Dhan Suraksha Express is a Unit Linked Insurance Plan (ULIP) from Star Union Dai-ichi Life Insurance Company with the objective of providing financial protection to your family with growth of your investment money. This ULIP is different from others as it is a low term ULIP and offers just two fund options to park your premium in.
Let us do a quick review of Dhan Suraksha Express – we will check its basic features, the charges and what kind of returns it could possibly offer to you.
Review of Dhan Suraksha Express
This is a Type II ULIP. A Type II ULIP is a unit linked insurance plan where you get both the sum assured and the policy fund value on death of the primary insured person. Over and above this, you also get the sum assured attached with the rider if you have taken any.
Here are the basic features of Dhan Suraksha Express.
- The minimum premium can be Rs 15,000 going to a maximum of Rs 1,00,000/-.
- Entry age – minimum 8 years and maximum 60 years.
- Maturity age – maximum 70 years.
- Term – 10 years.
Dhan Suraksha Express boasts of keeping things simple so there are only two funds to invest your money in – Growth Fund and Express Balanced Fund. This is quite a breath of fresh air from other ULIPs available in the market where you have so much fund options, that your head begins to spin. In both of these funds, the percentage of allocation can be between 10% to 100%.
The Growth Fund will always maintain an equity allocation of minimum 40% going upto 100% while the debt portion can be a maximum of 60%. If you think for a moment, this fund is almost like balanced mutual funds.
Similarly, the Express Balanced Fund of Dhan Suraksha Express ULIP can have a maximum equity allocation of 60% while the debt portion can range from 40% to 100%.
Riders – Dhan Suraksha Express offers you the benefit of taking riders either at the beginning of the policy or during its term.
The first one called SUD Life Accidental Death and Total & Permanent Disability Benefit Rider is meant to be paid on death due to an accident. The Total & Permanent Disability Benefit Rider will be paid in 10 equal half yearly installments and not in one go.
The SUD Life Critical Illness Benefit Rider is to be paid if a critical illness is identified. The list of critical illnesses are available with the insurers so make sure you run through them and are aware of what is covered.
Maturity Benefit – You will receive the entire fund value when the policy matures. You can also avail of taking this maturity money over a period of time either yearly, half-yearly, quarterly or monthly.
Loan – A loan can be availed only after 3 years of the policy term has been completed.
Tax Benefit – Under Section 80C you can avail tax benefit. Yearly premium (not more than 1 lakh) will be deducted from taxable income. Under Section 10(10D) death claim is completely tax free.
Investors are scared of charges in ULIPs so let us look at how Star Union Dai-ichi’s Dhan Suraksha Express fares on this front.
Premium allocation charge (PAC) is 7.40% for the first year, 5% for year 2 to year 5 and then 2.50% from year 6 to 10. For any top up premium, the PAC is 2%.
Fund Management Charge (FMC) is 1.35% of fund value for the Growth Fund and 1.30% in case of Express Balanced fund.
Policy Administration Charge – This is a charge calculated at the beginning of each policy month from the policy fund by cancelling units for equivalent amount. The charge is Rs 1.50% of annual premium and increases by 5% each year subjected to a total limit of Rs 3000/-.
Surrender Charges – While there exists a formula to calculate this, it should suffice investors to know that if the premium is less than Rs 25,000, then the surrender charges are a maximum of Rs 3000 in first year, Rs 2000 in second year, Rs 1500 in third year, Rs 1000 in fourth year and zero thereafter. The same figures for premiums of more than Rs 25,000 is Rs 6000 for first year, Rs 5000 for second year, Rs 4000 for third year, Rs 2000 for fourth year and nil thereafter.
Dhan Suraksha Express has been positioned to deliver a simple ULIP with 2 fund options. Do the charges mentioned above and this simplicity make a case for you to buy Dhan Suraksha Express ?
At around 6% and 10% rate of return from the funds that you invest your money in, the below is what your final corpus will be. Do not get carried away by the amount that you get after 10 years of putting in Rs 50,00 each year – what you need to look at the net yield to take a decision. Take some seconds to study the below information.
And now ask yourself the question, would you be willing to put your money into an investment product that gives you that net rate of return ? Of course, if the two funds from Dhan Suraksha Express return more than 10% your net yield will go up for sure but the illustration is what should drive home the point.
If you have already bought this plan then make sure you use the goal based investing approach to tie down this ULIP to your long term goals. Make the mistake of getting out of it in the short term and you will repent !
If you are looking to buy it then check what a equity diversified mutual fund would return to you if you invested money via the systematic investment planning route into it. And then take an informed decision.
What is your take on Dhan Suraksha Express from Star Union Dai-ichi Life Insurance company ? Will you buy it ?
Though this ULIP looks a lot simpler than the other ones in the market which offer hoardes of features and options which are difficult to understand and remember for the common man,it is no different from the others- positioned as a savings product with a life cover (while actually it is the other way round) huge charges and low yields.
Of course, I am in no way suggesting that this is a good product to buy. We advise investors to stay away from ULIPs.