ICICI Pru Future Perfect – ICICI Prudential – Is it good to buy?

ICICI Pru Future Perfect

Before reviewing the product let me share some info about it’s past CEO Mrs. Chanda Kochar. Chanda Kochhar is the former MD and chief executive officer of ICICI Bank . She stepped down from her position following allegations of corruption. Amidst investigations related to Videocon bad loans, she was forced by the board of ICICI Bank to take indefinite leave. The Central Bureau of Investigation named Chanda Kochhar and her husband as beneficiaries in the financial fraud.

The Justice B N Shrikrishna probe panel reported that Kochhar had violated ICICI Bank’s Code of Conduct, following which her service was terminated with all her entitlements and benefits revoked. Although she is no more, how can one track a company whose CEO is not trust worthy and involved in financial fraud.

Following are the salient features of ICICI Pru Future Perfect Plan

• It is a non-linked policy that offers guaranteed returns on investment.
• The policy provides guaranteed additions and tax-free maturity benefits.
• The policy provides life cover for 10 times the premiums paid to protect your family in case of the untimely death of the life insured.
• Policyholders can avail tax benefits on the maturity amount and premiums paid towards the policy.

Death benefit: ICICI Pru Future Perfect Plan pays a death benefit to the nominee in the event of the death of the policyholder. The death benefit paid is either sum assured plus guaranteed additions and bonuses, or minimum death benefit, or Guaranteed Maturity Benefit including Guaranteed Additions and Bonuses, whichever is higher. The minimum death benefit is equivalent to 105% of all premiums paid.

Maturity benefit: If the policyholder survives until the end of the policy term, the maturity benefit is payable, provided all due premiums are paid. Maturity benefit is payable as guaranteed maturity benefit along with guaranteed additions and other bonuses, or 100.1% of the annual premium, whichever is higher. Guaranteed Maturity Benefit is decided at the time of policy commencement, and it depends on the policy term, premium payment term, age and gender of the policyholder. Guaranteed Maturity Benefit (GMB) may be lower than your Sum Assured on death.

Surrender benefit: ICICI Pru Future Perfect Plan acquires a surrender value once the premium is paid for three full years in case of premium payment term of 10 years and above. For premium payment term below 10 years, the surrender value is acquired after 2 years of premium payment.

Bonus: The company offers a reversionary bonus under this plan, which is announced every year and gets added to the plan. The bonus amount depends on the returns earned by ICICI Pru Life Insurance. Though the bonus is announced each year, it is paid only at the time of policy maturity or death of the policyholder. The way the reversionary bonus is applied is different from other traditional plans. In this policy, the bonus is announced as a percentage of Guaranteed Maturity Benefit + all accrued reversionary bonuses paid earlier under your plan.

Terminal bonus is applicable in the year of maturity or death of the policyholder.

Our review: Let’s assume one is taking this policy term for 25 years and your premium payment duration is 20 years and you choose to invest Rs.1,00,000 per year.

So, in the policy term of 25 long years, you are getting the average return of just 7%.

Please note it is the best interest rate of this policy, as we have assumed the ARR of 8%.

If we consider the Assumed Rate of Return (ARR) as 4%, the average IRR comes down to 3%!!

On average, you can expect your returns to be somewhere between 3% to 7%!!

ICICI claims of guaranteed benefits, you can clearly see that ONLY your principal is guaranteed, and returns are NOT GUARANTEED!!

You can clearly see how much money you are losing if you choose to invest in this plan ( ICICI Pru Future Perfect)

Your guaranteed sum will be Rs.20,60,368 and you will never know how much-estimated bonus you will finally get out of Rs.26,46,231!! Even if you get the full bonus, your rate of return is still 7%!!

Now, you may also find your bank insisting you to buy this product. Be aware of their misselling. And, understand why your bank wants you to invest in such insurance policies.

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