Kotak Life - Kotak Smart Advantage

Kotak Smart Advantage is an insurance cover and an investment plan combined to give you better returns for the future. It is a long term plan where your amount is allocated in market linked funds. Thus you get a good amount of money at the end of term. This builds a good amount of corpus for your future needs. This plan comes with up to 100%* premium allocation. The 100% premium allocation is only from second year that too when the annual premium is over INR 36,000. Point to be noticed is that the first year's premium does not get allocated towards the fund. This plan claims to give up to 275% assured return on the first year's premium. This plan comes with a premium payment term (PPT) of 3 to 30 years.

Benefits:
1. You get assured bonus additions at regular intervals.
2. Tax benefits under section 80C and section 10(10D) of the Income Tax Act.
3. It offers guaranteed returns of up to 275% on your first premium on maturity.
4. The plan offers a choice of top-ups which can be added to your portfolio.
5. There is a choice of paying the premiums at different intervals which are monthly, quarterly, half-yearly and annually.
6. It also a choice of either switching between funds or a partial withdrawal can be made.

Maturity Benefits

Parameters	Minimum	Maximum
Age at Entry	0 years	65 years
Maturity Age	18 years	75 years
Minimum Premium	Regular – Rs 10, 000 p.a., Limited – Rs 36, 000 p.a.

Let us first answer a few questions that would help us in understanding the policy better

1. What do you mean by guaranteed 275% return on first year's premium?
   First year's premium that you pay for the policy does not get allocated to your fund, but will contribute towards fixed return at maturity. This fixed return could be from 100% (for PPT of less than 10 years) up to 275% (for PPT of 30 years). To get this fixed return it is necessary that you have paid all the due premiums. If all the premium are not paid the fixed return is reduced proportionally.
2. Is this fixed return good?
   In case you had put this money in fixed deposit earning a post tax interest of 5%, your money would have given a return of over 400% over 30 years where as this plan is giving only 275%.
3. Does the plan really give 100% premium allocation?
   Technically it does. But as seen in the above two questions this in not entirely true. As the first year premium is not allocated to the fund and gives return far below the average interest rate, considering a 5% post tax interest rate you can assume about 40% of your first year premium is lost. Also from second year 100% allocation is done only if your yearly premium is above INR 36,000.
4. Are there any other charges?
   Like any other ULIP, the following charges are also applicable:
   • Fund Management charges: Between 1.2 to 2.0% of the fund value depending on the type of fund.
   • Administrative charges: Rs. 65 per month (Rs. 780 per year). Can increase by 5% every year.
   • Mortality charges: Comparable to other plans. Get periodically subtracted from the fund value.
   • Surrender charges: Applicable only if policy gets surrendered with in first eight years.
5. Can partial withdrawal be done?
   Partial withdrawal can be made anytime after the third year. Charges of partial withdrawal is same as policy surrender. If more than 10% of the fund value is withdrawn it affects your fixed return at maturity.
6. What are the Settlement options?
   Upon maturity or mortality, the plan gives the option of  lump sum settlement or Equal installment over a period of up to 5 years. This feature becomes important if your policy maturing coincides with fall in stock market. In such a case, you might not want the fund value to be withdrawn. You can opt for equal installment giving your fund to increase in value before settlement.
7. What additional benefits are available?
   Loyalty bonuses, although small, are provided every five years after the tenth year.

Verdict

1. The plan claims to give fixed return, which is small as compared to a fixed deposit even for a PPT of 30 years. It is even worse for shorter PPT.
2. This plan also claims to give 100% premium allocation but does so only from the second year
3. Gives loyalty bonus every five years starting from the tenth year.
4. Has option of top-ups. Allows you to invest some extra amount in your policy if you feel it appropriate.
5. Gives option of investing in three different funds: Aggressive, Cautious and Conservative funds.

Overall the plan is worth investing only if you are ready to give a long term commitment as shorter PPTs will reduce your fixed return of the first year's investment. If you are one of those who like to time the market by investing extra in top-ups and delaying settlement, this can be a good plan for you. Please read the offer document carefully before investing.

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