Personal Finance

Flexibility gives it the edge

Rajalakshmi Nirmal | Updated on February 11, 2018 Published on February 11, 2018

Max Life Online Savings Plan allows you to choose the premium. Management and mortality charges are among the lowest

Max Life Insurance has launched a new ULIP — Max Online Savings Plan.

A unit linked insurance plan (ULIP) is a market-linked insurance policy that offers life protection and a choice between stocks, bonds or a combination of the two for investors to invest their premium.

This new ULIP can be bought online only. It offers flexibility in the choice of policy/premium term and choice of 10/15/20 times the premium for sum assured. Here, we look at how this plan fares in comparison to other plans in the market.

What’s on offer?

The plan offers two variants.

Variant 1, ‘Max Life Online Savings Plan - Wealth Creation Solution’, offers three cover options.

One can ask for a sum assured of 10/15/20 times the premium if aged 18-45 years. If aged between 45 and 55 years, the choice is between 10 and 15 times the premium.

If over 55 years, one has to necessarily settle for a sum assured of 10 times the premium. Being a ‘type 1’ ULIP, the sum paid on death is higher than the sum assured under the plan or the fund value.

On the individual surviving till the maturity of the plan, the fund value is paid.

In variant 2, ‘Max Life Online Savings Plan - Child Future Solution’, the cover (sum assured) is fixed at 10 times the premium.

On death of the life insured, the cover amount is paid as a lumpsum to the nominee immediately.

The future premiums on the policy get waived off, and, given it is a type II ULIP, the policy will pay the benefits that accrue to the nominee at the time of maturity.

The plan offers five fund options, including one for choosing the investment strategy.



Is this plan worth it?

While most ULIP plans today have zero premium allocation and administration charges, some such as Bajaj Allianz Future Gain charge customers.

In Max Life’s Online Savings Plan, there is no ‘premium allocation’ and administration charge. The carrot is also that the mortality and fund management charges are the lowest in the market. The mortality charge is 0.8 per 1000 sum assured (for age 30), while with others, it is in the range of 1-1.33 per 1000.

For equity funds, Max’s ULIP charges an FMC (fund management charge) of 1.25 per cent while others charge 1.35 per cent. In the case of balanced funds, it is 1.1 per cent versus 1.25-1.35 per cent of others and in debt funds it is 0.9 per cent compared to 0.95 — 1.35 per cent of others. It also allows switching between funds free of cost.

But Max’s plan doesn’t offer any loyalty additions, as in the case of the recently-launched Edelweiss Tokio Life’s Wealth Plus. A back-of-the envelope calculation with 8 per cent gross returns shows that the difference in IRR over a 20-year period between Max Life Online Savings Plan and Edelweiss Tokio Life’s Wealth Plus is not much. Max Life Plan offers more flexibility.

All the five funds of Max Life have given a return that is above that generated by the respective benchmarks most of the times.

Published on February 11, 2018
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