Birla Sun Life Insurance - Rainbow is a single premium insurance plan with guaranteed returns at the end of the policy term. The guaranteed returns are determined by the premium amount chosen by the policyholder, age at the time of policy purchase and policy term. Investors can choose between 5 years and 10 years as the policy term. The life cover (sum assured) offered is 5 times the amount of single premium paid by the policyholder.
Key Features - The scheme returns a maturity sum assured (MSA), guaranteed monthly additions and a guaranteed final addition as the maturity benefit at the end of the policy term. The guaranteed monthly additions are calculated at rates fixed by the insurance company from time to time. The current rates for guaranteed monthly additions range from 7.9% to 8.8% for the 10-year policy term and 6.35% to 7.25% for the 5-year policy term.
Surrender Value - The policy can be surrendered after the first policy year in which case the policyholder shall receive 90% of the MSA and guaranteed monthly additions accrued till the date of surrender. MSA is determined as a percentage of single premium (SP), ranging from 92.98% to 61.24% of SP for males and 92.93% to 69.83% of SP for females depending upon the entry age and policy term.
Return Analysis - Assuming investment by a 30-year-old male individual for a policy term of 10 years, the returns that will accrue to him are illustrated herewith…
Birla Sun Life Insurance — Rainbow can be construed as a savings plan with insurance as an add-on benefit. As a savings product, the plan generates tax-free returns broadly comparable with the post-tax returns of a bank fixed deposit at the highest tax slab. For instance, if the investor were to invest in a bank term deposit @ 9.5% (offered by State Bank of India for 10 years) and bought a term plan for the insurance cover, the net gains, post tax and premium paid for term plan, would be about 7.35% at the highest tax slab. The scheme can thus be considered as an alternative investment option to the bank term deposit. However, those seeking a higher amount of life cover should buy a term plan at nominal premium charges instead.
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