Ulips with health benefits are a costly affair

Buy health and life policies separately

Wealth creation plus medical cover – the new theme of Tata AIA Life Insurance ‘Suraksha Kosh’ – tries to attract customers with twin covers through a unit-linked insurance plan (Ulip) and health benefits. But in its attempt to offer too many things, it ends up being more expensive, even if one were to buy both the covers separately.

The premium of Tata AIA’s ‘Suraksha Kosh’, is Rs 25,000 for a 40-year term. This product will pay a sum assured (SA) of Rs 10 lakh each for death benefit, critical illness and accidental benefit. Additionally, it also offers to pay a sum assured of Rs 3.5 lakh for surgical benefits. In total, it covers an individual for Rs 33.5 lakh, provided you pay the stipulated premium every year for 40 continuous years.

Suresh Sadagopan of Ladder 7 Financial Advisory Services says such plans turn out to be expensive instead. “One should rather buy a pure protection plan and a medical policy, which will offer other benefits at a lower cost, too. If one wants to create wealth, investing in Ulips is not the only way.”

One can save as much as up to Rs 10,000, if the benefits are bought separately from specialists. Taking a similar example mentioned above, one has to pay Rs 3,540 towards a life cover (for SA of Rs 30 lakh), Rs 3,052 for accidental benefit (for SA of Rs 25 lakh), Rs 2,809 for critical illness (for SA of Rs 10 lakh) and Rs 800 for surgical benefits (for SA of Rs 3 lakh).

In total, one pays Rs 10,000 approximately for the same benefits with an equivalent or more sum assured/cover.

There are others such as ICICI Prudential Life Insurance which has a similar product ‘ICICI Pru Health Saver’ which gives hospitalisation benefit as well. Whereas HDFC Life and Kotak Life Insurance are among few other life insurers who offer similar Ulips but benefits have to be bought in the form of a rider unlike in Tata AIA where the benefits are in-built. Also, HDFC’s ‘SL ProGrowth Super II’ doesn’t give surgical benefits. Some also offer waiver of premium and hospital cash.

In other words, these are savings and wealth creating plans built on protection products. One has the option to choose from these plans. That is, death benefit remaining constant in such products, one can choose to combine it by adding one or all of these benefits (surgical, accidental and critical illness). These benefits in Tata AIA are in-built in the product and are not sold separately as riders.

Suresh Mahalingam, managing director, Tata AIA Life, says, “Our new product gives people an opportunity to get the best from their investments on a market-linked platform, without worrying about the risk of death, dismemberment and onslaught of medical exigency like a critical illness.”

Experts say, investing in such wealth creating products has its flip side, too. They require a long-term commitment as compared to yearly renewals required in a term and a medical policy. For instance, your Ulip policy gets lapsed, there are chances you will lose out on all the benefits you paid for in the previous years. However, the new rule now enables policyholders to revive a lapsed Ulip policy within two years from its premium due date.

However, these policies offer a term, which is usually from 15 to 40 years and is available to individuals from the age 18 to 50 years with maximum maturity age of 65. Premiums paid under such plans are eligible for tax benefits under Section 80C, 80 D and 10(10D) of the Income Tax Act, 1961.