POSTED BY September 15, 2012 3:01 am COMMENTS (11)ON
Dear Manish Sir,
Recently my dad purchased ICICI Pru life stage wealth series II with 5 yr PPT of 1 lac. p.a with policy term of 10yrs .following are the funds where he can invest :-
1. Opportunities Fund
2. Multi Cap Growth Fund
3. Bluechip Fund
4. Multi Cap Balanced Fund
5. Income Fund
6. Money Market Fund
7. Return Guarantee Fund
8. Dynamic P/E fund
Out of that my first purchase is of money market fund and income fund 50K each . As in the policy term and condition it has been mentioned that following charges
1).Premium allocation charges 1st year – 2% and 2nd yr onwards 0% .
2).Policy administration charges (these charges is % of the annual premium will be charged every month for the term of policy) 1yr to premium payment term – 0.47%
PPT to maturity – 0.10%
3).Fund Management charges (these will be applicable and wiil be adjusted from the NAV on a daily basis )
0.75%p.a for money market fund
1.25%p.a for Return Guaranteed fund (additional 0.25% for this fund)
1.35% p.a for rest of fund (6 fund)
3).Mortality Charges These will be deducted on monthly basis on the sum assured .
These are my following Question:-
1).These fund management charges are not cleared to me . Can u plz explain by showing some calculations.
2)/Mortality charges will be deducted monthly . I approached regarding this to agent he told me that it will be just once for whole period of policy . As per IRDA rules we can get 10times of annual premium as sum assured by giving just 1 time mortality charges . If I want to increase my sum assured then these charges will apply . I want to confirm about that ,is the agent saying right ?
Lastly my dad has average knowledge of share market shall he continue in same , As this policy is in free look period ,shall I continue or cancel it
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11 replies on this article “icici pru lifestage wealth II”
Dear Ashal Sir, thanks alot for your precious time and help . 🙂
Dear Ashal Sir, there is no financial liabilities on my dad .
And if i die 🙁 , it will be a huge loss , as i have 2 more elder sister who will get married within next 5 yrs . I cant analyse it in any figure ! :/ ,and dad has saving upto 25Lacs.
Dear Sanchay, when your father has already made enough provisions for family (sisters’ marriage & all other things) & at the same time, you are going to get a job within a year, where is the need of insurance for your father.
Now as of now, you are not earning any income, so the question of financial loss from your death does not arise. For the point – Sisters’ marriage, we you already told us that father has made provisions for all these things. That’s why at this point of time, you also should not think for an insurance policy.
Dear Ashal sir , for dad as well as me !!
graduation complete in 2013.
investment HDFC top 200
Dear Sanchay, May I know if your father is no more today, how much financial liabilities ‘ll remain open? Say 10L Rs. or 20L Rs. or 50L Rs.?
As of now you are student. You are not earning a single penny as on date. If you die today, how much income loss ‘ll be there for your family?
Please answer the above questions.
Thanks alot sir for your appreciation . I’m really annoyed by such kinda life insurance , so started enquiring about it then I came to know why these agents emphasise so much on such not so worthy plans as they get aprrox 20 – 40 % commission of our premium every year . I will surely surrender this within free look period . Can you / anyone suggest which policy should take or any other investment tool to get good life insurance and investment also for period of 10yrs .
Dear Sanchay, are you asking for your father or for yourself? Please clarify.
thank you Ramesh sir and anshal sir for your concern . My dad is 53 and its 7.85 per thousand . and my agent has told me these mortality charges are just one time for your cover and if i want to increase my cover than such charges will apply . As my agent mentioned according to IRDA rules we can get 10 times of premium per annum with just one time mortality charges . isn’t that right ?
secondly in my policy term and condition its written “Fund Management charges (these will be applicable and wiil be adjusted from the NAV on a DAILY BASIS ) ” . What does this daily basis mean i am not able to get that .
What is this Rs.1050 charges are of ?
the premium allocation charges for just 1st yr ans i.e 2% = 2000 of 1 lac investment .
what are these Rs 5640 charges are for ?
I also wanted to know if continue in this policy will i be able to overcome these charges if these fund perform with aprrox 8 to 9% gain yearly and i able to manage these fund properly with switching the funds regularly ?
Dear Sanchay, first of all I congratulate you for the fact that you are trying to learn the things. Regarding mortality charge, it’s not one time affair & your agent is not telling the truth. The mortality charge ‘ll be deducted every year. So it’ll be a big price for your father, considering his age.
Fund management charge means to manage the funds, the insurance co. ‘ll charge management fee from the corpus of the fund, which 0.75% or 1% or 1.25% as the case may be on yly basis. So it ‘ll be adjusted for daily basis for example if there are 250 business days in a year, the daily FMC ‘ll be 0.75%/250.
Dear Sanchay, If you are unable to figure out from the reply of dear Ramesh, The direct Yes & No type answer is – please ask your father to cancel that policy immediately in the free look period.
Please read at least 2-3 times to understand what dear Ramesh has elaborated for you.
1. Buying a life insurance policy at a late stage means the mortality charges will be huge. At age 60 it will be 1.4% per year (14.21 per thousand translated into percentages), and will go on rising up at an exponential rate. For first year, that translates into 14,210 as mortality charges (calculated as 14.21/1000*10,00,000). Since this appears to be a sum assured+fund value policy, the mortality charges will continue to be applied for the whole duration of policy term and not just PPT. And this money will continue to increase every year.
2. Fund management charge is the money charged by the AMC/InsuCo for analysis, execution and other aspects of the actual management. 1.35% is a decent amount for equity management in India, but that amount is subject to change and canbe upto 2.5% (of course after prior intimation). A normal indian equity MF currently charges from 1.25% to a max of 2.5%. For money market and income funds that amount is lesser.
3. The policy admin charges is 0.47% for first 5 years and then 0.1% for the rest of the time you continue in the policy. In your case this translates into 0.47% of 1lakh=470 per month which is 5640 for first 5 years (=28200 just for administering the policy over the first 5 years. I really do not know what purpose does that solve, but that is a charge which will just eat up that money without any benefit). For the rest of the duration of policy, this charge will be 1200 per year (this is a fixed charge again).
In short, for first year (and if your dad is 60 years of age), the total amount of charges will be 14,200+1050 (for income and money market fund FMC)+5640+2000 (for 2% premium allocation charges) = 22890. Add service tax of 12.36%=total 25720.
Now you decide what you have to do with this policy.