The Hindu Business Line : Aviva's EasyLife Plus

`EASYLIFE Plus' is an endowment plan that allows you to accumulate a certain amount at the end of a specific term through regular savings and also provides life cover. The product provides an in-built additional cover for death by accident and permanent disability. Also you need not undergo a medical examination to take the plan.

How it works?

You have the flexibility of choosing the amount you want to contribute as premiums as also the term. The sum insured will be 10 times the annual premium. Twenty times the annual premium is paid, in case of death by accident or permanent/total disability.

Investment options

One can choose from two investment fund options — With Profits and Unit Linked. Both are structured around units. Units are allocated at the purchase price on payment of each premium. At any time the policy value will be the number of units multiplied by the selling price of the unit.

The With Profits Fund is designed to provide capital guarantee on the investment portion of the premiums and, hence, are invested in safer instruments.

Bonus is declared on the With Profits Fund depending on the investment performance. If the actual performance is better than the bonus declared, it goes into profits. On maturity, 90 per cent of the profits are returned to the policyholder. The Unit Linked Fund is more aggressive in fund allocation and the returns are directly linked to the investment performance.

You have the option of either withdrawing the policy value fully or partially, or hold on to your units even after the expiry of the policy term. Though your life cover expires, the investment continues to earn returns.

If you discontinue premium payments after two policy years, you can either forego the risk cover and earn investment returns on the premiums paid or retain the full risk cover, provided the policy value supports the charges.

Allocation rate

The allocation rate is a percentage of the annual premium amount. It is 99 per cent for an annual premium of less than Rs 7,500, 100 per cent for premiums between Rs 7,500 and Rs 9,999; and 101 per cent for premiums above Rs 10,000.

Charges

All the charges are made in the form of unit deductions. The various charges are:

A selling or purchase spread of 5 per cent on the unit value, which is akin to an entry or exit load in a mutual fund.

An initial management charge of 5 per cent on the units purchased with the first year's premium.

A regular 1 per cent management charge on the policy value.

An administration charge of Rs 35 per month regardless of the premiums paid. This will be adjusted for inflation.

Risk charges according to age and sex.

An early redemption charge is applied if the policy is surrendered before the term.

Market Value Adjustment (MVA) is made if the policy is surrendered prematurely in a With Profits Fund, thereby reducing the quoted value of the underlying assets. The MVA is not applicable on payment of benefits on maturity, death and permanent total disability.

Importantly, charges are subject to review at the discretion of the management. If there is any hike in the charges in future, it might have a negative impact on your returns.

Death benefit

On death by accident or permanent disability within one year, twice the sum insured is paid. After year two, at least twice the sum insured is paid.

On natural death, 110 per cent of the premium is paid in the first year. Year two onwards, the sum insured or the accumulated policy value, whichever is higher, is paid.

Maturity benefit

You can withdraw your policy value (number of units in your account multiplied by the selling price of the unit on the date of withdrawal) on maturity.

Suitability

This plan is suitable for people looking at a regular savings medium. The charges levied by unit linked insurance plans dent the returns earned.

However, the charges for the `Easy Life' policy is lower compared to other unit-linked policies. Another catch is the same charge structure for unit-linked fund and with profits fund.

Since the latter is less aggressive in portfolio allocation, the charges may erode the returns. Moreover, there is a penalty on premature withdrawal, which restricts the liquidity. One has to consider these aspects before locking into the policy.

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