Good or Bad? An Insightful ULIP Review

Bajaj Allianz Life Fortune Gain II is a Unit-linked Non-Participating Individual Life Savings Insurance Plan.

Bajaj Allianz Life Fortune Gain II Plan is a Single Premium Savings Plan and provides maximum Premium allocation to funds. Your valuable money is fully utilized towards building you a fortune.

• Premium allocation of up to 99.5% for single premiums of ₹10 lakh and above.
• Loyalty additions of up to 5.6% of the single premium, based on the premium amount and chosen policy term.
• Access to a selection of 11 funds for investment.
• Flexibility to make partial withdrawals from the invested funds.
• Option to enhance coverage with top-up premiums.
• Facility to reduce the sum assured if required.
• Systematic switching option for fund management.
• Flexibility to receive death and maturity benefits in instalments through the settlement option.

Under Bajaj Allianz Life Fortune Gain II, the maturity benefit will be the Single Premium Fund Value plus Top-Up Premium Fund Value, if any, both as on the maturity date, provided the Bajaj Allianz Life Fortune Gain II Plan policy is in force.

It will be payable on the survival of the life assured to the maturity date.

The death benefit payable to the nominee as a lump sum (subject to the Guaranteed Death Benefit) is:

The higher of,

The Prevailing Sum Assured % or Single Premium Fund Value

PLUS

The higher of,

Top-Up Premium Sum Assured or Top-Up Premium Fund Value, if any

The loyalty addition, expressed as a percentage of the Single Premium, will be added to the Single Premium Fund Value at the maturity date of your Bajaj Allianz Life Fortune Gain II Plan policy.

Investor selectable Portfolio Strategy: You can choose from among the eleven funds below to suit your investment needs.

A. Premium Allocation Charge

B. Policy Administration Charge (PAC)

₹ 10 per month inflating every month at 5% per annum every month, subject to a maximum of ₹ 500 per month in any year.

C. Fund Management Charge (FMC)

D. Miscellaneous Charge

A miscellaneous charge of Rs. 100 per transaction will be charged.

E. Discontinuance /Surrender Charge

It depends on the Annual premium amount and the year of discontinuance or surrender. There is no Discontinuance /Surrender Charge from the 5^th policy year.

F. Switching charge

NIL

G. Mortality Charge

Mortality Charges will be deducted at each monthly anniversary by the cancellation of units. Female Life Assured will be eligible for an age setback of 3 years.

On surrender during the lock-in period of the first five years, the Single Premium Fund Value, less the discontinuance/surrender charge plus the top-up premium Fund Value, if any, as on the date of surrender, will be transferred to the discontinued life Policy fund, and life cover shall cease immediately.

The discontinuance value at the end of the lock-in period will be available to you as surrender value.

On surrender after the lock-in period of the first five years, the surrender value available will be Single Premium Fund Value plus top-up premium Fund Value, if any, as on the date of surrender.

• The Bajaj Allianz Life Fortune Gain II Plan lacks liquidity during the initial five policy years.
• There is no loan facility available under this Bajaj Allianz Life Fortune Gain II Plan.
• The sum assured may be insufficient to adequately meet the fundamental needs of a family.

In this section, we will evaluate the potential returns of the Bajaj Allianz Life Fortune Gain II plan.

By calculating the Internal Rate of Return (IRR), we can analyse the plan’s performance and compare it with other market-linked products. Let’s calculate the IRR based on the benefit illustration provided in the Bajaj Allianz Life Fortune Gain II Plan policy brochure.

Consider a 35-year-old male who opts for the Bajaj Allianz Life Fortune Gain II plan with a policy term of 24 years. He pays a single premium of ₹2,00,000 and selects a sum assured of ₹8,00,000.

At the end of the 24-year policy term, he receives the fund value as his benefit. The projected returns at 4% and 8% are purely illustrative, non-guaranteed, and do not represent the upper or lower limits of returns under the policy.

At a 4% return: The fund value is ₹2.31 lakh, with an IRR of just 0.60% as per the Bajaj Allianz Life Fortune Gain II Plan maturity calculator, indicating negligible value addition.

At an 8% return: The fund value rises to ₹7.51 lakh, with an IRR of 5.67% as per the Bajaj Allianz Life Fortune Gain II Plan maturity calculator, which is lower than the interest rates offered by many debt instruments.

Despite being a long-term investment with a 24-year horizon, the returns fail to outpace inflation. The IRR analysis shows that Bajaj Allianz Life Fortune Gain II provides limited real returns, which can significantly hinder your wealth accumulation goals.

Let’s now compare the potential returns of Bajaj Allianz Life Fortune Gain II with alternative investment options. Using the same parameters as outlined in the benefit illustration, it’s essential to choose investments that consistently outperform inflation over the long term.

A pure-term life insurance plan offering a sum assured of ₹8 lakhs can be purchased for a single premium of ₹61,400 with a 24-year policy term. This leaves ₹1.38 lakh available for investment in other financial instruments.

For this analysis, we’ve selected an Equity Linked Savings Scheme (ELSS) fund, a market-linked investment option. The investment grows to ₹21.03 lakh (pre-tax) over 24 years.

After deducting capital gains tax, the post-tax value is ₹18.73 lakh. The combined IRR for the pure-term insurance and ELSS investment is 9.77%.

This alternative strategy results in a significantly larger corpus and superior returns compared to the Bajaj Allianz Life Fortune Gain II plan.

Investing separately in insurance and investment products not only provides better returns but also offers greater flexibility and liquidity. In contrast, combining insurance and investment in a plan like Fortune Gain II yields lower returns and restricts liquidity.

Bajaj Allianz Life Fortune Gain II offers market-linked investment opportunities, but its returns are underwhelming due to high charges. Moreover, the sum assured is inadequate to meet the long-term financial needs of a family.

A market-linked product delivering returns comparable to a debt instrument does not benefit investors, as the risk-return balance under this plan is misaligned.

Consequently, the Bajaj Allianz Life Fortune Gain II plan provides no significant advantages and may jeopardize future financial plans and it also has a high agent commission.

It’s advisable to avoid insurance-cum-investment products and instead focus on building a diversified investment portfolio tailored to your financial goals.

Opting for a pure-term life insurance policy is a more practical choice, as it is cost-effective, provides adequate coverage, and can be customized to meet individual needs, ensuring peace of mind.

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Choosing the right investment products is essential for achieving your financial objectives. Consult a Certified Financial Planner to identify suitable options based on your risk tolerance and investment time horizon.