HDFC Life Sanchay claims 8% to 9% Guaranteed Addition and also the guaranteed maturity benefit of 220% to 325% of the Sum Assured depending upon the policy term. One of my blog readers noticed this and shared with me for review. Let us see what is the truth.
Note:- HDFC Life recently started a new version of this plan in the name of HDFC Life Sanchay Plus. I have written a detailed post on this. You can refer a below link for the same.
HDFC Life Sanchay Plus – A GUARANTEED TRAP!!
It is one of the traditional plans which is not related to stock market. In such a situation how can a product generate 8% to 9% GUARANTEED ADDITION?
Let us see the key plan features. They are listed as below.
Below are the eligibility conditions to buy this product.
The plan offers guaranteed additions as a percentage of Sum Assured on Maturity accrued at a simple rate for each completed policy year, throughout the policy term.
These Guaranteed Additions are payable at Maturity or Death whichever is earlier, subject to all due premiums being paid. In case of surrender, the surrender value of Guaranteed Additions will be payable.
Policy Term-15 Yrs to 19 Yrs-GA 8%.
Policy Term-20 Yrs to 25 Yrs-GA-9%.
If policyholder survives till the end of the policy period, then he will receive the below benefits.
Sum Assured on Maturity (which is equal to Basic Sum Assured)+ Accrued Guaranteed Additions. This according to HDFC Life varies from 220% for 15 Years policy to 325% for 25 years policies of Sum Assured.
If the death of the policyholder occurs during the policy period, then his nominee will receive below benefits.
Sum Assured on death is higher of the below.
a) Sum Assured on Maturity
b) an absolute amount assured to be paid on death, which in this case is equal to the Sum Assured on Maturity
c) 105% of premiums paid
d) 10 times Annualised Premium
As I said earlier, two things are highlighted by HDFC Life to sell this product. The first one is 8% to 9% Guaranteed Addition and second is Guaranteed maturity benefit of 220% to 325% of the Sum Assured depending upon the policy term.
Let us check the reality now. For this purpose, I took the same example of what they showed in their product brochure.
Ramesh, a 35-year-old individual, invests Rs. 1,14,877 annually for 5 years in the HDFC Life Sanchay. He chooses a policy term of 15 years. His Sum Assured on Maturity in the plan is Rs.5,00,000. He will receive a guaranteed maturity benefit of Rs.11,00,000 at the end of the policy term. Below table illustrates his benefits in the plan.
Now as per HDFC Life ‘s claim, Ramesh will definitely receive 8% GA per year without fail till maturity. Also, the maturity benefit is obviously 220% of Sum Assured.
So is it a GREAT product? Let us cross-check the reality by using the IRR formula and find out the actual returns from this plan.
You noticed that the actual returns are just 5.11% but not the 8% to 9%. Then why returns showing less?
# The premium in this plan is hefty but sum assured is less. Hence, the returns are less. Because your returns are linked to the sum assured you opted.
# The GA what HDFC Life will declare yearly will not earn any interest further. They just keep that money with them and will pay you back either at maturity or death.
# Even though 8% or 9% GA and 220% to 325% of Sum Assured at maturity will look fancy, but the reality is that this plan not gives you more than 6% returns.
Conclusion:–
The 8% and 9% GUARANTEED ADDITION may look you fancy to jump into investment. But when you check the return on investment, then you will see that returns are not more than 6%.
Also, one more fancy thing what HDFC Life did is that to claim 220% to 325% of Sum Assured as a maturity benefit. This at first glance looks so attractive. But the reality is something different.
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View Comments
good work...
HDFC Sanchay plus Guarantee Return for the 5/15 policy with premium of 10L per year for 5 yrs and at the maturity on 15th yr, maturity amount is 1,12,15,155 (1.12cr) with IRR of 6.92% is this any good ? Please help me with your views as I felt this is just little above FD (1% more) and USP is that it's tax free blah blah blah. Please help me understand this better. Thanks
Dear Kapil,
I have already replied to your email.
Dear sir, I've paid a total of 65K in HDFC Life Sanchay for past 5 months, and if I discontinue, fund will be lapsed and will lose my money. I was misguided by an agent to take this policy along with HDFC Click to wealth.
He claimed maturity amt will be 60 to 64 lacs. Currently Im paying combined premium of 25k per month
Policy term 15 yrs and paying term is 5 yrs.
Should I let go the 65 K and start an SIP? Investment is my priority. What should I do?
Dear Athul,
If you are OK with forgetting what you paid, then go ahead (I Know it is painful to say so).
Which is the best policy for investment with good returns? Can you please suggest
Dear Shraddha,
How can I say BLINDLY without knowing your actual requirements?
Dear sir I joined this plan in 2014. Should I leave it asap I paid 1 lakh premium for 5 years
Dear Aj,
Better to surrender.
HI
I have received the same plan offer from the Bharti AXA Life Elite Advantage.
Representative is offering to me pay annually 50,000 Rs and i will receive after 12th year 55000 upto 5 years and 13,00,000 after 12+5 years. OR i can receive the lumsum amount after 12th year approx 13,21,000Rs.
Please help me to understand is it good policy plan so i can go with it.
Dear Avnish,
if you are fine with your long term investment returns of around 5% to 6%, then go ahead. Otherwise, NO.
Hi,
The illustration i received for 12 year term has 6 year premium paying term with SA of Rs. 452,243. At the end of 12 year one gets Guarantted 196% of SA (i.e. Rs. 886,396) + Loyalty Addition of Rs. 434,153 (Rs 36,179 every year till policy term). Which makes total GA of Rs. 13,20,544 (i.e. IRR of 8.5%). Is there something which i am missing on calculating the returns ?
Dear Raj,
Do your own research. If this product generates you guaranteed 8.5% in the current scenario, then this is the 8th wonder of the world.
I have followed your formula in excel but i am not getting, i believe i am missing something
kindly let me know how you got 5.7 % investment.
Dear Avnish,
Refer above post again.
Hello
I received an benefit illustration for jeevan sanchay with following details. You pay amount each year till year 6 . After 12 years you get amount 14.68 return. I checked online the irr is coming 9.39, which is pretty good and probably highest for a guaranteed plan. Please confirm or point out anything that I may have missed.
Dear Chinmay,
If this product giving you 9.39% IRR, then please go ahead. WONDERFUL PRODUCT ON THIS EARTH. But whatever I shared above is as per their claim. Rest left with you as it is your money.
Just to clarify, the amount 14x you get after total 12 years from your initial investment.
Dear Chinmay,
God blessed to that guy who showed such exaggerated returns.
Sir maine hdfclife sanchay plan le liya hain sum assured 108961 aur quarterly 7838 premium hain 5 yrs premium paying term hain aur 10 yrs ka maturity hain to kitna amount milega maturity ke bad unke hisabse to 8% milega
Dear Kishor,
Refer above post to know how much you can expect. Never trust the SELLERS. Do your own homework.
Thank you for your help