Good or Bad? An Insightful ULIP Review

Reliance Nippon Life Premier Wealth Insurance Plan is a Unit-Linked, Non-Participating, Individual Life Insurance Plan. The plan can be tailored to individual needs and keep up with the changing priorities over time.

Reliance Nippon Life Premier Wealth Insurance Plan plan allows you the flexibility to balance the protection and investment needs during its tenure, in an active or a systematic manner.

• Choose from flexible premium payment options: Single Pay, Limited Pay, or Regular Pay.
• Enjoy Wealth Boosters credited annually from the eighth policy year onwards.
• Access partial withdrawals to meet emergency fund needs after five policy years.
• Combine wealth management and value creation in a single plan.
• Switch seamlessly between active and auto-managed investment styles.
• Customize your insurance coverage level to suit your individual requirements.
• Avail tax benefits as per prevailing tax laws.

On survival of the Life Assured till the end of the Reliance Nippon Life Premier Wealth Insurance Plan Policy Term, total Fund Value which is the sum of Base Fund Value and Top-up Fund Value, will be payable.

You can receive the Maturity Benefit as a lump sum or as a structured payout using the Settlement Option.

In the unfortunate event of death of the Life Assured, while the Reliance Nippon Life Premier Wealth Insurance Plan Policy is in force, we will pay to the nominee the highest of:

• Base Sum Assured net of all “Deductible Partial Withdrawals”, if any; and
• Base Fund Value; and
• 105% of the total premiums paid (excluding Top-up premiums) less “Deductible Partial Withdrawals”, if any

In addition to this, provided the Reliance Nippon Life Premier Wealth Insurance Plan policyholder has a Top-up Fund Value, the highest of:

• Top-up Sum Assured; and
• Top-up Fund Value; and
• 105% of the Top-up premium paid

Wealth Boosters in the form of additional units will be added to your Reliance Nippon Life Premier Wealth Insurance Plan Policy every Policy year, starting from the end of the eighth policy year.

Each Wealth Booster will be a percentage of the average daily Fund Value in the preceding 12 months of the base plan in the same Policy year and will be 0.30% per annum for Regular/Limited Pay policies and 0.50% per annum for Single Pay policies.

Reliance Nippon Life Premier Wealth Insurance Plan offers you two investment strategies to manage your funds. At inception, you have to choose between a Self-Managed Option and an Auto-Managed Option.

i.) Self-Managed Option

This option enables you to manage your investments actively. Under this investment strategy, you manage your investments by choosing amongst the seven investment funds in proportions of your choice.

You have the option of switching amongst these funds and may choose premium redirection for your future premiums depending upon your changing risk appetite and market conditions. The details of the various investment funds are given in the table below:

ii.) Auto-Managed Option

Under the Auto-Managed Option, you can choose between the Target Maturity Option and the Life Stage Option. You can opt in or out of these options at any time during the Reliance Nippon Life Premier Wealth Insurance Plan Policy Term.

iii.) Target Maturity Option (Based on the outstanding term of the Policy)

Under this option, your investments will be allocated between Life Equity Fund 3 and Life Corporate Bond Fund 1.

During the first five Policy years, 100% of the allocation will be in Life Equity Fund 3.

From the sixth Policy year, any renewal premium or Top-up that you invest will be allocated between Life Equity Fund 3 and Life Corporate Bond Fund 1 based on the allocation schedule for that Policy year.

Allocation in Life Equity Fund 3 = (Outstanding Policy Term – 1) / (Policy Term – 5)

iv.) Life stage option

At the inception of your Reliance Nippon Life Premier Wealth Insurance Plan Policy, your investments will be distributed between two funds, Life Equity Fund 3 and Life Corporate Bond Fund 1, based on attained age.

As you move from one age band to another, the renewal premiums and top-up premiums will be allocated based on the attained age.

A. Premium Allocation Charges

The Premium Allocation Charge as a percentage of the premium will be deducted from the premium amount at the time of premium payment and the balance premium will be used to allocate units in the chosen investment fund/s thereafter.

B. Policy Administration Charges

The monthly Policy Administration Charges, for Regular/Limited Pay, will be deducted at a rate of ₹ 300, at the start of every Policy month.

Policy Administration Charges The monthly Policy Administration Charges, for Regular/Limited Pay, will be deducted at a rate of `300, at the start of every Policy month.

C. Mortality Charges

The Mortality Charges will vary depending on the amount of life insurance cover, attained age, occupation, health of the Life Assured and the Fund Value

D. Fund Management Charges (FMC)

E. Partial Withdrawal Charges

Two partial withdrawals in a Policy year are free. A partial withdrawal charge of ₹ 100 will be deducted from the fund withdrawn on every extra partial withdrawal.

F. Discontinuance Charges

The discontinuance charges depend on the year of discontinuance, premium amount, and premium paying term. There are no discontinuance charges from the 5^th policy year onwards.

G. Switching Charges

There are 52 free switches during any Policy year and 4 free switches per year during the settlement period. Subsequent switches if any will have a fixed charge of ₹ 100 per switch.

These expenses increase an investor’s overall costs and are not typically associated with other market-linked investment products. Over time, these charges can considerably erode your returns, impacting your wealth accumulation potential.

For Regular/Limited Pay Policy

Grace Period

There is a grace period of 30 days from the due date for payment of the premium. In the case of monthly frequency, the grace period is 15 days.

Discontinuance

Discontinuance of Policy during the first five Policy years i.e. during the Lock-in Period: If the due premium has not been paid within the grace period, the total fund value after deducting the applicable discontinuance charges, shall be credited to the Discontinued Policy Fund and the risk cover and rider benefits (if any) shall cease.

At the end of the fifth Policy year, the proceeds of the discontinuance fund shall be paid to the policyholder and the Policy shall terminate

Discontinuance of Policy after the first five Policy years i.e. after the Lock-in Period: If due premium has not been paid within the grace period, the Policy shall be converted into a reduced paid-up Policy with the paid-up Sum Assured.

Revival

The Reliance Nippon Life Premier Wealth Insurance Plan policyholder may revive the policy within the Revival Period of three consecutive complete years from the date of the first unpaid premium.

In the event you disagree with any of the policy terms or conditions, or otherwise and have not made any claim, you shall have the option to return the policy within 30 days beginning from the date of receipt of the policy document, whether received electronically or otherwise.

For Regular/Limited Pay Policy

During Lock-in Period: You have the option to surrender the Reliance Nippon Life Premier Wealth Insurance Plan Policy anytime and you will be entitled to the Discontinued Policy Fund Value at the end of the fifth Policy year or the date of surrender whichever is later, and the Policy will be terminated

After Lock-in Period: The Reliance Nippon Life Premier Wealth Insurance Plan policyholder has the option to surrender the Policy anytime during the revival period and the fund value shall be payable and the Policy will terminate.

For Single Pay Policy

On surrender of the Policy during the first five Policy years, the Total Fund Value (i.e. Base Fund Value plus Top-up Fund Value), if any, after deduction of applicable Discontinuance Charge, shall be transferred to the Discontinued Policy Fund and risk cover and rider cover, if any, shall cease.

The proceeds from the Discontinued Policy Fund will be payable to you at the end of the fifth Policy year or on the date of surrender whichever is later.

On surrender after completion of the fifth Policy year, you will be entitled to the Fund Value including Top-up Fund Value, if any.

• This plan does not provide a loan facility.
• Liquidity is limited during the initial five policy years.
• Premiums are invested after deducting applicable charges.

After reviewing the plan’s features, it’s essential to assess its performance. Estimating potential returns helps compare this plan with other investment options. Let’s calculate the Internal Rate of Return (IRR) based on figures from the policy brochure.

A 35-year-old male purchases the Reliance Nippon Life Premier Wealth Insurance Plan with a sum assured of ₹25 lakhs.

The policy term and premium payment term are both 20 years, with an annual premium of ₹2.5 lakhs.

Upon regular premium payments, the maturity benefit will be the fund value. The illustrations provided assume two potential rates of return: 4% p.a. and 8% p.a. These rates are indicative and not guaranteed, nor do they define the upper or lower limits of returns.

At a 4% return scenario: The fund value is ₹63.42 lakhs, yielding an IRR of 2.21% as per the Reliance Nippon Life Premier Wealth Insurance Plan maturity calculator, effectively offering no real value addition.

At an 8% return scenario: The fund value rises to ₹99.32 lakhs, with an IRR of 6.16% as per the Reliance Nippon Life Premier Wealth Insurance Plan maturity calculator.

The returns from the Reliance Nippon Life Premier Wealth Insurance Plan fall short when compared to other market-linked investments.

While the plan carries significant risk, its returns are comparable to low-risk debt instruments, making the risk unjustifiable.

This mismatch in risk and return undermines the plan’s value, making it an unsuitable choice for achieving financial goals. Investing in the Reliance Nippon Life Premier Wealth Insurance Plan could disrupt your financial strategy rather than support it.

The Reliance Nippon Life Premier Wealth Insurance Plan falls short in supporting long-term wealth accumulation and offers a relatively low sum assured.

For comprehensive financial security and substantial wealth creation, a strategy separating insurance and investment is more effective. Let’s compare the returns of such an approach using the same example.

A pure-term life insurance policy with a sum assured of ₹25 lakhs costs ₹13,200 annually for a 20-year term. By contrast, the Reliance Nippon Life Premier Wealth Insurance Plan requires an annual premium of ₹2.5 lakhs.

Opting for the term insurance policy saves ₹2,36,800 annually, which can be invested to grow your wealth.

Investment options should align with your risk appetite. Low-risk investors can choose debt instruments like PPF. High-risk investors may opt for equity instruments like ELSS. Here, we have considered both.

PPF Investment

Though the annual PPF investment limit is ₹1.5 lakhs, this example assumes the full surplus is invested (negligible, as it is for illustrative purposes).

Over 20 years, the pre-tax maturity value is ₹1.05 crore, with an IRR of 6.64%. This matches the returns from the 8% scenario of the Reliance Nippon Life Premier Wealth Insurance Plan, despite PPF being a low-risk debt instrument.

ELSS Investment

Investing the annual surplus in ELSS results in a pre-tax value of ₹1.91 crore. After accounting for capital gains tax, the maturity value is ₹1.73 crore, with a post-tax IRR of 10.78%.

This strategy provides a significantly larger corpus, outperforming inflation and better-supporting life goals. By separating insurance and investment, each component delivers optimal results.

Final Verdict on the Reliance Nippon Life Premier Wealth Insurance Plan

The Reliance Nippon Life Premier Wealth Insurance Plan aims to combine market-linked savings with life insurance coverage.

However, it struggles to deliver effectively on both fronts. Return analysis indicates that the plan rarely generates the corpus needed to meet life goals, primarily due to high charges that diminish the investment amount and negatively impact returns.

The insurance coverage offered is insufficient, failing to provide a robust safety net for unexpected events and it also has a high agent commission.

Effective financial planning requires both adequate protection and substantial wealth accumulation, which Reliance Nippon Life Premier Wealth Insurance Plan does not achieve. As a result, it falls short on all fronts, making it an unworthy choice for the associated risks.

A more effective approach involves choosing a pure-term life insurance policy for comprehensive coverage and building a diversified investment portfolio to achieve wealth accumulation.

This strategy eliminates the drawbacks of combining insurance and investment, providing a clearer path to fulfilling your financial goals and aspirations.

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Before committing to any financial product, thoroughly assess its suitability. For personalized guidance, consult a Certified Financial Planner to create a resilient investment portfolio tailored to your risk tolerance, time horizon, and life objectives.