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Sowmya Sundar

SETHUBANDHAN is a life insurance-cum-savings product designed for non-resident Indians. However, the policy is also open for resident Indians. It is a single premium endowment plan with a limited term of five or 10 years. The premium on the base policy depends on the term chosen and not the age. A guaranteed addition of 5 per cent of the sum assured accrues every policy anniversary. These additions are reversionary and are not compounded.

Benefits

On death during the policy term, the sum assured plus guaranteed additions till that date are payable. On maturity, the sum assured plus all accrued bonuses, are payable. The benefits are repatriable in foreign currency at the prevailing exchange rate. No medical check up is required for the insuree under the base policy.

Critical illness rider

You can take an optional critical illness rider covering six major illnesses — cancer (including leukaemia), heart attack, kidney failure, heart by pass surgery, stroke and major organ transplant. The rider can be taken for either Rs 3 lakh or Rs 5 lakh.

The benefit under the rider is payable on satisfactory diagnosis and not linked to actual treatment. The rider premium is payable annually.

Dependant cover

One can also opt for a life cover with return of premium option for a maximum of Rs 10 lakh for one or more dependants residing in India for a term of five or 10 years. The significant aspect is that though the NRI is the proposer for the policy, the dependant cover continues even if the contract under the original policy expires (for instance, if the insuree under the original policy dies). A critical illness cover not exceeding Rs 5 lakh can also be taken with the dependant cover. The premium for the dependant cover depends on the age and term of the insuree (that is, the dependant). The premium payment will be the same as an independent SBI term policy.

Loans

A rupee loan can be taken from any of the SBI branches after the policy attains a surrender value after two years.

Suitability

The policy is targeted at the NRIs and Resurgent India Bond holders who will be looking for investment avenues in India. Now that the NRIs cannot invest in small saving schemes directly, the only fixed income investment avenue available for them is bank NRI deposits on which the rates have been cut sharply. In this backdrop, a guaranteed rate of 4 per cent (yield) for a 10-year term appears reasonable.

Also, the cost of insurance for an NRI in India is much cheaper than abroad. Therefore, an insurance policy coupled with a guaranteed rate of return makes it an attractive proposition for the NRI.

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

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