ICICI Prudential has recently launched ACE which is much better than my previous best choice for a ULIP (Unit Linked Insurance Plan) - iGain2 from Bajaj Allianz. I discovered this policy almost by accident, since I had given up on ICICI Prudential. I had hoped for a good ULIP product from ICICI Prudential and have been disappointed for last 5 years. Finally, they have delivered a good product. Thanks to http://www.policybazaar.com for helping me discover this policy.
Here are few plus points for ICICI Prudential Ace
1. Zero premium allocation charge - While IGain2 was the only product which had zero premium allocation (that was not a pension plan), ICICI Pru Ace joins the list. Unlike IGain2, there is no premium threshold which is good for small investors.
2. Lower Administration Charges - With fixed administration charges of Rs 60 per month, the charge is much lower than IGain2 (Rs 100 per month).
3. Loyalty Addition - ICICI Pru Ace will give loyalty addition every 5th year from 10th year onwards - equivalent to 2.5% of average funds in preceding 8 quarters. This is really significant and effectively lowers the fund management charge significantly below IRDA dictated norms.
4. 2% additional premium allocation - IGain2 offers 2% additional premium allocation from 11th year onwards. ICICI Prudential Ace does a one up on IGain2 and offers 2% additional premium allocation from 6th year onwards.
5. Lower mortality charges - ICICI Pru Ace has lower mortality charges as compared to IGain2. They are still higher than other insurance companies (for example, Aegon Religare). However, benefits on other charges makes up for higher mortality charges, if you are looking for 5X sum assured. For 20X sum assured, you may want to check the final illustration to make the comparison.
Now the downsides -
1. Less flexibility - Only 4 switches are free, partial withdrawal allowed once in three years and limited only to 20% of funds, and host of other restrictions (for example, loyalty additions only if all premiums are paid).
I am concerned by this 3 year lock-in between partial withdrawals. Financial exigencies can happen anytime and such restrictions can cause serious damage in the future. I also don't understand the purpose behind this restriction since I can always surrender my policy. When I can make 100% withdrawal, why is ICICI Pru not allowing me to make partial withdrawals at will.
Update (9th Feb 2010) - ICICI Prudential ACE cannot be structured as a Children Insurance Plan, unlike IGain2. If you are looking a Children Insurance Plan, IGain2 is still the best.
2. Premium allocation charge on top-ups -ICICI Prudential Ace has 1% charge on top-ups which is the anti-thesis of existing ULIP structures. Current trend is zero allocation charge on top-ups and 5%+ premium allocation charge on first/second year premiums. Since I don't plan to do top-ups, I am fine with this.
3. Online Systems and customer service - Despite ICICI group's focus on technology and customer service, I have found that ICICI Prudential Mutual Fund's IT systems lag behind modern times. Online purchase of Ace does not work at present (link throws up a server error). So far, my experience with Bajaj Allianz online system and customer service for IGain has been good.
4. Fund Management Charges- Fund management charges are now standard across most ULIPs with IRDA dictating them. Before this regulation came into force, ICICI Prudential had the highest fund management charges. However, Ace seems to match the charges with other ULIPs now, except for debt funds. Unlike other ULIPs which charge 1% or less for debt funds, ICICI Pru Ace charges 1.35%.
As usual, please consult your financial advisor before making a choice. I don't recommend any financial investment products and please make your own decision taking all other factors into account.
Hi Vivek, this is excellent comparison between the two cheapest ULIP policies that exist in India. This will help the individuals to make informed decision.
ReplyDeleteThanks
Moloy
How can one structure iGain2 as a Child Insurance Plan? Will be very helpful.
ReplyDeleteBTW, good comparison of ACE vs. iGain. Thanks.
You should ask Bajaj Allianz on details. I believe they let you assign the policy to your kids which means the proceeds are received by your kids. You are still the insured (that's also the desirable option) while all proceeds on maturity go to the kid (when he/she attains 18yrs of age).
ReplyDeleteWhat about hdfclife they also provide best child plan with good benefits.
ReplyDeleteI have not checked the HDFC Child Plan details, however, just the premium allocation charge is 4% per year for first 7 years for HDFC YoungStar Super II, cannot comment further on this because of lack of knowledge. However, of those I examined, most child plans were very expensive, I believe they were relying on marketing pitch to convince customers without providing a competitive product.
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