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Nath Balakrishnan

IN 2004, there was a flood of unit-linked insurance plans, with several private insurers launching their versions of this popular instrument. SBI Life has kicked off 2005 with Horizon, a plan that signals the company's foray into the unit-linked plan space. A a look at some of the features of this plan that was unveiled a few days ago.

Plan features

Premiums paid by the policyholder is invested in one of the two plans: A Dynamic Plan, which has a higher allocation to equities; or a Growth Plan, which attempts to address the investment needs of a risk-averse policyholder. The premium available after deduction of the entry fee is used to buy units in one of these plans. The policyholder has to choose his plan at the outset; no switch between plans during the policy's duration is permitted.

The Dynamic and the Growth Plans have a set of three funds into which the premiums are invested — an equity fund, a bond fund and a money market fund. The allocation among funds is done in such a manner that as maturity approaches, a greater proportion of funds are moved into the bond and money market funds, thereby reducing the risk for the investor.

To illustrate, in the case of the Dynamic Plan, a minimum of 80 per cent is allocated to equities when a period of 20 years is still left for the policy to mature; the minimum allocation to equities shrinks to zero when the time to maturity of the policy is two years.

Maturity and death benefit

On maturity, the policyholder would receive the total value of units held in the funds. In the event of the policyholder's death before the plan's maturity, the beneficiary would receive the sum assured and the policy value at the time of death.

The sum assured is 10 times the annualised premium. Charges for mortality under this plan are on a one-year renewable basis and are recovered by monthly cancellation of units.

Other features

After the completion of three policy years, partial withdrawals are permitted. The first two such withdrawals are free; subsequent withdrawals attract a charge. The policy can also be surrendered from the second policy year onwards. Any surplus can be brought into the plan in the form of a top-up; the top-up does not affect the sum assured and is deployed entirely for investment.

Apart from the entry and mortality charges, the other levies under this plan include administration and fund-management charges. Collectively, these charges would temper returns; it would be better to familiarise oneself with their impact before taking an investment decision.

(Readers are requested to compare products featured under this column with similar ones offered by other players.)

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