Good or Bad? A Detailed ULIP Review

Canara HSBC Life Insurance Wealth Edge is a Unit Linked Individual Saving Life Insurance Plan.

Canara HSBC Life Insurance Wealth Edge Plan recognizes the importance of your life goals and helps you fulfil them along with the added shield of life insurance to protect you and your family against any uncertainties in the future.

• Ensure your family’s financial security throughout the policy term.
• Enjoy flexible premium payment options – choose a one-time payment, limited period payments, or pay throughout the policy term.
• Select from 5 investment strategies and 9 fund options to match your financial goals.
• Adapt your policy to changing financial needs by modifying premiums, payment terms, policy terms, or sum assured.
• Stay invested longer and benefit from Loyalty Additions & Wealth Boosters.
• Mortality charges deducted during the policy term are refunded to your fund value at maturity.
• Access your accumulated wealth when needed through the Systematic Withdrawal Option (SWO) or Milestone Withdrawal Option (MWO).
• Maximize your investments with lower premium allocation charges by opting for a higher premium amount.

Invest Plus: Provides life coverage during the Canara HSBC Life Insurance Wealth Edge Plan Policy Term and the accumulated fund value at maturity.

Premium Plus: In case of your unfortunate death during the Policy Term your Nominee will receive the Lump Sum Death Benefit. All future premiums will be waived and the Nominee will receive the Fund Value, if any, at the policy maturity date.

Life Plus: This Canara HSBC Life Insurance Wealth Edge Plan option allows you to build a corpus for your golden years while having life insurance for your whole life (i.e. till 99 years of age)

Invest Plus

Higher of:

• Sum Assured fewer partial withdrawals/ withdrawals under MWO / withdrawals under SWO, if any, in the preceding two years, or
• Fund Value as on date of intimation of death claim, or
• 105% of all Premiums paid up to the date of death

Premium Plus

Higher of the following will be payable as a lump sum:

• Sum Assured, or
• 105% of total premiums paid up to the date of death

Premium Funding Benefit will also become payable. All the charges, except Mortality charges and Premium Funding Benefit charges, shall continue to be deducted from the unit account until maturity of the Policy.

At maturity, Fund Value is payable as a lump sum or as per the Settlement Option chosen by the Canara HSBC Life Insurance Wealth Edge Plan Policyholder before death.

Life Plus

Higher of:

• Sum Assured fewer partial withdrawals/ withdrawals under MWO/ withdrawals under SWO, if any, in the preceding two years, or
• Fund Value as on date of intimation of death claim, or
• 105% of all Premiums paid up to the date of death

Invest Plus and Life Plus

In case the Life Assured survives till the maturity of the Canara HSBC Life Insurance Wealth Edge Plan Policy, Fund Value as on the date of maturity is payable and the Policy will terminate upon payment of such benefit.

Premium Plus

Fund Value as of the date of maturity is payable to the Life Assured if the Life Assured is alive or to the Nominee(s) if the Life Assured is not alive.

0.5% of the average Fund Value of the last 12 monthly policy anniversaries, will be added to the fund at the end of every policy year starting from the 6^th policy year till the end of the Canara HSBC Life Insurance Wealth Edge Plan Policy Term.

A Wealth Booster of 2.90% of the average Fund Value of the last 60 monthly Policy Anniversaries, will be added at the end of the 10^th policy anniversary. From the 15th Policy Year and thereafter at the end of every 5 Policy Years, the wealth booster rate is 1.50%

You can choose from a range of 9 Unit Linked Funds. You can choose to allocate your Premiums to any, all or a combination of the Unit Linked Funds as per your risk preference. The investment and risk profile of each Unit Linked Fund is described below:

i.) Systematic Transfer Plan (STO)

Through STO, your entire annual/single allocable Premium (after deduction of applicable charges) will be first allocated to the Liquid Fund (‘Source STO Fund’) and then systematically transferred on a monthly basis into any one of the Unit Linked Funds (‘Target STO Fund’) as chosen by you as per the below Table.

STO can be opted / re-opted only when Premiums are paid in annual mode.

ii.) Return Protector Option (RPO)

Through RPO, your entire Premium net of applicable charges is invested into any one of either Large Cap Advantage Fund or India Multi-Cap Equity Fund or Equity II Fund or Emerging Leaders Equity Fund, as opted by You (‘RPO Fund) and gains made from RPO Fund are automatically transferred to a lower risk Debt Fund so as to create a more stable sequencing of investment returns during the Policy Term.

You can choose any fixed flat target appreciation percentage in multiple of 1 within a range of 5% to 15%.

iii.) Auto Funds Rebalancing (AFR)

Once opted, after every 3 months, it automatically rebalances the allocation of your savings in various Unit Linked Funds to the allocation proportions chosen by you.

iv.) Safety Switch Option (SSO)

The Safety Switch Option will be available only under Invest Plus and Premium Plus.

As the Canara HSBC Life Insurance Wealth Edge Plan Policy nears maturity, your funds will get shifted systematically to the relatively low-risk Liquid Fund at the beginning of each of the last 4 years of the Policy as per the following schedule:

v.) Loss Protector Strategy (LPS)

This investment strategy is well suited for risk-averse customers who would want to minimize the losses in case of a downturn in the market by transferring the units from high-risk to low-risk funds.

First, the entire Premiums net of applicable charges (“Net Invested Amount”) are invested into any one of either India Multi-Cap Equity Fund or Equity II Fund or Large Cap Advantage Fund or Emerging Leaders Equity Fund, as opted by the Policyholder (“LPS Fund”).

In the event, that the loss from the LPS Fund becomes equal to or more than the chosen Depreciation Percentage, then units from the LPS Fund will be transferred to the Debt Fund at the prevailing Unit Price.

A. Premium Allocation Charge

This charge will be deducted upfront and will be levied through reduced Premium Allocation to the fund.

B. Policy administration charge

Policy Administration Charges will be levied every month by redemption of units.

For Regular/Limited Premium payment policies – Rs. 500 will be charged per month, from the 6^th policy year till the end of the Policy Team

For Single Premium payment policies – 0.0083% of the Single Premium will be charged per month, throughout the Canara HSBC Life Insurance Wealth Edge Plan Policy Term.

C. Mortality Charge

This charge is the cost of life insurance. It will be deducted at the beginning of each Policy month by cancellation of units. The amount of the charge taken each month depends on the Life Assured’s age and Sum at Risk.

D. Premium Funding Benefit (PFB) Charges

This charge is only applicable for Premium Plus. The Premium Funding Benefit Charge will apply on the Present Value of Future Premiums payable by the Life Assured for an in-force Policy.

E. Fund Management Charge (FMC)

This charge is levied as a percentage of the value of assets and will be deducted on a daily basis from the Fund before the calculation of the NAV.

F. Surrender/Discontinuance Charge

It is levied on the Fund Value on account of Surrender/Discontinuance of the Policy. It depends on the year of discontinuance, premium amount and premium paying term.

G. Switching Charge

Switches are free of charge.

H. Partial Withdrawals Charge

Partial Withdrawals are free of cost.

I. Miscellaneous Charge

Nil

Grace period, Discontinuance and Revival of Canara HSBC Wealth Edge Plan

Grace Period

You have a period of 30 days for Annual, Half Yearly and Quarterly Mode of Premium payment and 15 days for Monthly Mode of Premium payment from the due date to pay your Premiums, during which life insurance cover will continue.

Discontinuance

Discontinuance of Policy during Lock-in Period (during first five years): the Fund Value less applicable Discontinuance Charge will be transferred to the DPF and the risk cover, if any, under the Policy will cease.

The proceeds of the DPF shall be paid to the Canara HSBC Life Insurance Wealth Edge Plan Policyholder at the end of the Revival Period or Lock-in Period whichever is later.

Discontinuance of Policy after the Lock-in Period (after the first five years): the Policy shall be converted into a Reduced Paid-up Policy, with the Paid-up Sum Assured. The Policy shall continue to be in Reduced Paid-up status.

The Fund Value shall be paid to the Canara HSBC Life Insurance Wealth Edge Plan Policyholder at the end of the Revival Period or at the end of the Policy Term, whichever is earlier.

Revival

The Canara HSBC Life Insurance Wealth Edge Plan policy can be revived within a period of three consecutive years from the date of the first unpaid premium

If the Policyholder does not agree with the terms and conditions of the Policy or otherwise and has not made any claim, they shall have the option to request for cancellation of the Policy by returning the Policy Document (if issued physically upon request) within the free-look period of 30 days from the date of receipt of the Policy Document, whether received electronically or otherwise (whichever is earlier).

Surrender of Policy during Lock-in Period (during first five years): the Fund Value after deduction of applicable Surrender Charges is transferred to the DPF and the proceeds of discontinued policy shall be refunded to the Policyholder only after completion of the Lock-in Period.

Surrender of Policy after the Lock-in Period (after the first five years): the Canara HSBC Life Insurance Wealth Edge Plan Policyholder has the option to surrender the Policy anytime and Fund Value shall be payable.

• Partial Withdrawals: Available from the 6^th policy year onwards, provided the life assured is at least 18 years old.
• Settlement Option: This can be chosen under the Invest Plus and Premium Plus Plan options.
• Premium Redirection: Offered free of charge.
• Waiver of Premium: An inbuilt feature in the Premium Plus option.
• Fund Switching: Enjoy unlimited free switches between funds.

• No Policy Loans: Loans are not allowed under this plan.
• Limited Liquidity: No access to funds during the initial policy years.
• Inadequate Coverage: The sum assured may not be sufficient.
• Lower Returns: Investment returns are relatively low compared to other options.

Evaluating the potential returns of the Canara HSBC Wealth Edge Plan is crucial in assessing its suitability.

While the plan appears attractive due to its market-linked investment option, even for those without technical expertise, calculating the Internal Rate of Return (IRR) provides a clearer picture of its actual benefits.

Let’s analyse a case study from the Canara HSBC Life Insurance Wealth Edge Plan policy brochure.

A 30-year-old male purchases the Canara HSBC Wealth Edge Plan with a sum assured of ₹20 lakhs, a policy term of 15 years, and a premium payment term of 15 years. He pays an annual premium of ₹2 lakh. He chooses the Invest Plus variant.

By consistently paying premiums, he becomes eligible for the fund value at the end of the policy term.

However, the assumed returns of 4% p.a. and 8% p.a. in the illustrative examples are not guaranteed and do not represent the upper or lower limits of potential returns, as actual performance depends on market conditions and various factors.

At a 4% return scenario: The fund value is ₹36.47 lakhs, with an IRR of 2.40% as per the Canara HSBC Life Insurance Wealth Edge Plan maturity calculator.

At an 8% return scenario: The fund value is ₹50.66 lakhs, with an IRR of 6.31% as per the Canara HSBC Life Insurance Wealth Edge Plan maturity calculator.

Even at an 8% return, the IRR is comparable to or sometimes lower than returns from traditional debt instruments.

Given that the Canara HSBC Wealth Edge Plan is a market-linked product, its returns should ideally outperform inflation, but they fall short when compared to other market-linked investments. Furthermore, the sum assured is inadequate.

The plan also lacks transparency in its investments, imposes high charges, and offers low life coverage, making it an unattractive financial option.

A key drawback of ULIP products like the Canara HSBC Wealth Edge Plan is the lack of transparency regarding capital allocation—how much is actually invested and how much goes toward commissions and expenses.

Additionally, the life cover provided under this Canara HSBC Life Insurance Wealth Edge Plan is inadequate.

To ensure sufficient life coverage and efficient wealth accumulation, it is advisable to separate insurance from investment and compare potential returns.

Let’s analyse the same metrics as in the previous illustration. For life coverage, a pure-term insurance policy with a sum assured of ₹20 lakhs costs an annual premium of ₹8,100, with a policy term and premium payment term of 15 years.

By opting for this, instead of paying ₹2 lakhs annually into the ULIP, an individual saves ₹1,91,900 per year, which can be invested based on risk preference.

High-risk investors can allocate funds to equity-based instruments while Risk-averse investors can opt for debt instruments. We consider both scenarios.

Pure-Term + PPF (Public Provident Fund): Although PPF has an annual investment limit of ₹1.5 lakh, the illustration assumes a higher amount for explanatory purposes, making the deviation justifiable. The final maturity value is ₹52.04 lakhs, yielding an IRR of 6.62%.

Pure-Term + ELSS (Equity-Linked Savings Scheme): The pre-tax maturity value is ₹80.12 lakhs, and after accounting for capital gains tax, the post-tax value is ₹ 73.86 Lakhs, resulting in an IRR of 10.62%.

The return from PPF is similar to the 8% scenario of the Canara HSBC Wealth Edge Plan, even though PPF is a debt instrument, it performs on par with a market-linked product. Meanwhile, ELSS significantly outperforms inflation, making it a superior investment strategy.

By separating insurance from investment, this approach enhances risk-adjusted returns, ensures better transparency, and provides greater flexibility—aspects that the Canara HSBC Wealth Edge Plan lacks.

The Canara HSBC Wealth Edge Plan comes in three variants: a standard ULIP, a waiver of premium option (in-built feature), and a whole-life policy.

While the plan provides an opportunity to invest in the market, a closer analysis reveals that its returns are relatively low compared to other market-linked investments.

Long-term investments are expected to deliver high returns to support wealth accumulation. However, despite being a long-term plan, the Canara HSBC Wealth Edge Plan struggles to outpace inflation due to its high charges. This could leave you financially short when your goals come due. Additionally, the plan’s sum assured is inadequate, making it an unattractive investment option and it also has a high agent commission.

For long-term wealth creation, it is best to avoid ULIPs, as there are more efficient equity investment options that offer higher, inflation-beating returns at a lower cost.

When it comes to life coverage, insurance and investment should be kept separate. A pure-term life insurance policy is the most effective way to secure your family’s financial future.

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For a personalized financial plan, consider consulting a Certified Financial Planner. Their expertise can help you build a structured investment strategy tailored to your financial goals, risk appetite, and investment horizon.