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Nath Balakrishnan

SUDARSHAN from SBI Life is an endowment plan that comes in two flavours: One has a fixed sum assured throughout the policy duration, and in the other it is raised by 5 per cent every year to offset the effects of inflation. Otherwise, the scheme operates like any other endowment plan.

Plan features

The policyholder has to pay premiums over the chosen policy term. Premiums for the increasing sum assured plan are higher. However, they are fixed at the start and do not change thereafter.

To illustrate how the increasing sum assured plan works: Assume a basic sum assured of Rs 1 lakh with a policy term of 20 years. The sum assured at the end of the term will stand at Rs 2 lakh (Rs 5,000 — 5 per cent of Rs 1 lakh — added every year to the basic sum assured for 20 years). On maturity, the policyholder receives the basic sum assured (or the increased sum assured) and the accumulated bonuses. Bonuses are declared on the sum assured, and are simple additions. Under the increasing sum assured plan, the bonus is declared on the increased value of sum assured each year.

Death benefit

Under the fixed sum assured plan, the beneficiary receives the basic sum assured plus the bonus accrued.

The payout, in the case of the increasing sum assured plan, is the increased sum assured along with the accrued bonuses. For instance, if death occurs in the 11th policy year, the sum assured will be Rs 1,50,000 (Rs 1 lakh plus Rs 5,000 added every year for 10 policy years) plus bonus.

Riders

Three riders can be attached to the basic policy.

Term Assurance Rider: The payout under this rider is made if the policyholder dies during the policy term, and is over and above the basic sum assured.

Critical Illness Rider: This can be used to cover either four or six critical illnesses. On diagnosis of a critical illness, the sum assured under the rider is paid out immediately. The basic cover continues, for which the premium will has to be paid.

Accidental Death and Total Permanent Disability (TPD) Rider: In the case of death by accident or TPD, the basic sum assured is paid out and the rider sum assured in 10 equal annual instalments.

Suitability

Maturity proceeds of such a plan can come in handy to meet the education or marriage expenses of children. At the same time, the financial security of the policyholder's family is not jeopardised if he meets with an unfortunate development. Those looking for such twin benefits can examine the policy.

Pieces under this column seek to examine insurance products in detail. Readers are requested to compareproducts featured under this column with similar products offered by other players before arriving at an investment decision.

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