Good or Bad? An Insightful Review

Aviva Bharat Parivar Vikas Yojana is an Individual Non-Linked, Participating Life Insurance Plan.

On survival of the Life Insured till the Maturity Date, provided all due Premiums have been paid, the Maturity Sum Assured shall be payable along with Vested Simple Reversionary Bonuses and Terminal Bonus (if any).

• Provides life insurance coverage to ensure financial security for your family.
• Offers flexibility to select either the premium amount or the sum assured based on your convenience.
• Includes vested simple reversionary bonuses and a terminal bonus (if applicable), which are paid to the nominee along with the death benefit.
• Option to enhance protection with the Aviva Cancer Cardio Non-Linked Rider.
• Enjoy tax benefits as per prevailing tax laws.
• Allows access to a loan facility under the plan.

In case the Life Insured dies during the Aviva Bharat Parivar Vikas Yojana Policy Term, the highest of the following amounts shall be paid immediately as lumpsum.

• Death Sum Assured or,
• 105% of the Total Premiums Paid

Here Death sum assured depends on the chosen plan option

• Plan option A: 10 times the Annualized Premium
• Plan option B: same as the Maturity Sum Assured

In addition to the above, the Vested Simple Reversionary Bonuses and Terminal Bonus, if any, shall also be paid to the Nominee. Further, the Maturity Sum Assured shall also be paid to the Claimant on the Maturity Date without any bonuses

On survival of the Life Insured till the Maturity Date, the Maturity Sum Assured shall be payable along with Vested Simple Reversionary Bonuses and Terminal Bonus (if any). The Maturity Benefit cannot be less than 101% of the Total Premiums Paid.

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 Bharat Parivar Vikas Yojana 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 Bharat Parivar Vikas Yojana 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 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 Bharat Parivar Vikas Yojana 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 avail a loan against your policy, with a maximum limit of 80% of the surrender value.
• The plan offers bonuses, including vested simple reversionary bonuses and a terminal bonus.
• An in-built waiver of premium feature ensures maturity benefit is paid irrespective of the survival of the policyholder.

• 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.

The Aviva Bharat Parivar Vikas Yojana is a savings-cum-insurance plan that divides premiums between savings and insurance components.

To assess its investment potential, calculating the Internal Rate of Return (IRR) provides a clearer picture than simply analysing cash flows. Let’s evaluate the plan using a sample illustration.

A 35-year-old male opts for the Aviva Bharat Parivar Vikas Yojana with Plan Option A, a sum assured of ₹10 Lakh, a policy term of 20 years, and a premium payment term of 15 years.

The annual premium for this plan is ₹1 Lakh. At the end of the term, the maturity benefit includes Vested Simple Reversionary Bonuses and a Terminal Bonus.

Based on assumed future investment returns of 8% p.a. and 4% p.a. (keep in mind these rates are non-guaranteed), the following outcomes are observed:

At 4% return: The maturity value is ₹21.08 Lakhs, resulting in an IRR of 2.60% as per the Aviva Bharat Parivar Vikas Yojana maturity calculator, which is lower than the interest rate offered by a savings bank account.

At 8% return: The maturity value is ₹30.11 Lakhs, yielding an IRR of 5.31% as per the Aviva Bharat Parivar Vikas Yojana maturity calculator, which is still lower than the returns from a bank fixed deposit.

These returns are modest, making the investment aspect of the plan inadequate for achieving significant financial goals.

Furthermore, the life insurance coverage offered under the Aviva Bharat Parivar Vikas Yojana is insufficient to meet a family’s future needs.

In summary, both the insurance and investment features of the Aviva Bharat Parivar Vikas Yojana fall short of being a favourable option for investors.

The potential returns from the Aviva Bharat Parivar Vikas Yojana fail to outpace inflation.

Let’s explore an alternative approach using similar parameters as the previous illustration but with separate insurance and investment components to assess the potential returns.

Pure-term policies provide extensive coverage at a lower cost, freeing up funds for investment in higher-yielding instruments aligned with your risk appetite.

For example, a pure-term policy with a sum assured of ₹10 Lakhs has an annual premium of ₹8,700 for a policy term of 20 years and a premium payment term of 10 years.

In this scenario, the premium payment term for the pure-term policy is shorter (10 years) compared to the 15 years in the previous example.

This allows for greater savings over time. In the first 10 years, after paying the insurance premium, the remaining amount is invested. For the subsequent 5 years, the entire ₹1 Lakh is available for investment.

Investment options are chosen based on personal risk preferences:

Risk-averse investors: opt for debt instruments like PPF. Assuming this route, the final maturity value in PPF is ₹35.64 Lakhs, with an IRR of 6.58%.

High-risk investors: opt for equity-based instruments like ELSS. Assuming this choice, the final pre-tax maturity value is ₹68.27 Lakhs, while the post-tax value (after capital gains tax) is ₹61.66 Lakhs, yielding a post-tax IRR of 10.68%. Detailed tax calculations are provided below.

This comparison underscores the benefits of separating insurance and investment. By adopting this approach, you can achieve your financial goals more effectively, benefiting from superior returns and greater liquidity compared to the Aviva Bharat Parivar Vikas Yojana.

The Aviva Bharat Parivar Vikas Yojana is a participating limited-pay endowment plan designed to provide financial protection for your family.

However, the maturity benefit offered is insufficient to build a substantial corpus. Since the benefits rely on bonus declarations, achieving your life goals becomes uncertain. Additionally, the sum assured under this plan is too low to meet your family’s future basic needs.

The combined maturity benefit and bonuses are unlikely to keep pace with rising inflation, making it inadequate for long-term goals and it also has a high agent commission.

Selecting financial products that deliver returns exceeding the inflation rate is essential for building lasting wealth. Investing in the Aviva Bharat Parivar Vikas Yojana may impede your journey to financial success.

For life insurance, a pure-term policy offers comprehensive coverage at a lower premium, ensuring better financial security. By opting for a term plan, you can allocate the savings toward investment products tailored to your goals.

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Choose investments based on your risk appetite, financial objectives, and time horizon. For personalized advice on insurance and investments, consider consulting a Certified Financial Planner who can help design a strategy that aligns with your unique needs and aspirations.