As we all know that the majority of the insurance products are sold using marketing strategies which mislead the people. Such strategies make it appear as if these insurance products offer 7%-8% returns whereas that’s not the case in reality. Before getting into HDFC Life Sanchay Plus review, here are the returns in different options of the product, without GST. But if you really want to know how this product-cum-trap has been designed to fool you, read till the end.
- Guaranteed Maturity Option – Returns – 5.5%
- Guaranteed Income Option – Returns – 5.7%
- Life Long Income Option – Returns – 6%
- Long Term Income Option – Returns – 6.1%
“Get Guaranteed payouts and create a legacy for your family starting at 2500/- per month with HDFC Life Sanchay Plus.” This is precisely the add which is being aggressively run on Facebook by HDFC Life. I am sure that you also would be seeing the same in your newsfeed. This article is all about HDFC Life Sanchay Plus review and returns. At the end of the article, you can decide whether HDFC Life Sanchay Plus is a good or bad product.
HDFC Life launched Sanchay plan last year. Sanchay Plus is an extension of HDFC’s existing plan and it has some new features.
Also Read : HDFC Life Sanchay Review
HDFC Life Sanchay Plus Options
Coming back to HDFC Life Sanchay plus review, there are 4 options in the plan.
- Guaranteed Maturity – Where you can pay the premium for 5/6/10 years. The maturity benefits would be paid as a lump sum after the completion of 10/12/20 years.
- Guaranteed Income – In this option, you pay a premium for 10/20 years. A guaranteed income is paid as maturity benefits from the 12th-21st year and the 14th– 25th year. (i.e. maturity benefits are paid as a guaranteed income for 10/11 years).
- Life Long Income – It’s a kind of different variant where you can pay a premium for 5/10 years. The income would be life long till 99 years from the 6/10 years.
- Long Term Income – Again, you can pay a premium for 5/10 years but the number of years is fixed for maturity payout. The payout is 30 years in a 5-year term whereas for a 10-year term it is 25 years.
In all the variants of Income, there is a gap of 2 years between the premium payment term and payout period. In simple words, you will start getting benefits only after the 2nd year of paying all the premiums.
HDFC Life Sanchay Plus – Details
I hope, I don’t have to explain the eligibility criteria of the plan such as age group, the sum assured, etc. However, if you still want to check, here it is.
HDFC Sanchay Plus Review and Returns – Good or Bad One
Take a look at this screenshot which lists the various options from HDFC Life Brochure.
Now, Let us review the options one by one.
Option 1 – Guaranteed Maturity Review
Let’s say, Ajay, who is 30-year old, buys the plan and invests 1,00,000 per annum for 10 years.
At the end of the 20th year, he will get the sum assured. The sum assured is equal to the total premiums paid and guaranteed additions as per the company’s defined age brackets.
Ajay will get Rs.23.1 Lakhs at the end of the maturity period.
The returns in the policy – 5.5%
I have considered the 10-year option because it offers the maximum returns.
Furthermore, the returns also depend on your age. Someone who is between the age of 56-60 will get only around 5.2% returns.
Another point to be noted is that this is not inclusive of GST. After including the same, the returns will come down even further.
My View – Just do not buy this guaranteed maturity option.
Where is the catch? – The company starts providing bonus from the 8th year onwards. No bonus is paid from the 1st-7th year.
Having discussed the first one, let us move on to the 2nd option.
Option 2 – Guaranteed Income Review
Ajay pays a premium of 1 Lakh for 10 years. The company starts paying 1.95 Lakh every year from the 13th year onwards for 10 years.
The returns in the policy – 5.7%
This is applicable only if Ajay is aged between 5-50. What if Ajay is buying a policy between the age of 51-60?
Ajay pays a premium of 1 Lakh for 10 years. The company starts paying 1.85 Lakh every year from the 13th year onwards for 10 years.
The returns in the policy – 5.3%
The same is with the 12-year option in the plan.
Returns are 5.7% if you are aged between 5-50 whereas they’re 5.3% if you are aged between 51-60 years.
My View – Just do not buy this guaranteed income option.
Where is the catch? – After paying a premium for 10/12 years, there is a 2-year gap in which no payout is made. That brings the returns down.
Option 3 – Life Long Income Review
Ajay, who is 50-year old pays a premium of 1 Lakh for 10 years. The company starts paying 95,000 every year from the 13th year onwards till Ajay turns 99. If Ajay survives till age 99, all the premiums are paid back.
(All benefits would be paid to the nominee if the person who took the policy dies during the payout period).
The returns in the policy – 6.1%
If you include 4.5% GST in the first year and 2.25% in the remaining, the returns are 6%. (Though Tax-Free).
Where is the catch? – The returns would be 6.1% only if you survive till the age of 99. Moreover, life expectancy in India is still not 99 years.
Assuming a life expectancy of 85 years, the returns in the policy would only be 5.7%.
Here is the sequence of returns based on your life expectancy:
Life Expectancy – 75 Years – Returns – 5.2%
For Life Expectancy – 85 Years – Returns – 5.7%
Life Expectancy – 99 Years – Returns – 6%
The plan is not being offered to people below the age of 50. Hence, life expectancy calculations have definitely been done by the company.
My View – 6% returns are not bad but you will get 6% returns only if you live till age 99.
Also Read: LIC Jeevan Shanti Review
Option 4 – Long Term Income Review
Ajay pays a premium of 1 Lakh for 10 years. The company starts paying 1 Lakh every year from the 13th year onwards for 25 years.
The returns in the policy – 6.1%
With GST included, the returns would be around 6%
Where is the catch? – The payout actually starts from the 13th year and not the 12th. The product shows the first premium payment as zero-year.
My View – You can go for this options as 6.1% tax free returns are not that bad.
Purchase only if you need a long term income. You will incur loss if, at any point of time, you thought of surrendering the policy.
Where Is The Biggest Trap?
We will now discuss the last 2 options of life long income and long term income here. Since these 2 options show returns of only 6%, people feel happy, especially NRIs, with tax-free returns.
The returns in life long income option depend on your life expectancy as I have explained above. The returns will reduce i.e. will come out as 5.7% only if your life expectancy is 85 years.
The second and the most important point – You would never be able to escape the trap of this product. You are going to get stuck. Let me explain to you how.
If you die in between the policy term, your nominee will get the sum assured. The same feature is there in almost every insurance policy except for pension policies.
But if you die during the payout period, the nominee will get the same benefits as per the policy term.
What if you want to withdraw the lump sum amount at maturity? What if the nominee wants to withdraw the lump sum amount after the death of the life assured? This is the policy wording and thus, the biggest trap.
“On the maturity date, you shall have an option to receive the Guaranteed Sum Assured on Maturity, which under this option, shall be the present value of future payouts, discounted at a rate of 9% p.a.”
Do you know what it means – If you have paid 1 Lakh premium for 10 years and want to get a lump sum option at maturity. You will get the amount at a 9% discount rate which can further increase. If you want a lump sum after paying a premium of 10 Lakhs in 10 years, you’d get only 10.9 Lakhs.
Returns – 1.1%
You must have heard about the power of compounding; this is the power of discounting.
If you want to invest only for tax-free purposes, give it another thought. You can never come out of the trap laid by this product as you would never have an option to get the lump sum amount back.
This was my view on HDFC Life Sanchay Review, what is your view? Also, Feel free to get in touch if you want to share any thoughts regarding this product. We would be more than glad to hear you voice your opinion!