Recently a friend of mine asked me whether he should choose to invest in a Mutual Fund or this ULIP named Bajaj Allianz Future Gain. The ULIP salesman have apparently been pestering him a lot to invest in that scheme while I had strongly suggested him to not go with any ULIP at all. In my books ULIPs have a blanket ban. My friend Prabhakar Kudva and Dhirendra Kumar of valueresearchonline.com have given me enough information to realize that combining investment and insurance is not a good idea and ULIPs in India are definitely very bad investment options for almost all.

valueresearchonline.com had been a regular critic of ULIPs back in 2000s when ULIPs had a free run without any check. In those days ULIPs charged insane charges like 25% to 30% and have literally scammed investors. After a lot of noise was made about this, IRDA finally woke up and put in some nominal rules to regulate this kind of practice. It however left a huge holes in the policy for these insurance companies to exploit. Insurance companies are not so closely watched as the Mutual Fund companies are watched by SEBI and transparency requirements are also lower for insurance companies. As a result ULIPs become very risky options for investors because of the exploitation possibility.

Anyways that was the history. Despite all this gyaan, my friend however wanted me to take a specific look at this particular ULIP - Bajaj Allianz Future Gain.

So I tried to do a quantitative analysis of the same to demonstrate how bad an investment option it is.

NOTE : Professionally I am an engineer and finance is just a hobby for me. So calculations below are as per my understanding and hence should not be taken as serious financial advise.

Bajan Allianz Future Gain plan facts (Source : http://www.bajajallianz.com/Corp/content/endowment/future-gain-web.pdf)

Minimum premium : 25,000/- Yearly

Minimum sum assured : 2,50,000/- (10 * annual premium)

Minimum Policy term : 10 years

Minimum Premium paying term : 5 years

Lock in period : 5 years

Premium allocation charge :

1st year : 5.5.% of Annual premium = 1,375/-

2nd - 5th year : 3.75% of Annual premium = 937.5/- per year. (3,750/- for 4 years)

Average yearly charge = (1375 + 3750) / 5 = 1025

Yearly charges so far = 1,025/-

Policy administration charge :

33.33/- per month increasing at 5% p.a. every month

Assuming this 5% is compunded every month at the end of 5 years this value will be 42.77.

So for the sake of simplification let us take the average of starting and ending value as the monthly dedudction

Average monthly dedudction = (33.33 + 42.77) / 2 = 38.05 =~ 38/-

Yearly policy administration charges = 38 * 12 = 456/-

Yearly charges so far = 1,481/

Mortality charge :

For a person aged 30, charge = 1.34 per thousand sum at risk (Deducted at monthly anniversary a.k.a every month)

Sum at risk = Maximum of [death benefit – regular premium fund value - top up premium fund value, zero]

Death benefit = 2,50,500/-

Regular Premium Fund value will keep changing depending the fund performance.

At beginning for first year = (First premium - charges) = 25,000 - 1481 = 23,519

So sum at risk = 2,50,000 - 23,519 = 226481/-

Mortality charge = 227 * 1.34 = 304

Yearly charges so far = 1,785/-

NOTE : The mortality charges will decrease as you pay more premium and also as the fund gains more value. But to keep things simple taking an average value is acceptable for this calculation and to illustrate the point that ULIPs are not really good options.

So for a yearly premium of 1,785/- you get a life cover of 2,50,000/- for 5 years (assuming you do not want to pay a premium after the mandatory 5 years)

Now consider the Anmol Jeevan - II (822) term plan from LIC.

For a yearly premium of 1,617/- you get a life cover of 7,00,000/- for 5 years (Source : https://www.licindia.in/premium_calculator.htm)

So wouldn't it make sense to separate out investment and insurance? For insurance take a plain term plan and for investment choose a decent ELSS scheme. This way your investment will perform much better and you will also have a much better insurance life cover.

valueresearchonline.com had been a regular critic of ULIPs back in 2000s when ULIPs had a free run without any check. In those days ULIPs charged insane charges like 25% to 30% and have literally scammed investors. After a lot of noise was made about this, IRDA finally woke up and put in some nominal rules to regulate this kind of practice. It however left a huge holes in the policy for these insurance companies to exploit. Insurance companies are not so closely watched as the Mutual Fund companies are watched by SEBI and transparency requirements are also lower for insurance companies. As a result ULIPs become very risky options for investors because of the exploitation possibility.

Anyways that was the history. Despite all this gyaan, my friend however wanted me to take a specific look at this particular ULIP - Bajaj Allianz Future Gain.

So I tried to do a quantitative analysis of the same to demonstrate how bad an investment option it is.

NOTE : Professionally I am an engineer and finance is just a hobby for me. So calculations below are as per my understanding and hence should not be taken as serious financial advise.

Bajan Allianz Future Gain plan facts (Source : http://www.bajajallianz.com/Corp/content/endowment/future-gain-web.pdf)

Minimum premium : 25,000/- Yearly

Minimum sum assured : 2,50,000/- (10 * annual premium)

Minimum Policy term : 10 years

Minimum Premium paying term : 5 years

Lock in period : 5 years

Premium allocation charge :

1st year : 5.5.% of Annual premium = 1,375/-

2nd - 5th year : 3.75% of Annual premium = 937.5/- per year. (3,750/- for 4 years)

Average yearly charge = (1375 + 3750) / 5 = 1025

Yearly charges so far = 1,025/-

Policy administration charge :

33.33/- per month increasing at 5% p.a. every month

Assuming this 5% is compunded every month at the end of 5 years this value will be 42.77.

So for the sake of simplification let us take the average of starting and ending value as the monthly dedudction

Average monthly dedudction = (33.33 + 42.77) / 2 = 38.05 =~ 38/-

Yearly policy administration charges = 38 * 12 = 456/-

Yearly charges so far = 1,481/

Mortality charge :

For a person aged 30, charge = 1.34 per thousand sum at risk (Deducted at monthly anniversary a.k.a every month)

Sum at risk = Maximum of [death benefit – regular premium fund value - top up premium fund value, zero]

Death benefit = 2,50,500/-

Regular Premium Fund value will keep changing depending the fund performance.

At beginning for first year = (First premium - charges) = 25,000 - 1481 = 23,519

So sum at risk = 2,50,000 - 23,519 = 226481/-

Mortality charge = 227 * 1.34 = 304

Yearly charges so far = 1,785/-

NOTE : The mortality charges will decrease as you pay more premium and also as the fund gains more value. But to keep things simple taking an average value is acceptable for this calculation and to illustrate the point that ULIPs are not really good options.

So for a yearly premium of 1,785/- you get a life cover of 2,50,000/- for 5 years (assuming you do not want to pay a premium after the mandatory 5 years)

Now consider the Anmol Jeevan - II (822) term plan from LIC.

For a yearly premium of 1,617/- you get a life cover of 7,00,000/- for 5 years (Source : https://www.licindia.in/premium_calculator.htm)

So wouldn't it make sense to separate out investment and insurance? For insurance take a plain term plan and for investment choose a decent ELSS scheme. This way your investment will perform much better and you will also have a much better insurance life cover.

insurance for safety

ReplyDeletemore info.....

life insurance

Bajaj Allianz ULIP plans offer the flexibility of market linked returns on your investments and life insurance cover for you and your family.visit to know more: https://www.bajajallianz.com/Corp/ulip-plans/ulip.jsp

Delete

ReplyDeleteDear Layman , Future Gain of Bajaj Allianz is a ULIP and much better then ELSS Mutual Funds , If you invest 1 lac or more . It is Best and Cheaper then any equity Mutual Scheme of any M F if you invest 2 lac or more on yearly bases for 5 years . After my 19 Years experience in financial market it is Highly recommended from my side for the investment in Future Gain. As Layman you can say any thing but as a expert I challenge you , Prabhakar Kudva and Dhirendra Kumar of valueresearchonline.com for the result of your Gyaan. For Any doubt Call after SMS @ 9256312560,9815522255

Anuradha Marwaha

This comment has been removed by the author.

DeleteGreat Mam , keep it up.

DeleteGood mam........

DeleteGood mam........

DeleteI have put in my calculations to show it is not good. If you say it is good, you can put in your calculations. Then we can talk.

DeleteMr. Brahmana ji, Future Gain of Bajaj Allianz is a best investment plan and it is cheaper then Mutual fund schemes.The returns are double + as compare Index in 3 and 5 years. Please mail or call with your Age ( DOB) then I can advice you for how it is best . Thanks and Regards Anuradha 09256312560 anug69@yahoo.com

DeleteOK What is your age also inform investment 1 lac+ or 2 lac+ please mail anug69@yahoo.com marwahapathankot@gmail.com

ReplyDeleteThank you for sharing such great information. It is informative, can you help me in finding out more detail on ULIP, i am interested and would like to know more about this field and wanted to understand the basics of ulip insurance policy

ReplyDeleteYes It is my pleasure . Future Gain of Bajaj Allianz is a best investment plan and it is cheaper then Mutual fund schemes. Please mail or call with your Age ( DOB) then I can advice you for how it is best. Thanks and Regards Anuradha 09256312560 anug69@yahoo.com

DeleteAnuradha, I want to invest Rs. 10k per month, my age is 45. Kindly suggest

ReplyDeleteAnuradha, I want to invest Rs. 10k per month, my age is 45. Kindly suggest

ReplyDeleteMy age is 36 n want to invest 60k suggest me best return plan

ReplyDelete9871661632

My age is 36 n want to invest 60k suggest me best return plan

ReplyDelete9871661632

What about the service tax on premium?

ReplyDeleteThe Bajaj Allianz Future Gain Doc says, 'Service Tax As applicable on all Charges mentioned above'

How is it more superior than Click2Invest of HDFC? Also, the returns are far more lower than compared to the top performing MF schemes. The persons highlight the lower cost, but they hide the lower performance. To save few % on cost side, you are also losing more % on revenue side.

ReplyDeleteSorry for late response if you want to invest in Future Gain before 31st March 2017 please send a SMS / What's app @ 9256312560 I am in Delhi from Sunday morning.

ReplyDeleteSorry for late response if you want to invest in Future Gain before 31st March 2017 please send a SMS / What's app @ 9256312560 I am in Delhi from Sunday morning.

ReplyDeleteThank you for sharing such great information.It is informative, can you help me in finding out more detail onUlip Plan Comparison

ReplyDeleteMam I buy a bajaj future gain policy 10000/month mar'17 it will continue or surrender. I am confused pls help 9734064908.

ReplyDeleteThank you for sharing such great information.It is informative,can you help me in finding out more detail onBest Investment Plans,i am interested and would like to know more about this field and wanted to understand the basics of Term Insurance Policy

ReplyDeleteI have bought Bajaj Allianz, 36000 annually for 20 years. My Maturity amount is 45,47000. I am just doubtful will this company really return me this sum of amount. Are there any hidden things where they can exploit me in future? Please give your valuable advise.

ReplyDelete