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Triple Advantage

Triple Advantage

For the first time, there is an endowment plan that combines three features.

Normally, endowment plans don't offer these triple benefits: flexibility, guaranteed additions and guaranteed survival benefits. But for those who like insurance endowment plans, which is a combination of insurance and savings, there's a new product with enhanced features in Aviva Life's Dhanvriddhi.

This product is for the conservative investor and comes with easy steps to calculate probable returns.

Vivek Khanna
Vivek Khanna
Head Marketing) /Aviva Life:
"There are endowment policies which offer a combination of any two, but not all three put together"
For every Rs 1,000 sum assured, Dhanvriddhi offers a guaranteed addition of Rs 70 for every year of policy term. But the premium paying term is five years lower than the term of the policy.

However, there's no single premium option. Vivek Khanna, Head (Marketing), Aviva Life, points out that this is the only policy which combines three features-flexibility to increase sum assured in multiples of Rs 10,000, guaranteed additions as mentioned above and guaranteed survival benefits which amount to 20 per cent of the sum assured payable every five years.

 "There are endowment policies in the market which offer a combination of any two," says Khanna, "but not all three put together."

But the plan is not without its cost. It has a high premium payout-a new entrant has to take a call on whether it would be sustainable for him to remit a regular premium for a term of 20 or 25 years.

For instance, on a sum assured of Rs 3 lakh, a 35-year-old male pays a premium of Rs 27,381 for 20 years with a policy term for 25 years. By comparison, a 25-year-old pays Rs 26,775, just Rs 606 less.

The difference in total outgo of premium between the two at the end of 20 years is just Rs 12,120. The maximum policy term is only 25 years, it reduces further for those who have crossed 45.

Rahul Aggarwal
Rahul Aggarwal
CEO/ Optima Risk Management Services:
"By taking advantage of its corpus size, it (LIC) is able to give better returns for policyholders"

However, the rate of return upon maturity works out to around 7.5 per cent for the maximum payable term of 20 years, and reduces progressively for lower tenures and terms. In case of death, the full sum assured along with the accrued additions till the year of death is paid out irrespective of whether survival benefits have been taken earlier.

But how does an endowment policy of LIC compare? One that comes close is the Endowment Assurance Limited Payment which charges a lower premium, but there are no guaranteed additions.

It has a single premium option. On a sum assured of Rs 3 lakh, a 35-year-old male pays a premium of Rs 13,392 for 20 years for a policy term of 25 years. Therefore, this is far easier on the purse.

Bonus is declared every year (profits distributed among policyholders) and it gets accrued to the sum assured at regular intervals. A final maturity benefit is a single payout at the end of term.

Says Rahul Aggarwal, CEO of Optima Risk Management Services: "A study reveals that the rate of return offered by LIC is generally higher. By taking advantage of its corpus size, it is able to give better returns for policyholders."

For those keen to know exactly what they are getting, Dhanvriddhi may be a good alternative.

Published on: Aug 31, 2007, 5:18 AM IST
Posted by: AtMigration, Aug 31, 2007, 5:18 AM IST