HDFC Life Smart Protect Plan

Plan Options in HDFC Life Smart Protect plan

This product offers 4 plan options that you can choose from depending on your Protection and Saving needs:

Option A: Level Cover

This plan option provides a level cover throughout the policy term.

Option B: Level Cover with Capital Guarantee

This plan option provides a level cover throughout the policy term. The policyholder also gets a Capital Guarantee, which is in the form of a minimum Assured Benefit at maturity.

Option C: Decreasing Cover

Under this plan option, the cover would decrease with the policy year. This is subject to the ‘Level Cover Period’, chosen by the policyholder at policy inception.

Option D: Decreasing Cover with Capital Guarantee

Under this plan option, the cover would decrease with the policy year. This is subject to the ‘Level Cover Period’, chosen by the policyholder at policy inception. The policyholder also gets a Capital Guarantee, which is in the form of a minimum Assured Benefit at maturity.

HDFC Life Smart Protect Plan -Investment Strategy Review

For Plan Option A (Level Cover) and Plan Option C (Decreasing Cover)

The following 5 fund options are available under the product. Policyholder may choose to put his/her premiums in one or more of these funds in the proportion he/she desires and can change this allocation during the policy term according to the fund performance.

For Plan Option B (Level Cover with Capital Guarantee) and Plan Option D (Decreasing Cover with Capital Guarantee)

For these funds, the premium received will be allocated to the ‘Capital Growth Fund’ and the ‘Capital Secure Fund’ only. The allocation proportion and any rebalancing in these funds will be solely determined by the company.

Benefits Payable Under Various HDFC Life Smart Protect plan Options

Option A: Level Cover

Death Benefit

“Death Benefit” is payable as a lump sum if the life assured dies during the policy term.

Subject to the Policy being in force and all due premiums having been paid.

The Death Benefit payable to the Policyholder/ Assignee/ Nominee shall be the highest of the following:

• Total Sum Assured less partial withdrawal made, if any, where Total Sum Assured is Basic Sum Assured plus any additional Sum Assured in respect of Top-ups; or
• Fund value, or
• 105% of Total Premiums Paid.

Maturity Benefit

On survival of the Life Assured till the Maturity Date, subject to Policy being in force on the Maturity Date.

The risk cover shall cease and Fund Value at Maturity plus Loyalty Additions payable at Maturity shall be payable to the Policyholder as the maturity benefit.

Option B: Level Cover with Capital Guarantee

Death Benefit

“Death Benefit” is payable as a lump sum if the life assured dies during the policy term.

Subject to the Policy being in force and all due premiums having been paid.

The Death Benefit payable to the Policyholder/ Assignee/ Nominee shall be the highest of the following:

• Total Sum Assured less partial withdrawals made, if any, where Total Sum Assured is Basic Sum Assured plus any additional Sum Assured in respect of Top-ups; or
• Fund value, or
• 105% of Total Premiums Paid.

Maturity Benefit

On survival of the Life Assured till the Maturity Date, subject to Policy being in force on the Maturity Date, the risk cover shall cease and Loyalty Additions payable at Maturity Benefit shall be payable to the Policyholder.

The maturity benefit will be calculated as a higher of

• Fund Value at Maturity plus Loyalty Additions payable at Maturity,
• Assured Benefit (Total Premiums Paid less Total Partial Withdrawals made (if any)).

Option C: Decreasing Cover

‘Level Cover Period’ is the period of the initial policy year(s) during which cover would remain level. The Level Cover Period can be between PPT to (Policy Term less 5) years.

From the policy year following the ‘Level Cover Period’, the cover would decrease uniformly every year, subject to it being more than or equal to the Minimum Basic Sum Assured at any point in time.

Death Benefit

“Death Benefit” is payable as a lump sum if the life assured dies during the policy term.

Subject to the Policy being in force and all due premiums having been paid.

The Death Benefit payable to the Policyholder/ Assignee/ Nominee shall be the highest of the following:

• Total Sum Assured less partial withdrawals made, if any, where Total Sum Assured is Sum Assured applicable in the year of death plus any additional Sum Assured in respect of Top-ups; or
• Fund value, or
• 105% of total Premiums paid.

Maturity Benefit

On survival of the Life Assured till the Maturity Date, subject to Policy being in force on the Maturity Date.

The risk cover shall cease and Fund Value at Maturity plus Loyalty Additions payable at Maturity shall be payable to the Policyholder, as the maturity benefit.

Option D: Decreasing Cover with Capital Guarantee

‘Level Cover Period’ is the period of the initial policy year(s) during which cover would remain level. The Level Cover Period can be between PPT to (Policy Term less 5) years.

From the policy year following the ‘Level Cover Period’, the cover would decrease uniformly every year, subject to it being more than or equal to the Minimum Basic Sum Assured at any point in time.

Death Benefit

“Death Benefit” is payable as a lump sum if the life assured dies during the policy term. Subject to the Policy being in force and all due premiums having been paid, the Death Benefit payable to the Policyholder/ Assignee/ Nominee shall be the highest of the following:

• Total Sum Assured less partial withdrawals made, if any, where Total Sum Assured is Sum Assured applicable in the year of death plus any additional Sum Assured in respect of Top-ups; or
• Fund value, or
• 105% of total Premiums paid.

Maturity Benefit

On survival of the Life Assured till the Maturity Date, subject to Policy being in force on the Maturity Date, the risk cover shall cease, and Loyalty Additions payable at Maturity Benefit shall be payable to the Policyholder.

The maturity benefit will be calculated as a higher of

• Fund Value at Maturity plus Loyalty Additions payable at Maturity,
• Assured Benefit (Total Premiums Paid less Total Partial Withdrawals made (if any)).

HDFC Life Smart Protect plan – Loyalty Additions Review

The product offers loyalty additions at different points during the policy term.

Return of 2X to 3X Mortality Charge

The product offers a return of 2 to 3 times the mortality charges starting from policy year 11. The addition is in the form of extra units.

Policy year 11 – 10 – 2 times

Policy year 31 – 40 – 3 times

Return of 2X Premium Allocation Charge

2 times the total Premium Allocation Charges (excluding taxes) shall be added back in the form of allocation of extra units. The addition will happen at the end of each of the years between 10 to 13 years.

Return of Fund Management Charge (FMC)

At maturity, the total of FMC charges (excluding taxes) collected throughout the policy term will become payable.

Return of 2X of Investment Guarantee Charge

This will be available only under Option B (Level Cover with Capital Guarantee) and Option D (Decreasing Cover with Capital Guarantee). At maturity, 2 times of total of guarantee charges (excluding taxes) collected throughout the policy term will become payable.

HDFC Life Smart Protect plan – Other Benefits – Review

Switching

The option to switch funds is available under Option A (Level Cover) and Option C (Decreasing Cover). Under this option, you have the option to switch your investment or a part thereof from one fund to another fund (s) available under this product during the Policy Term. It is allowed for an unlimited number of times.

Premium Redirection

Premium Redirection is available under Option A (Level Cover) and Option C (Decreasing Cover).

It allows you to calculate and allocate your future premiums to a different fund or set of funds. Premium Re-direction will not be allowed if Systematic Transfer Plan (STP) is chosen.

Partial Withdrawal

You have the option to withdraw money from your funds to meet any future financial emergencies, through Partial Withdrawals. It shall be allowed only after the completion of five policy years.

Top-Up Premium

The Policyholder has the option of paying Top-up premiums, provided the policy is in force.

This is only available under Option A (Level Cover) and Option C (Decreasing Cover). It is not permitted during the last 5 years of the contract. The minimum Top-up amount is calculated at Rs. 5,000.

Settlement Option

The Policyholder has the option to take the Fund Value payable as Maturity, in lumpsum, or in periodical installments over a Settlement Period which may extend to a maximum of 5 years after the Maturity Date. The first installment under the settlement option shall be payable on the date of maturity.

Option to Reduce Sum Assured

At any policy anniversary, the Policyholder will have the option to reduce Sum Assured. If opted under Option C (Decreasing Cover) or Option D (Decreasing Cover with Capital Guarantee), the Policy will continue with a reduced Sum Assured as calculated under this option and no further decrease will be applicable.

Various Charges under HDFC Life Smart Protect Plan

Premium Allocation Charge

Policy Administration Charge

Fund Management Charge

1.35% p.a. of the fund value for all the funds, charged daily. The Fund Management Charge for Discontinued Policy Fund shall be 0.50% p.a.

Mortality Charge

The mortality Charge is calculated as the Sum at Risk (SAR) multiplied by the applicable Mortality Charge Rate for the month, based on the attained age of the Life Assured. The Sum at Risk for Life Assured is Death Benefit less Fund Value.

Investment Guarantee Charge

This will be applicable only for Option B (Level Cover with Capital Guarantee) and Option D (Decreasing Cover with Capital Guarantee). This will be charged daily, as a % of Fund Value.

Discontinuance Charge

This charge depends on the year of discontinuance and your annualized premium. This charge is not applicable from the 5th policy year onwards.

Partial Withdrawal Charge, Switching Charge, Premium Redirection Charge & Miscellaneous Charge

Nil

Inference from the charges – Most of the market-linked products levy charges just to manage the fund. But here there are some extra charges like investment guarantee charge, discontinuance charge, etc. These charges will bring down the return in the long run.

A grace period, Discontinuance & Revival of HDFC Life Smart Protect plan

Grace period:

This plan has a grace period of 15 days for the monthly mode and 30 days for other modes.

Discontinuance:

Discontinuance of Policy during the lock-in-Period (5 years) –

Policyholders (single premium policies) can avail of tax benefits under Section 80C of the Income Tax Act, 1961. The premiums paid are deductible from the policyholder’s taxable income till the limit of ₹1.5 lakhs.

For other than single premium policies, the fund value after deducting the applicable discontinuance charges, shall be credited to the discontinued policy fund, and the risk cover and rider cover, if any, shall cease.

Discontinuance of Policy after the lock-in-Period (5 years) –

The policy shall be converted into a reduced paid-up policy with the paid-up sum assured i.e., the original sum assured multiplied by the total number of premiums paid to the original number of premiums payable as per the terms and conditions of the policy.

Revival:

You have the option to revive a discontinued policy within three consecutive years from the date of the first unpaid premium.

Free Look Period – HDFC Life Smart Protect

In case you are not agreeable to any of the terms or conditions, you have the option of returning the policy, within 15 days from the date of receipt of the policy. The Free-Look period for policies purchased through distance marketing will be 30 days.

Surrendering HDFC Life Smart Protect

In the case of Single premium policies, the policyholder has the option to surrender at any time during the lock-in period. Upon receipt of the request for surrender, the fund value, after deducting the applicable discontinuance charges, shall be credited to the discontinued policy fund. On completion of the lock-in period (5 years), the fund value as of date shall be payable.

In case of other than single premium policies –

Surrender of the policy before the lock-in period – The policy shall continue to be invested in the discontinued policy fund and the proceeds from the discontinuance fund shall be paid at the end of the lock-in period (5 years)

Surrender of the policy after the lock-in period – The policyholder has the option to surrender the policy at any time after the lock-in period. Upon receipt of the request for surrender, the fund value as of the date of surrender shall be payable.

Advantages of HDFC Life Smart Protect

• The policy offers a wide range of plan options like decreasing cover & capital guarantee.
• The plan returns some of the charges like mortality charges, Fund management charges, and Investment guarantee charges within the policy term.
• Top-up premiums increase your fund value.
• There is no Partial Withdrawal Charge, Switching Charge, Premium Redirection Charge & Miscellaneous Charge.
• Riders can be added to the base policy.

Disadvantages of HDFC Life Smart Protect

• The loan option is not available.
• Although the plan returns some of the charges, it doesn’t consider the time value of money.
• The lock-in period is 5 years for partial withdrawal or surrender.
• Some of the extra benefits are available under some plan options only.

Research Methodology

HDFC Life Smart Protect Plan invests in market-linked products. To estimate the potential return of this plan, let us analyze the benefit illustration taken from the HDFC portal. The estimated return can be compared with other investment products. This comparison will give you clarity in choosing your financial instrument.

HDFC Life Smart Protect plan – Benefit Illustration – IRR Analysis

A 30-year-old male buys HDFC Life Smart Protect under Option A Level cover. The Sum Assured is ₹ 1 crore & the annual premium is ₹ 1 Lakh. The premium paying term is 12 years & the policy term is 25 years.

The assumed rates of returns (8% & 4%) are not guaranteed and they are not the upper or lower limits of what you might get back, as the value of the policy is dependent on several factors including future investment performance.

If he pays the premium regularly, at the end of 25 years, he would be receiving the fund value. Here the fund value @8% is ₹ 38.14 lakhs & @ 4% is ₹ 17.59 lakhs.