Summary
The SBI Life Smart Wealth Builder policy is a unit-linked insurance plan that offers both life cover and investment options. It has three variants and allows investors to choose from 11 different funds. The death benefit is based on the highest value among fund, sum assured, and 105% of total premium. The maturity benefit varies depending on the rate of return, with the worst-case scenario generating a 2.26% return and the best-case scenario generating a 6.01% return. Comparisons with other investment options, such as PPF and ELSS mutual funds, show that the SBI Life Smart Wealth Builder plan may not be the best choice for long-term investors.
SBI life smart wealth builder policy will this policy help you build wealth smartly will this help you get adequate life core let us analyze and evaluate this financial and investment decision before evaluating or analyzing this particular policy let us understand the key features of this policy sbi life smart wealth builder is a unit linked insurance plan that means it is market length the premium collected will have two portions.
The first portion goes towards getting you life cover mortality charges and the second portion goes towards investment that investment portion is invested in stock market and money market based on the funds you choose so as it is invested in stock market there can be ups and downs that can be volatility there is a risk component in this product this particular policy has got three variants on a single premium you pay premium and wait for some time and on which you do get back the value our limited premium payment term you pay premium regularly for a fixed period after that wait for a set of period and on maturity get back the maturity value third option is you pay premium till maturity period then on maturity without waiting further you get back the maturity value all the three options are available in this policy and this policy gives you life cover throughout the policy term for the first five years there is no policy administration fees on sixth year onwards policy administration fees will be charged the first 10 years there will be premium allocation charges after 11th year there will not be any policy allocation charges under section 80c you can get the benefits tax saving benefits
The investment portion of this particular policy will be invested in 11 funds of your choice they will give you 11 funds there are funds which will invest only in equity 100 percentage in equity they can invest it is available there are funds which will invest predominantly in fixed income schemes that is also available and in between different ratio of equity and fixer income allocation is available there are funds which focuses only on mid cap there are funds which focuses on top 300 theme so different things are available based on your specific requirement you can pick and choose the fund combination if you are an aggressive investor you can choose 100 equity if you are a very conservative investor you can choose only fixed income scheme or as a combination you can pick and choose also like some portion you could be some portion in fixed income also you can pick and choose the death benefit from this policy is the highest of these three values one is fund value second one is basic summation third one is 105 of the total premium spread out of these three values whichever is higher that will be given to the nominee in case of unfortunate death of the policy holder
As we have looked at the key features and also the death benefit now we will move on to the maturity benefit this particular policy can be assessed in a worst-case scenario and also in a best-case scenario SBI Life’s website has generated a benefit illustration based on that benefit illustration in the worst case scenario if the fund itself generates four percentage kind of return then what will be the net return for an investor if an investor is paying 50 000 rupees every year for 30 years and on maturity at a four per cent grass return it accumulates to 21 lakhs 74 000 approximately it works out to an IRR of 2.26 percentage written in the worst case scenario it generates you 2.26 percentage return which is less than your savings bank account interest rate in the best case return
SBI life’s websites benefit illustration assumes they will be able to generate eight percentage kind of pattern at a eight percentage grass return the money will be [Music] generating approximately to 42 lakhs 50 000 rupees paid for 30 years and maturity it works out to 42.95 lakhs so it works out to the net return for an investor it is six percentage return six point zero one percent digit in a worst case scenario it is generating you 2.26 percentage return which is less than your savings account and in a best case scenario it is giving you six percentage return which is comparable to your bank fd kind of return this is a good return uh six percent may be a kind of decent return if you are comparing it with an a fd but remember this product invest in stock market takes risk so is six percent is a risk adjusted return no or do we take risk and invest in stock market because we want to beat inflation two percent or six percent is definitely not sufficient to beat inflation and money is locked for long term right 30 years even after locking your money for 30 years it is generating you six percentage so this is not a very good long term return also so money value is getting errored you lose your purchasing power by investing in this product so to get much more better clarity let us compare this product with few other investment options so that we will get clarity
Let us compare the debt fund version with PPF and term insurance this policy gives you life cover and a majority benefit so this combination of term insurance and ppf also gets you life as well as maturity benefits let us see how it works the 50,000 of this premium is divided into two portions 10500 goes towards term insurance premium balance 39500 goes towards investing in ppf is the government-backed fixed income investment as of now the interest rate is 7.10 percent if someone is paying for 30 years then on maturity it works out to 40.6 lakhs 40 lakhs is the maturity value from ppf even after getting one crore cover from term insurance the same money invested in uh bond fund of this particular plan works out to 23.97 tax even a very safe government investment like ppf and a combination of with term insurance has got the potential to generate 40.68 lakhs which is close to 17 lakhs higher so do we have to invest in this policy before you take your decision
Let us see one more comparison let us compare this plan with the combination of Elss mutual fund and term insurance right Elss mutual fund also invests in stock market so it can go up and down volatility is that in the past else’s funds have generated 12 percentage kind of freedom so we are taking 12 percentage as the rate of pattern assumption for the else’s mutual fund again here the money is divided into two portions fifty thousand rupees dividend two ten thousand five hundred is going towards buying term insurance policy balance 39500 is invested in elss mutual fund after 30 years on maturity it works out to one crore it works out to one crore whereas in equity fund option of the sbi well builder plan it works only to 45 lakhs there seems to be a huge difference even after paying tax for elss mutual funds uh long-term capital gain it works out to 97.7 lakhs so there seems to be a huge difference 45 lakhs and 97 lakhs close to 50 lakhs is the additional gain by investing in elss mutual fund so this uh elss mutual fund return seems to be a much higher written for an investor definitely this helps you beat inflation this is definitely a good risk adjusted rate of item again this is a very good wealth compounder for a long term investor
So we have compared this product with the PPF as well as elss what you should do as an investor now as an investor who has been investing for long term five years plus if you are an aggressive investor risk-tolerant investor then go for a combination of term insurance plus elss mutual fund or if you are a very conservative investor who want to avoid risk then in the case go for ppf and term insurance combination instead of sbi smart wealth builder plan
So do you have to invest in this plan or avoid this plan in a nutshell because it is a long-term plan and invested in the stock market taking a risk but it is delivering very lesser return six per cent or 2.26 per cent return definitely this policy is not going to help you beat inflation or is not going to give you a good risk adjuster data so obviously you have to avoid this policy and either go for a term insurance plus ppf combination after mentions plus mutual fund combination we have done an in-depth analysis about this particular policy
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