Let’s do a small quick review of Tata AIA Fortune Guarantee Plus. Let us see if its going to change your fortune in guaranteed way.
As with any insurance plans, there are multiple options available to confuse users. However underlying returns do not change much. So we will take one use case and check IRR or kitna deta hai?
What is Tata AIA Fortune Guarantee Plus Plan?
This plan is basically an savings plan. What I mean is returns are not market linked. When you buy the plan, you would know exact amount that you would get. So if peace of mind is your prime concern, this addresses that need.
There are two options to pay premium. Regular and Single pay. Let us take example of Single pay. In this case, you will pay certain amount upfront to Tata AIA. Say 10 Lac.
Then there will be cooling period of six years . In this period, you will not pay or get any amount in return. Only in case of death, sum assured would be paid back. Sum assured will be 10 times premium. So 1 Cr in this example (10lac x 10).
From 7th year onward, you will start receiving fixed sum (as decided at the time of buying policy). This payment would continue for selected number of years (between 20 to 35).
You can nominate a person to receive the amount if something happens to you. Nominee in turn can nominate someone to get amount in his / her death. So overall plan would pay agreed amount for agreed years.
At the end of all the years, your premium paid would be returned back to you or nominee.
What are returns of Tata AIA Fortune Guarantee Plus plan
Review of Tata AIA Fortune Guarantee Plus is incomplete if we don’t talk about returns. So let’s see it’s IRR or Internal Rate of Return.
There are multiple options to chose from. For simplicity, I am taking three cases, to give you feel of expected returns.
I have taken Single Pay option for Female person. Premium I have taken as 10Lac. So including taxes, you will need to pay 10 Lac 45 thousand upfront.
Payout period I have taken as 25 years (you can chose between 20 to 35)
First Case / example : 30 Year old – If you see below, person would get 72,900 every year for chosen payout period. In our case 25 years. Premium of 10Lac will also be returned at end of policy term. XIRR or returns comes around 4.95%
Second Case : 40 Year old- If you see below, person would get 70,300 every year for chosen payout period. In our case 25 years. Premium of 10Lac will also be returned at end of policy term. XIRR or returns comes around 4.80%
Case 3 : 50 Year old – If you see below, person would get 60,100 every year for chosen payout period. In our case 25 years. Premium of 10Lac will also be returned at end of policy term. XIRR or returns comes around 4.17%
So overall returns of Tata AIA Guarantee Plus Plan are around 4.2% for older people and younger person getting nearly 5%. Being insurance plan, returns are tax free as of now.
This is a guaranteed return plan so naturally returns are low. For moderate and aggressive risk profile people, this is simple NO.
Plan is only suitable for very conservative investors. People who still invest in Bank Fix Deposits, can look at this plan as returns are tax free. Also looking at decline in interest rates, if you want to lock at current interest rate, then this is one of the options. Being insurance product, payout is tax free and will beat bank FD returns over long run.
Don’t look at it as insurance plan. Its purely regular payout plan for fixed years under insurance umbrella to get tax benefit.
There are many other options like regular pay, riders. Also your age will pay important role in getting that little extra or less returns.
Ideally buy in name of your wife (younger) and make yourself nominee. This will help you get little better returns. If you decide to go for this plan, do try out few combinations using XIRR calculator in my other blog. Select one with better returns.
Looking at returns though, name Fortune Guarantee seems little misleading. May be they are referring guaranteed fortune for Tata AIA. You can read more about plan from Tata AIA themselves.
Happy reading & happy investing.