Good or Bad? An Insightful Review

Aviva Signature Increasing Income Plan is a Non-Linked Non-Participating Individual Life Insurance Savings Plan. It is a post-retirement plan that provides you with a Guaranteed Increasing tax–free monthly income.

The income keeps growing by 15% every 3 years and financially covers you till 100 years of age by providing a return of 105% of Total Premiums.

• Provides life insurance coverage to ensure your family’s financial security.
• Offers guaranteed monthly income that increases every three policy anniversaries, continuing until 100 years of age.
• Ensures the claimant receives income as per the scheduled payout in case of the life assured’s demise during the premium payment term.
• Returns 105% of the total premiums paid at the end of the payout period.
• Allows optional riders to enhance protection.
• Includes tax benefits as per prevailing tax laws.
• Offers a loan facility for added financial flexibility.

On survival, the Life Insured will start getting Guaranteed Monthly Income from the Maturity Date and thereafter payable at each monthly Policy anniversary during the Payout Period. This would increase by a simple interest of 15% every 3^rd anniversary of the Payout Period.

In addition, Life Insured will also get 105% of Total Premiums Paid along with the last payout of the Guaranteed Monthly Income.

The Maturity Benefit would be payable to the Nominee irrespective of whether the Life Assured is surviving or not during the Payout Period.

In case of unfortunate demise of the Life Assured during the Aviva Signature Increasing Income Plan Policy Term, the Nominee(s) shall receive higher of the following benefits immediately based on the Death Benefit option chosen at inception.

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

In addition to the above, a Guaranteed Monthly Income shall be paid during the Payout Period to the Nominee. The first Monthly Guaranteed Income shall start from the Maturity Date.

Inference from the benefits

• You can opt to receive a lump sum of future income benefits at a discounted rate, but deferring the income benefit during the payout period is not allowed.
• The income benefit is available only in the monthly payout mode.
• Life coverage is not provided during the income payout period.

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.

Revival

The 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 Aviva Signature Increasing Income Plan 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.

• Enjoy a guaranteed monthly income up to the age of 100.
• Avail a loan of up to 80% of the policy’s surrender value.
• Switch between monthly, quarterly, half-yearly, and yearly premium payment options at any policy anniversary without any charges.
• Benefit from an increase in income every three years.
• The maturity benefit is payable to the claimant, regardless of whether the life insured is alive during the payout period.

• The life cover offered is inadequate and does not extend into the income payout period.
• Income payouts may encourage unplanned spending.
• The overall returns are relatively low compared to other investment options.
• The inability to defer income benefits may not suit your financial requirements.
• Monthly withdrawals hinder the compounding growth potential of your investments.

The Aviva Signature Increasing Income Plan provides annual cash payouts that grow over time. At the end of the income payout period, a lump sum maturity benefit equal to 105% of the total premiums paid is provided.

However, guaranteed cash flow alone should not drive your investment decision; returns play a crucial role. Let’s analyse a quote and calculate the Internal Rate of Return (IRR).

A 25-year-old male opts for the plan with a base sum assured of ₹8.80 Lakhs (death benefit: ₹23.52 Lakhs).

The premium payment term is 28 years, followed by a 7-year deferment period, making the total policy term 35 years. He pays an annual premium of ₹80,000.

After completing the premium payment and deferment periods, income benefits commence, starting at ₹2.61 Lakhs and increasing every three years.

Additionally, a maturity benefit of ₹23.52 Lakhs (105% of the total premium) is paid at the end of the income payout period. The IRR for this cash flow is calculated to be 5.36% as per the Aviva Signature Increasing Income Plan maturity calculator.

While the plan offers guaranteed, regular payouts, the extended waiting period of 35 years to start receiving benefits significantly reduces their value when adjusted for inflation.

By the time the income benefits begin, they amount to a relatively small sum in real terms, considering rising living costs.

Though the Aviva Signature Increasing Income Plan ensures regular payouts and life coverage over the long term, its returns fall short of the inflation rate.

The annual payouts may be insufficient for major expenses, and with no option to defer benefits, it might lead to unnecessary spending. Additionally, the life cover is inadequate to meet a family’s long-term financial needs.

The income payout period begins at age 60 and continues for 40 years, irrespective of the survival of the life insured.

While the plan provides guaranteed benefits, the combination of low returns, insufficient life coverage, and lack of flexibility makes it unsuitable for achieving long-term financial goals.

The Aviva Signature Increasing Income Plan highlights its increasing income and life coverage throughout the policy term.

However, by separating insurance and investment, you can achieve similar benefits with potentially higher returns. Let’s explore an alternative strategy using the same parameters from the previous example.

Consider a pure-term life insurance policy with a sum assured of ₹25 Lakhs. This policy requires an annual premium of ₹21,600 for a 10-year premium payment term and a policy term of 35 years.

This leaves ₹58,400 annually available for investments, which can be allocated based on your risk appetite. For the first 10 years, after paying the insurance premium, the surplus is invested. In the next 18 years, the entire ₹80,000 is directed toward investments.

For low-risk investors, instruments like the Public Provident Fund (PPF) could be an option, while high-risk investors might consider equity-based options like Equity-Linked Savings Schemes (ELSS). In this example, the funds are assumed to be invested in an ELSS fund.

To create a stream of regular cash withdrawals, the accumulated ELSS corpus can later be transferred to an instrument offering a 7% annual return. The final investment value is structured to match the maturity benefit of the Aviva Signature Increasing Income Plan.

At maturity, the ELSS fund’s pre-tax value is ₹3.05 crores, and the post-tax value is ₹2.70 crores. This corpus is then invested in a 7% return instrument, generating regular withdrawals.

Following a withdrawal pattern similar to the Aviva plan, the final value of the investments grows to ₹29.91 crores. The combined post-tax IRR for this strategy—combining pure-term life insurance and ELSS investments—is 8.63%.

This approach provides returns that outpace inflation, and avoiding periodic withdrawals can further enhance growth.

When planning for life goals, separating insurance and investment typically yields superior financial outcomes compared to traditional life insurance policies.

The Aviva Signature Increasing Income Plan offers guaranteed rising income and family protection, but it has notable drawbacks.

The life coverage does not extend into the income payout period, and while the guaranteed income feature might appeal to those seeking regular cash flow, its returns are lower than even basic debt instruments.

The increasing income benefits are insufficient to cover major expenses and could lead to unnecessary spending. Furthermore, the sum assured falls short of meeting future financial needs and it also has a high agent commission.

By combining insurance and investment, the Aviva Signature Increasing Income Plan underperforms in both areas.

As a long-term investment, this plan fails to meet the expectations of most investors. For those seeking regular income, it is more effective to invest separately rather than depend on cash payouts from a life insurance policy.

At the same time, protecting your family against unforeseen risks is crucial, and a pure-term life insurance policy is the most reliable option for life coverage.

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To achieve your financial goals, focus on building an investment portfolio tailored to your risk tolerance, life objectives, and time horizon. Consulting a Certified Financial Planner can provide valuable guidance and help you create a personalized financial plan for a secure future.