SBI Life – Smart Income Protect Review

by Manshu on December 1, 2012

in Insurance

SBI Life Insurance has come out with a new traditional participating plan called SBI Life – Smart Income Protect. Under this plan, you pay a certain premium for 5, 10 or 15 years, and after that the plan pays you a guaranteed amount every year for the next 15 years. You can also choose to get a lumpsum paid at maturity. There is an insurance component to the plan as well.

Returns of SBI Life Smart Income Protect

The returns of this plan are divided into two parts – the guaranteed part and the non guaranteed part.

Let’s look at the guaranteed returns from this plan first. You get 11% of the sum assured every year for 15 years after you have paid for 5, 10 or 15 years based on which plan you choose.

The Smart Income Protect plan page has a very helpful calculator that allows you to input your details and shows you how much your premium is expected to be. The payout is of course 11% of the sum assured so that part doesn’t change.

The non guaranteed part is the sum that you will get as lumpsum based on the discretion of the company, and based on how much profits they have themselves generated. The benefit illustration shows this at 6% or 10%, which is the standard number all insurers pick to show these type of calculations.

I put in some details to calculate premium and payout for a 29 year old who takes the policy without any riders and got the following details. (Click to enlarge)

SBI Life Smart Income Protect

 

I have created this spreadsheet for calculating the return on this policy and it shows that if you only consider the guaranteed returns then the IRR of this policy is 2.3%, if you consider the bonus they have shown at 6% then your IRR is 4.01% and if you consider the bonus at 10% then your IRR is 5.30%.

The one thing to note about this IRR calculation is that I have included the value of service tax in the cash outflow as well, and that may change to a higher or lower rate in the term of your policy.

Insurance Component of Smart Income Protect

The plan offers life insurance and then you have the option to choose up to four of the following riders:

  1. SBI Life – Accidental Death benefit rider (UIN: 111B015V01)
  2. SBI Life – Accidental Total & Permanent Disability benefit rider (UIN: 111B016V01)
  3. SBI Life – Criti Care 13 Non Linked Rider (UIN: 111B025V01)
  4. SBI Life – Preferred Term Rider (UIN 111B014V01)

You have to remember that any such plan will at best partly fulfill your insurance needs, and if you want to really insure yourself then the term plan is the best way to go where you can get a large amount insured with relatively lower premiums.

If you have a term plan, then these type of plans will help you supplement that insurance but on their own, this won’t fully take care of your insurance needs. Other than that, this looks like a fairly standard offer for these type of plans.

Tax Benefits Under Smart Income Protect

The most important tax benefit is under Section 80C, where the premium can qualify for tax deduction within the overall 80C limit. If you choose the Criti Care 13 Rider then that’s eligible for tax deduction under section 80(D).

In the last budget they put in a condition that if the premium exceeds 10% of the sum assured in any year then the premium won’t be eligible for 80C deduction.

The way this plays out in these type of policies is that if you choose a term of 15 years then the premium will be less than 10% of the sum assured but then if you chose a period of 5 years then it will certainly be higher than 10% of the sum assured. I think the 10 year range is somewhere in between but this is something you have to keep in mind if you want the tax benefit.

Look at what the premium is and if it’s greater than one tenth of the sum assured then you aren’t eligible for the 80C deduction.

Now, should you opt for a higher term just because of this reason? That’s a lot harder to answer and you have to also consider that there are so many other things you can buy that will be eligible for 80C deduction that this question could just become irrelevant.

Surrender Value of Smart Income Protect


The surrender value ties in nicely to the question of the term of plan because you really stand to lose a lot if you surrender the plan, and that’s true for all plans in general, and for that reason if you’re making a long term commitment you should be ready to go through it.

In the case of this plan, if you surrender before the lapse of the first two years then you don’t get anything back, and if you surrender after that then you get 30% of the premiums paid excluding the premium paid in the first year so you can see for yourself how much you stand to lose if you surrender the plan. The surrender value doesn’t consider the rider premiums. This is the guaranteed surrender value and then there is a non guaranteed surrender value which is calculated based on factors like demographics and product performance, but I think it’s safe to say that you should expect to lose a lot if you’re not able to go through the term of the policy.

Rebates under Smart Income Protect

There are certain rebates available if you insure over a certain amount as shown in this table.

SBI Life Smart Income Protect Rebate

I think this covers all the main aspects of the policy that I could think of and if you have any questions or think that I’ve left something out then please leave a comment.

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{ 14 comments… read them below or add one }

anna December 7, 2012 at 12:41 am

Hi Manshu,

Tht was a good review. So do i, a 33 yr old, having a term plan, Endowment plans, a child ULIP & investing in Equity MF’s really need this plan??
I am told IRR as 7%, equivalent to a FD giving 10% pa.

Reply

Manshu December 8, 2012 at 10:59 pm

Who told you an IRR of 7% is equal to a bank FD of 10%? That isn’t right, how are they calculating that?

Reply

anna December 9, 2012 at 11:31 pm

i dont really know hw are they calculating… But doesnt IRR mean actually percentage of returns?? anw, Wht do i do??

Reply

Manshu December 9, 2012 at 11:53 pm

You should have a good reason to invest in this and one product will not suit everyone, so that’s a personal decision. If you don’t have a good reason then stay away. Also, to say that this product is equal to a 10% SBI FD is wrong, and you should ask whoever told you this to explain it in detail next time.

Reply

anna December 10, 2012 at 2:36 pm

Thanks a lot Manshu..i am staying away !!!

Reply

Ashok Kumar February 16, 2013 at 3:38 pm

Hi,
Could you suggest me to bay smart income protect for 5y ,SBI executive told me ill get 11% /y of my sum assured after paid 5y premium till 15y and 2.15lakh after paid 5y premium . Is it correct?
Thanks
Ashok Kumar

Reply

Manshu February 17, 2013 at 5:37 pm

Yes, you will get 11% of your sum assured, but this is not the same thing as 11% return which is what I think you are equating it to. The return will be a lot less than 11% per year in the sense that you think of return on a fixed deposit etc.

Reply

Anju February 20, 2013 at 6:26 pm

Are SBI Smart Income Protect and Shubh Nivesh good to invest in ?

Reply

Manshu February 20, 2013 at 8:42 pm

It depends on what your goals are but if you are just looking for returns then you can possibly invest in other simpler products with similar or higher returns. What are you trying to do, what are your goals?

Reply

Govind March 20, 2013 at 3:37 pm

Hi,
Someone just contacted me for this plan and then i thought of exploring more into this policy.
This is what he has promised:
I am taking an yearly premium of 50,000/- for next 15 years
– Rebet on the premium amount is 25% (That means, i have to pay Rs 37,500/- every year but all the calculations will be done at a premium value of 50,000/-
– Life insurance 8 times of the premium amount i.e. 4 lacs and accidental death coverage is 16 times i.e. 8 lacs for 15 years
– At the end of 15 years, i will get whatever i have deposited i.e. 7,50,000/-
– At the end of 15 years, i will also get a bonus at the rate of 8% of the insured value (i.e. 8% X 4 lacs= 32,000/- per year that adds upto 4,80,000/-)
– Therefore at the end of 15 years of policy term i shall get 7.5 lacs + 4.8 Lacs = 12.3 lacs
– After 15 years, insurance (natural and accidental death coverage) will end
– from 16 years onwards for next 15 years, i shall start getting a assured income of 11% of the insurance cover (i.e. 4 lacs X 11%= 44,000/-) every year.
– Thus at the end of 30 years, i shall get 12.3. lacs + (44,000/- X15 years)= 18.9 lacs
– If i die after 15 years, my nominee will get 44,000 X 15 years = 6.6 lacs as lump sum amount.

Please suggest if this is advisable to go for this policy, as i have my own doubts.

Reply

Vikas Awasthi March 23, 2013 at 7:55 pm

Hi Govind,

Please share your contact number with me @ awasthi23@gmail.com.
I wanted to know more about that policy as somebody from SBI contacted me with more or less similar conditions. Would be helpful for both of us to finalize this.

Thanks

Reply

Vikas Awasthi March 26, 2013 at 2:20 pm

Govind,

This is nothing but a trap. There is nothing on 10th year except accumulated reversinory bonus which cannot be predicted upfront. I appeal to SBI management to show some responsibility here and stop these kind of misleading guys. This could be an industry practice to trap people with false and aggressive marketing but SBI is a name we trust.

Shame on you selfish people who make people fool for commotions. Nothing more than a pimp.

-Done

Reply

Aditya September 5, 2013 at 11:09 am

Hello sir,
I took this policy for my father for a period of 10 year and the premium is rs 66455 /- p.a. For a sum assured of rs 5,00,000 /-

Sbi adviser told me that after maturity company gave us a sum of rs 650000/- as we paid as premium by way of vested reversionary bonus plus terminal bonus whice decilered by company every year and gurented 11% payoff after 10 year for next 15 year

I want to know that is company decraled such rate of bonus so after maturity we got a amount equal to a amount which we paid that is( 66455*10=6,64,550)

PLEASE ADVICE

Reply

Jagdish kumawat September 10, 2013 at 8:53 pm

Mujhe kuch naya plan chahiye sir

Reply

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