Monday, June 10, 2013

Aviva Life Insurance LifeSaver Plus Review

One Mr. Shah a neighbour of mine showed me his policy taken from Aviva Life Insurance Lifesaver plus with Balanced Fund = 100%. He was purchasing a flat and wanted to surrender and see how much will he get back. He had paid 4 installment of Rs. 50,000 totalling to Rs. 2,00,000.

The details of the policy are as follows.

Base plan = 2,50,000
Policy Term = 20 years
Annual Installment = 50,000
policy start date = November 2009
Balanced Fund = 100%

1. policy admin charges : Rs. 660 First year (Rs 52 per month )
2. Fund Management charges : 1.25% per annum for balanced fund
3. Premium Allocation charge : (White collar Robbery)
      a) Rs 20,000 First year (40% of first year premium)
      b) Rs 15,000 second year (30% of 2nd year premium)
      c) Rs   2,500 third year (5% on third year premium)
      d) Rs  1,000 fourth year onwards (2% on fourth year premium)
4. Mortality charges as per age mortality column

1st year :
Amount invested : 50,000
Total charges : 22,327
Actual Investment : 27,680
Fund value: 30,552  ( Even at 10% return it will only be around 30,552)

2nd year
Amount Invested : 50,000
Total charges : 17,968
Acutal investment : 32,032
Fund value : 68,988

3rd year
Amount Invested : 50,000
Total charges : 6,326
Actual investment : 43,674
Fund value : 1,24120

4th year
Amount Invested : 50,000
Total charges : 5,774
Actual Investment : 44,226
Fund value : 1,85,423

So even after 4 years of investing Rs 2 lakhs you will end up with a fund value of Rs. 1,85,423

Now if you want to surrender this policy you will get back only Rs 1,39,423 because you have to pay there surrender charges which is 25% of the fund value after 4 years.

Had he invested in PPF or even simple Fixed Deposit he would have got 2 lakh plus as ppf gives more then 8%, he would have easily got more then 2,43,330 Approx  (Balanced mutual fund or debt fund would have also given more then this because they have total charges cap of 2.5%)

He has been robbed of  Rs 1,03,907 (2,43,330 - 1,39,423)

Who is responsible for this day light robbery ?
1. IRDA (regulator who regulates such policy)
2. Company ( who design this products )
3. Agent  (who mis-sold the policy)
4. customer (who did not read the policy before buying)

The interesting part about this is the initial document has all this charges written in black and white in fine print.

All I can say is BE AWARE of such legalised fraud

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