ICICI Pru iAssure Single Premium Plan Review

by Manshu on October 20, 2011

in Insurance

ICICI Pru iAssure Single Premium Plan is a product that lets you pay only one insurance premium, and in return gives certain guaranteed returns as well as provides a life cover.

The iAssure plan is covered under section 80C, and while the brochure says the deduction amount is limited to 20% of the sum assured – I think this is another way of saying the amount of the premium you pay will be eligible for deduction.

I think the 20% figure comes from the fact that you can either get 125% of your premium as sum assured, or you could get 500% of your premium as sum assured.

This is an important point, and if you happen to buy the policy you should confirm with the people who are selling this.

This plan doesn’t get any tax benefit under section 10(10D).

ICICI Pru iAssure Single Premium Life Cover

This policy gets you a life cover and that depends on your age. If you are less than 55 years of age then the policy gives you a life cover of 5 times the premium, and if you are more than 55 years of age then the policy covers only 1.25 times the premium.

You can’t take the policy if you’re 80 or older and the policy comes with two maturity periods – 5 and 10 years.

You should be at least 18 years of age when the policy matures so based on the policy you take – you should be either 10 or 13 years of age.

The minimum premium is Rs. 20,000 and while I didn’t see any mention of a maximum limit – since one of the key characteristics of this plan is that you get 80C benefits – I think it will probably not make sense to take a premium that makes you go over the limit.

ICICI Pru iAssure Single Premium Guaranteed Maturity Benefit

At the time of maturity you get an amount which they call the guaranteed maturity benefit. The guaranteed maturity benefit is a number / factor that’s multiplied with your premium to decide how much money you will get at maturity.

This number / factor depends on the following things:

Maturity term: Other things being equal the factor will be higher for a ten year maturity period than a 5 year one.

Age: They have 3 different slabs for age – completed 35 years, 45 years and 55 years, and the younger you are – the higher is the factor.

Premium: The premium you pay also affects the factor – and the higher the premium – the better it is.

Reference Rate: They calculate a reference interest rate based on the prevailing interest rate, and the higher the rate – the better it is.

They must have some tables, or an equation of some sort that uses all these factors and gives you the factor to multiply the premium, but I couldn’t find this on the website.

So, you will need to ask about this factor if and when you purchase the policy. The brochure did have an illustration so let me take that as an example here.

ICICI Pru iAssure Single Premium Policy

ICICI Pru iAssure Single Premium Policy

  • Premium: Rs. 1 lakh
  • Entry Age: 35 years
  • Term: 10 years
  • Reference Rate: 6% or 8%

The document shows that for this kind of policy the guaranteed maturity benefit will be Rs. 1,47,000 if the reference rate is 6% and Rs. 1,79,000 if the reference rate is 8%. Now, keep in mind that I don’t know if the current reference rate is actually 6% or 8% or a number lower or higher.

The next step is to see what rate of return you need to get to this amount yourself. I find that you need 4% compounded yearly to generate about 1,47,000 and 6% compounded annually to generate Rs. 179,000.

These returns look quite similar to the ICICI Guaranteed Savings Insurance Plan we looked at yesterday, and when I think about these two plans  – the thing that strikes me is that in this plan you have to pay the premium only once a year so you know that you will get the 80C benefit. Under the other plan, if Direct Tax Code kicks in then you may not get any tax benefit at all.

Also, in this plan you know the guaranteed maturity benefit well in advance so at the time of talking to them you can ask them what the numbers are at various premium levels.

Then you can easily compare that maturity benefit to how much return you need to generate on your own and find out if this interests you or not.

{ 14 comments… read them below or add one }

bemoneyaware October 20, 2011 at 9:06 am

Was curious about GSV, NGSV on table, so filling it up the info Ref: ICICI Pru iAssure Single Premium Plan
GVV is :Guaranteed Surrender Value and NGSV is Non Guaranteed Surrender Value both pertain to what if one wants to surrender a policy and GMB is guaranteed maturity benefit

Surrender is not allowed during the first policy year. The Surrender Value will be the higher of the Guaranteed Surrender Value (GSV) and the Non Guaranteed Surrender Value (NGSV).After the first policy year, the Non Guaranteed Surrender Value will depend on the then applicable Reference Rate and the term outstanding to maturity at the time of surrender.

The Guaranteed Surrender Value will be 20% of the GMB if the term remaining to maturity is greater than 5 years and 40% of the GMB if the term remaining to maturity is less than or equal to 5 years.

Loan value:
Yes, a loan amount of up to 80% of the Surrender Value can be availed. The interest rate charged for policy loans will be the 10 year Reference Rate + 200 basis points. The policy will be foreclosed in case the outstanding policy loan with accrued interest exceeds the Surrender Value.

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Manshu October 20, 2011 at 10:24 pm

Thanks for including those things here.

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bemoneyaware October 21, 2011 at 4:01 am

You are always welcome Manshu. It’s a pleasure. I have realised the more I try to find answers or reply the more I learn

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Manshu October 21, 2011 at 8:14 pm

That is so true for me too 🙂

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bemoneyaware October 20, 2011 at 9:28 am

Just clarifying your statement “this plan you have to pay the premium only once a year so you know that you will get the 80C benefit.”

In this plan you pay premium only once and enjoy the life cover throughout the term along with a guaranteed maturity benefit at the end of term. The plan is offered for a term of 5 years and 10 years. In the unfortunate event of the death of the Life Assured during the term of the policy, the nominee shall receive Sum Assured or the Guaranteed Maturity Benefit, whichever is higher. At maturity, the Guaranteed Maturity Benefit, declared at policy inception, is paid to the policyholder.

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bemoneyaware October 20, 2011 at 9:35 am

Tax angle:
What is the maximum limit for claiming tax benefit in relation to premium paid?
In case you pay more than 20% as premium of your sum assured, for any of the years during the term of the policy then tax benefit under 80C is not available.For example: Say you have taken an insurance policy for a sum assured of Rs. One lac and yearly premium in respect of this policy is Rs. 21,000, then the deduction in respect of the entire premium paid will not be available for deduction under Section 80C.

Section 10(D)
Now let us look at the tax aspects of the money received. Any money received in respect of Life Insurance policy together with the accumulated bonus is exempt fully from income tax under Section 10(10D) .

However, money received on your insurance policy together with accumulated bonus in respect of life insurance policy issued after 1st April, 2003, will be fully taxable if the amount of premium payable on the policy is more than twenty percent of sum assured for any of the years during the term of the policy .

But any money received on death of the person insured will be tax free though the premium for any of the year might have been more than 20% of the sum assured of the insurance policy.
Ref

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Vijay October 20, 2011 at 10:26 am

Manshu,
1.First of all, i checked up with the local ICICI branch and you know what, they told me that ICICI Pru iAssure product is no longer there !!! i.e No fresh investments are being accepted and the product has been withdrawn !!! Could you check up and confirm that? The ICICI person also added that the only single premium product that they have is one in which you need to invest an amount of Rs 3,00,000 at one go and is a sorta Retirement Product (read Pension product) of which i am yet to obtain details.
2.Although you have told that the GMB is mentioned at the time of application, i found that the process of calculation of the GMB, a tad mysterious and tedious (unlike the G SIP) – although you have tried to simplify it….
3.The returns are TAXABLE, and that takes away some sheen ! (Unlike LIC BIMA BACHAT)
4.And probably because of 1. i.e iAssure has been withdrawn from the Market, LIC is claiming that BIMA BACHAT is the only money back policy which offers a loan facility!!! (http://www.licindia.in/periodic_moneyback_006_benefits.htm)

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Manshu October 20, 2011 at 6:32 pm

Wow very weird! I actually did the review because a reader sent me the link to it and I can ask him whether someone approached him or if he found the product himself.

I’ll talk to some other folks who will know about this too, and update the article.

The LIC Bima Bachat plan is also on my list to do, so maybe a post on that in the coming week.

Thanks Vijay!!!

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Manshu October 20, 2011 at 11:00 pm

Hey Vijay, does LIC have any table or anything about loyalty additions or how much a person gets at maturity?

Couldn’t find it – thanks!

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Vijay October 21, 2011 at 7:22 am

Manshu, just like ICICI G SIP / ICICI iAssure, in BIMA BACHAT,the calculation for loyalty addition is a bit esoteric. But when i chatted up the guys at the LIC Branch, they told me that it is roughly Rs 30 to Rs 35 for every Rs 1000 invested (i.e they have been authorised by their higher ups to tell so to the customer!). So,one gets the amount invested plus the abovementioned at maturity.

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Manshu October 21, 2011 at 8:13 pm

Thanks Vijay – very helpful under the circumstances – for these products we must make some assumptions and move forward else nothing will be done. I created a spreadsheet yesterday and found that the illustration given in the LIC page just shows an annual return of 5% or so, which is why I asked the question because if we at least get an idea of what bonus there could be that could be incorporated in the calculation to see if it makes a difference or not.

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Vijay October 21, 2011 at 8:55 pm

🙂 true!

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Sahil October 21, 2011 at 6:07 am

avoid icici, you’ll burn your fingers.

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asif pathan March 9, 2013 at 9:47 am

wonderful illustration n brother u saved my money from being wasted in this gsip policy.pls suggest me some good investment plans so that i can be able to create wealth over the period of next ten years.

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