HDFC Progrowth Plus Review – Should I Surrender?

Would you ever buy a product if your agent tells you bluntly that the product charges are extremely high? In the first 2 years, the charges are around 7 %, and for the next 3 years, they are around 5%. Whereas the charges go as high as 9.9% from the 6^th-10^th year. This is the actual reality of the HDFC Progrowth Plus Plan – a ULIP by HDFC Life. So, here’s the HDFC Progrowth Plus Review at the beginning of the article – Do not buy it at any cost. Irrespective of the high returns and tax-free options being presented by your agent, just do not buy it. Once stuck, you would not be able to come out of this product for a period of 5 years.

When it comes to buying mutual funds, people usually wonder whether they should buy a direct plan or a regular plan. It’s so because there’s only a slight difference of 1-1.5% in the fund management charges. The regular plan’s fund management charges are 1-1.5% higher than the direct plan of mutual funds.

Nonetheless, this ULIP is still being sold like hot cake, yes, with such high charges. It could be that people are ignorant or greedy. But the insurance companies are equally responsible for taking the customer for a ride. They design the product is such a complicated manner that you would never be able to identify the charges.

HDFC Progrowth Plus Review & Charges

Now that we have begun, let us try to understand the charges first. Here’s a screenshot of charges taken from the brochure of HDFC Progrowth Plus Plan.

Source of Charges : HDFC Life website

Premium Allocation Charges

In the first year, the company deducts an amount equivalent to 2.5% of your total premium. Whereas for the second year, the premium allocation charges are 2%.

If you are paying a premium of 50,000 per annum, Rs. 1250 will be deducted in the first year. And, Rs. 1000 would be deducted in the second year. After these two deductions, there would not be any premium allocation charges for the entire policy term.

You know, nowadays, the insurance companies have started playing very smart. When people started becoming aware of the premium allocation charges, the companies made a quick shift to policy admin charges. Let us analyze the policy admin charges.

Also Read : ICICI Pru Elite Life Super Review

Policy Admin Charges

For the first 5 years, it is 0.42% of the annual premium charged per month. (i.e. 0.42% of your total annual premium per month.) So, if we multiply it by 12 to calculate the annual policy administration charges, it wouldd be 5.04% per annum.

To simplify it, you’ll pay policy admin charges of Rs. 2520 on a premium of Rs. 50,000 per annum.

Policy Admin Charges = (12*0.42*50000)/100= Rs. 2520

What about the policy admin charges after 5 years? The company is, in fact, increasing it to .83% of the annualized premium charges per month. That is a whopping 9.96% per annum.

Suppose you are paying a premium of 50,000 per annum. In this case, Rs. 4980 would be deducted as policy admin charges from the 6^th-10^th Year.

Tell me, would you ever buy this policy if the insurance agent would have told you about these charges beforehand?

On top of all that, HDFC Life is playing extremely smart as far as designing the policy is concerned. First, the maximum premium  is 1 Lakh. The policy wordings state that the maximum amount that can be charged towards policy admin charges is 500 per month. By capping the premium amount, the company is ensuring that you’ll pay minimum charges of 6% between the 6^th-10^th year.

HDFC Progrowth Plus Returns

Here’s the table of charges – If you buy HDFC Progrowth Plus plan with an annual premium of 50,000.

Premium Payment Term – 10 Years

Policy Term – 10 Years

As you can see, the product is deducting so many charges for a continuous span of 10 years. Now, the question is – how can such a product offer returns? Either the fund manager should do exceptionally well or you should be lucky enough to get even 6-7% returns.

Should I Surrender the Policy?

I have already bought the policy and paid the premium for 2-3 years? In such a case, should I surrender the policy or continue with it?

Let me ask you a very simple question. If a product is deducting 10% of your premium as charges, how will you get returns?

I can understand that if the charges are going down, the chances of earning returns may be higher. But the charges in this policy are only increasing with time. It may even eat your previous returns as well if you choose to continue with the policy. My only suggestion for this product is, even if you bought it, surrender it immediately. It’s totally useless to continue with a product in which the charges are so high.

I have not considered the fund management charges which are around 1.35%. While in the direct plan of mutual funds, the charges are even less. Additionally, there are mortality charges and GST on it.

And please do not simply go by the NAV of life insurance products. It’s not at all like mutual funds. NAV, in life insurance products, is shown before the deduction of charges such as premium allocation and policy admin charges. For example, the NAV of a particular fund is showing a return of 9%. In such a case, there are high chances that your product might not even be delivering 6%.

Furthermore, those who have already bought the policy can easily make a comparison. They can compare the actual returns with the returns of a particular fund listed by the insurance company on their website.

In the end, I would like to say one thing – The money is yours, so take a wise decision. Insurance is for protection, not for investments. This is my opinion about HDFC Progrowth Plus review, what is your experience with the plan, please share.