Recently HDFC Life launched one more Non-Linked Savings Insurance Plan HDFC Life Sanchay Plus. The eye-catching part of this product is GUARANTEED.
Long back I wrote a post about one of the HDFC Life’s products “HDFC Life Sanchay – Reality check of 8% to 9% Guaranteed Addition“. After visiting this particular post, many people requested me on what will be my review about HDFC Life Sanchay Plus. Hence, thought to write a post on this.
This is the typical Endowment Plan with different features added to it. The biggest tagline that attracts many of us is GUARANTEED.
Let me share the HDFC Life Sanchay Plus eligibility criteria.
This plan offers four types of Benefit Options. They are as below.
I am taking the example of a person whose age is 30 years and the yearly premium of Rs.30,000 (which is minimum).
In this plan, the policy term is 20 years and the premium paying term is 10 years (this I have taken for my calculation purpose). At maturity, you will receive the Guaranteed Sum Assured on Maturity+Guaranteed Addition. Here, the guaranteed addition available is higher for younger age group and lower for older. The GA ranges from Rs.60 at the minimum to the maximum of Rs.140. Hence, to make sure how much the maximum benefits one can receive under this plan, I will take the 30 years young proposer example and the term also the long term. This makes us to consider the Rs.140 GA for our calculation.
One more catch here is that there is no GA for a certain period. See the below chart for the same.
After considering this maximum benefit, the results are as below.
You noticed that returns are around 5.7%. Hence, not a big game changer for your investment of around 20 years. Do remember that I have excluded the GST which you have to pay on the premium. If we consider this, then the returns will be less than 5.7%.
Under this plan, the policy term is 11 years and the premium paying term is 10 years. From the 12th year onwards you will receive the GUARANTEED income for the next 10 years. As per the below illustration, one will receive the yearly benefit of Rs.61,800 for the 10 years.
Looks attractive right? You are paying Rs.30,000 for 10 years and from next year onwards yearly Rs.61,800 for the next 10 years. Each of your yearly premium paid will be doubled. Wait….Let us calculate the IRR of the investment. In principle, it is nothing but your each year money will be doubled for every 10 years. Hence, in plain, you can assume that the return on investment will be just 6%.
Look at the below calculation. I have not changed any numbers. Whatever it is shown in the benefit illustration, I have included for IRR calculation. The returns are just around 6%.
Do remember that I have excluded the GST which you have to pay on the premium. If we consider this, then the returns will be less than 6%.
Under this plan, the policy term is 11 years and the premium paying term is 10 years. From the 12th year onwards you will receive the GUARANTEED income up to 36 years. As per the below illustration, one will receive the yearly benefit of Rs.32,455 for the 36 years. On 36th year, you will also receive the premium you paid along with 36th-year benefit.
Again an eye-catching of 36 years GUARANTEED income. But let us look into the IRR of this example.
You notice that IRR is again at 6.5%. No big differentiator. Do remember that I have excluded the GST which you have to pay on the premium. If we consider this, then the returns will be less than 6%.
Here, one more surprise to us. This plan is only for those whose age is 50 years or above than that. Hence, it is nothing NEW but a LURING way of Life Long GUARANTEED income.
In this plan, you will pay the premium for 10 years. From 12th year to 99 years of your age, you will receive the Guaranteed Benefit.
Life Long GUARANTEED is an eye-catching term. But the reality is again something different when we check the IRR.
Image may look small. However, the end result is not more than 6.9%. When I wrote at first, I have not considered the return of premium which life assured will receive at 99 years of age. Few readers pointed out this error. But want to say one thing, if one assumes the 6% simple inflation and his age is 50 years, the amount of Rs.3,30,900 he receives at his 99 years of age in today’s value is Rs.19,041. It means almost half of what he is able to pay now. Do remember that I have considered 6% inflation. However, in reality, inflation is beyond 6%.
One more BIGGEST point which the DEFENDERS of this plan forgot that we have to pay GST on the premium (which I have excluded for illustration purpose). If we consider the GST, then the returns will be again at around 6%.
Do remember that I have excluded the GST which you have to pay on the premium. If we consider this, then the returns will be less than 6%.
Yes, it is a TRAP in the name of GUARANTEED LONG TERM INCOME TRAP. You noticed that in all benefit options returns will not be more than 6%. Hence, should you buy it? My take
# This product is a typical endowment plan sold as if GUARANTEED income or GUARANTEED Addition. However, when you look at the returns, its just around 6%. Do remember that we have to pay GST on the premium also. Hence, if we consider this expense, then the returns from all the above options will be around 5%.
# This product even though claim to be LIFE LONG GUARANTEED income for you. But fail to give the solution to inflation. You will receive the same income throughout your life (In Life Long Option). How this is going to benefit ONLY GOD KNOWS.
# Wisely they increased the minimum age for Life Long Income Option to 50 years and make sure that their liability of paying you the GUARANTEED income should be to the maximum of 49 years (90 Yrs-50 Yrs). Hence, it is completely an eyewash to present you in a different AVATAR of the benefit option LONG TERM INCOME.
# Many of your Bank RMs may be behind you to buy this product. However, look at the pathetic returns of around 6%, which even can’t beat the inflation. Hence, it is better to say NO.
# One must not buy just because there is a tagline GUARANTEED. We have to think about how much is GUARANTEED and what will be the final returns.
# In the Guaranteed Maturity Benefit, their Guaranteed Addition looks attractive. However, the GA will not be added to you immediately you start the policy. They will add it after a certain period. Hence, this again lowers the returns to around 5.7% (in the above example).
# It is better to buy a term life insurance and by investing monthly in PPF kind of product, you have the possibility to earn more than this plan.
FINAL THOUGHT…STAY AWAY FROM SUCH PRODUCTS!!
EPF Scheme 2026 explained fully: EPF withdrawal, EPS pension, and EDLI insurance changes with examples,…
Chasing financial freedom? Do health, time, relationships and contentment matter just as much? Sadly, we…
Your "safe" SIPs, SGBs, PPF, or Index Funds are secretly sabotaging your wealth. Peltzman Effect…
Thinking your retirement plan is foolproof? Why LUCK - not asset or fund selection or…
Nifty 50 Index Funds Vs Active Large Cap Funds — Can we really compare them…
Should you pick Nifty 500 Multicap 50:25:25, Nifty 500, or Nifty LargeMidcap 250 Index Fund?…
View Comments
Well said. Also one more thing if we take inflation into account then the client is not going to get any.
Dear Arun,
Thanks for airing your views.
Sir this year on 14 mar i have purchased this policy 100000 p.a PPT 8 Years and after reading it i am so much confused what about to do now?
Dear Avijit,
If you are fine with above-mentioned returns from this policy, then can continue. Else, you have to think twice.
in how many years, policy can surrendered? or can policy discontinued after a year
Dear Snehanshu,
After 3 years in case of traditional policies.
Many thanks for the detailed explanation Sir.
I already paid one year premium for HDFC sanchay plus plan which is 71,000 last year and now I have to pay the second year premium. Now, after reading all these I am very much confused whether to continue the plan or just let go off the premium paid. Request you please advice me whether to continue or let go of 71k?
Dear Srikanth,
It is painful to say that you forgo the first-year premium. However, it seems to be sensible.
Hi Sir,
Thank you for writing about this and awaring us.
But, If someone like me has already purchased this then what we could do to have the least loss, Should we surrender it or what we should do,
Please explain in detail
Thanks
Dear Chandan,
It is painful to suggest. But better to convert into paid up.
I red this article completely. I am happy that we also did this much deeper analysis.
1) we also calculated around 6-6.5% IRR only.
2) we considered FD rates are similar or slightly lower at that point of time.
3) we considered it as a fixed income allocation
4) we considered some amount coming till the age of 99 including for spouse is big saviour in any adverse financial situations.
5) we also considered tax exemption is a benefit relative to any FD.
6) we also thought after 10-20 years possibility of intrest rates going down sub 7% is high than going beyond 7%.
While I appreciate the author’s view point of enlightening the community, this all depends upon the contextual background and relativity. If he says for all the money I have yes, he is right. But when I do 2% of my money for longtime safety I am right.
Coming to the marketing gimmick… yes. Marketing means that only without cheating. And I also feel the same with HDFC balance advantage fund. When you have SWP with every product, now a days monthly fixed income is just a marketing gimmick and no relevance.
Dear Raj,
2% of your net worth or cash flow?
Hi Basu,
I regret purchasing the 'HDFC LIFE SANCHAY PLUS PLAN'. I got lured by the banker to purchase the long term income plan. I have to pay a premium of 1lpa anually for six years(3 premiums paid until now) after which from 8th year I shall be paid 40k annually until the 37th year when i also get back the principal amount.
I understand the damage is done thus request you to please guide what best can be done after it matures.
There is a clause in the policy about maturity which goes as :
(On the maturity date, you shall have an option to receive the Guaranteed Sum Assured on Maturity(4.56lpa printed on my policy), which under this
option, shall be the present value of future payouts, discounted at a rate of 9%p.a. This interest rate is not guaranteed.
However, any change in the interest rate will be subject to prior approval of the Authority and will be applicable only to
the policies sold after the date of change.
At any point of time during the Payout Period, you shall have an option to receive the future income as a lump sum,
which shall be the present value of future payouts, discounted at a rate which is computed using the prevailing interest rates.)
1) Could you please help me in understanding this clause.
2) Is receiving the amount in lumpsum or continuing it more practical?
Highly appreciate if you could provide some guidance
Dear Suyash,
I am unsure of when you purchased the policy. Hence, hard for me to guide anything. Regarding the clause, it is the current value discounted at 9% and will be payable to you.
Thanks, after reading your post had just checked today for hdfc sanchay plus long term income 10yr premium payment 2 yr deferment and income from 13th yr for 25yrs and return of premium on 25th year in policy bazar website.
The xirr shown was 7.22% without considering the the gst implications for 1lakh premium
Dear Kaushal,
Calculate on YOUR OWN rather than depending on someone else claim.
Currently these plan for 25yrs income or 30yrs income plus return of premium is offering 7.1% tax free return after consideration of the gst on premium. Which other fixed return instrument shall offer more as rbi bonds have floating interest rate and 5yrs or 8yrs down the line it shall not offer more return after considering the tax implications on it. PPf has a limit of 1.5Lakh so cant go more than that. Please highlight anyother scheme which can offer better return for a longer period.
Dear Kaushal,
For 25 years to 30 years, if as per your calculation the returns are 7.1%, then go ahead. But calculate on your own before you believe of 7.1%.
I guess you must understand the plan first then write nonsense and illogical post, your post is misleading.
From 6.9% IRR just by adding GST of 2.25% how will the IRR drop below 6% ??
Also getting tax free returns of 6% is not a very bad idea for long term.
Dear Varun,
Thanks for your kind words. Please come up with your own calculation then compare mine. If I am wrong, then I will accept it.
Hi
Your analysis seems to be half baked.
Could you please suggest any other debt oriented guaranteed investment option which can give a yield of 7% tax free?
If yes, plz suggest. Otherwise plz don't downgrade such big conglomerate for sadistic pleasure.
Dear Hidayat,
Thanks. PPF is one such instrument. Another one is VPF.
Hi, thanks for your analysis...
My bank representative is saying that in the long term income plan, after 12 years of payment, from 14th year onwards , if we want, we can take the lump sum amount, which will be given for next 25 years... So 25x amount we will get at 14 th year (-9% service deduction)... This seems attractive to me... What's your take on that?
Dear Vmano,
The first rule of financial planning is staying away from BANKERS. They are the most dangerous species for your money nowadays. If you feel 5% to 6% returns are attractive by holding for the such long term, then please go ahead. As per me, its a worst decision.