ICICI Prudential Guaranteed Wealth Protector is a unit-linked insurance plan with a capital guarantee. Your premium is allocated between two funds − Life Growth (equity) and Life Secure (debt) − based on your age. It is a Type-I ULIP. This means upon the policyholder's death, the nominee gets the sum assured, or the minimum death benefit, or the fund value, whichever is higher.

The minimum death benefit is 105 per cent of premiums paid, according to IRDA requirements.

It is a limited premium paying plan with the option to pay premium for five years or settle it in one single premium. The maximum policy term is 10 years. The maximum allowed age for entry is 60 years for a premium payment term of five years and 70 years for a single premium. There is no limit to the maximum sum you can invest. The sum assured is 10 times the annual premium if your age is less than 44 years. Those between 45 and 54 years of age can choose a sum assured of seven or 10 times the annual premium. However, elderly investors above 55 years of age will be given a cover of only seven times the annual premium. In single premium policies, all investors get 1.25 times the premium as sum assured.

How does it work?

This policy gives a capital guarantee, i.e. at maturity, you will get at least 101 per cent of all the premiums you paid.

To ensure this, the insurer reduces equity exposure and increases debt investment as the policy ages. Those less than 45 years of age will begin with a 60 per cent allocation in equity with 40 per cent investment in debt in the first year. But from the fifth year onwards, the proportion of equity investment will drop and exposure to debt will increase. By the ninth year, investment in equity would be just 10 per cent and investment in debt would rise to 90 per cent.

On maturity, the insurer also offers loyalty additions in the form of extra units. However, charges in this plan are on the higher side. The premium allocation charge is 6 per cent in the first year, reducing to 4 per cent in the third year and thereafter.

The policy administration charge is 2.25 per cent a year for the premium paying term and 1.2 per cent after that. The fund management charge is a high 1.35 per cent a year. The higher charge is levied on account of the the capital guarantee.

The product brochure shows that at a gross return of 8 per cent, someone aged 35 years investing ₹1-lakh for five years in this policy will get maturity proceeds of ₹7,24,607. So the net return works out to 4.7 per cent.

Comments

The attempt to combine a market-linked product with a guarantee reduces this scheme’s attractiveness. A ULIP may be able to offer high returns that beat inflation at low costs, if the markets fare well. A guaranteed return traditional plan may be able to offer modest returns of 4-5 per cent with a high level of certainty. Here, the investor may end up getting neither in full.

Essentially, the capital guarantee forces the insurer to maintain a very conservative portfolio during the final years, reducing returns. Following regulations in 2010, ULIPs with a good track record do make for good long-term investment products. But due to the 10-year cap on tenure and the capital guarantee feature, this product's appeal is diminished.

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