinued Policy Fund shall be paid to you and the Aviva Signature Investment Plan – Platinum policy shall terminate at the end of the Lock-in-period.

Policy Discontinuance after the Lock-in-period: Your Aviva Signature Investment Plan – Platinum policy shall be converted into a reduced Paid-up Policy with the Paid-Up Sum Assured.

Paid-Up Sum Assured = Sum Assured x (Number of Limited or Regular Premiums Received / Total Number of Limited or Regular Premiums Payable under the Policy)

Revival

You have the option to revive the Aviva Signature Investment Plan – Platinum policy within the Revival Period of three years.

If the policyholder disagrees with any of the terms or conditions, he/she has the option to return the policy within 15 days (30 days if the policy is solicited through distance marketing) from the date of receipt of the policy document.

Lock-in-period means the period of five consecutive completed years from the date of commencement of the policy.

Within the lock-in period: the Funds shall remain invested in the Discontinued Policy Fund. The proceeds of the Discontinued Policy Fund shall be paid to you at the end of the Revival Period or Lock-in-period, whichever is later.

After the lock-in period: If You surrender the Aviva Signature Investment Plan – Platinum policy, Fund Value will be paid to you.

• Top-up premiums can be added at any point during the Aviva Signature Investment Plan – Platinum policy term.
• Partial withdrawals are available after completing five policy years or when the life insured turns 18, whichever comes later.
• Systematic withdrawals offer structured, regular payouts tailored to your financial needs.
• Premium redirection allows you to reallocate future premiums across funds without any additional cost.
• Enjoy unlimited free fund switches to adapt your investments as needed.

• Policy loans are not permitted under this plan.
• No liquidity is provided during the early years of the policy.
• The sum assured might be inadequate to meet significant financial needs.
• Investments are based on the net premium, calculated after deducting applicable charges.

This section analyses the investment component of the Aviva Signature Investment Plan – Platinum. By estimating potential returns, we aim to assess the plan’s performance and compare it with alternative investment options.

The following Internal Rate of Return (IRR) analysis is based on the figures outlined in the Aviva Signature Investment Plan – Platinum policy brochure.

Consider a 38-year-old male who opts for the Aviva Signature Investment Plan – Platinum with a sum assured of ₹15 lakhs. Both the policy term and premium payment term are 20 years, requiring an annual premium of ₹1.5 lakhs.

The fund value at the end of the policy term assumes consistent premium payments. The policy brochure projects potential returns based on assumed investment rates of 4% and 8%.

These rates are neither guaranteed nor indicative of the actual upper or lower limits of returns, as the maturity benefit depends on various factors, including the policy’s future performance.

At a 4% return, the fund value is ₹35 lakhs, translating to an IRR of 1.45%, which is lower than the interest offered by a basic savings account as per the Aviva Signature Investment Plan – Platinum maturity calculator.

At an 8% return, the fund value grows to ₹56 lakhs, yielding an IRR of 5.63%, which is still below the interest rates provided by bank fixed deposits as per the Aviva Signature Investment Plan – Platinum maturity calculator.

Although the Aviva Signature Investment Plan – Platinum is positioned as a long-term investment, its low returns significantly limit wealth creation.

Consequently, the accumulated corpus may fall short of meeting financial goals, and the sum assured is also inadequate.

The Aviva Signature Investment Plan – Platinum falls short in its suitability due to its inability to offer inflation-beating returns and an inadequate sum assured. The blending of insurance and investment in a single product leads to suboptimal returns.

To illustrate this, let us explore an alternative strategy that separates insurance from investment.

Consider purchasing a pure-term life insurance policy with a sum assured of ₹15 lakhs at an annual premium of ₹9,700.

With a policy term and premium payment duration of 20 years, this leaves ₹1,40,300 annually available for investment. This amount can be allocated based on your risk appetite.

Low-risk approach: Investing in a debt instrument like the Public Provident Fund (PPF) results in a maturity value of ₹62.27 lakhs with an IRR of 6.53%.

Notably, this is comparable to the returns in the 8% scenario of the Aviva Signature Investment Plan – Platinum, despite PPF being a safer debt instrument.

High-risk approach: Allocating the funds to an equity-oriented instrument like an Equity-Linked Savings Scheme (ELSS) yields a pre-tax maturity value of ₹1.13 crores.

After accounting for capital gains tax, the post-tax maturity value is ₹1.02 crores, with an IRR of 10.68%. ELSS, being market-linked, delivers significantly higher risk-adjusted returns along with the added benefit of liquidity and unrestricted withdrawals.

When compared, the Aviva Signature Investment Plan – Platinum lacks both the flexibility and the ability to deliver superior risk-adjusted returns, making it less effective than the alternative strategy of separating insurance and investment.

The Aviva Signature Investment Plan – Platinum is marketed as a dual-purpose solution, offering security through the sum assured and growth via the fund value to support your family. However, a closer evaluation reveals significant shortcomings due to its low potential returns.

The high charges associated with this ULIP (Unit-Linked Insurance Plan) severely impact its performance, resulting in subpar returns and limiting its ability to accumulate wealth and it also has a high agent commission.

Furthermore, the plan’s inadequate sum assured reduces its appeal. Combining insurance and investment in a single product compromises the overall efficiency of the Aviva Signature Investment Plan – Platinum.

A more effective strategy is to secure your family’s future with a pure-term life insurance policy, which provides substantial coverage at an affordable premium.

To achieve your financial goals, consider investing separately in options that align with your risk tolerance and time horizon.

For better returns on market-linked investments, avoiding ULIPs is recommended. Always analyse a product’s potential returns before committing your money.

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