Traditional Whole Life Plan with Limited Payment Term of 15 Years with Guaranteed Annual Cash Payment & Cash Dividend but having Very Low Returns
Tata Aig MahaLife Gold is a participating life insurance plan with a limited premium payment term that gives you lifelong insurance coverage and guaranteed and non guaranteed payouts every year.
The eligibility for this policy starts right from birth, which means, if you buy this policy for your child; you only have to pay premiums for the first 15 years, after which the child gets a guaranteed annual income as well as coverage for his entire life. Or it can also provide you steady income till age 100 so that you don’t miss you salary cheque even after retirement.
Tata Aig MahaLife Gold on the face of it looks like a good plan. Limited Premium Payment Term of 15 Years. Guaranteed Returns from 10th Year onwards of 5% of Sum Assured + Cash Dividend, if any, declared by the company Year 6 onwards + Sum Assured on death (or maturity if you live for 100 years).
Now, lets dig deep and see what actually this policy is about.
The plan sounds so good, we actually stop calculating the actual benefits to received and the return the plan is generating. Over a period of 96 Years i.e. till Child Age 100 for a Child of Age of 5 Years for Sum Assured of Rs. 3,00,000 this plan generates a rate of return of 5.19%.
That Even DOES NOT COVER INFLATION!
These are cold hard figures
(with one assumption of cash dividend rate of 2% of Sum Assured as I could not find the actual dividend rate anywhere including the official website of Tata Aig)
At the start of the review, I was thinking this looks like one of the traditional product that I have to recommend but, I am Very Very Disappointed. Is there not a single traditional product that is worthy of recommendation? Tata Aig MahaLife Gold is certainly not that one.
At the start of review, this plan looked promising. But the low rate of return, over even a term as high as 96 years for a child where even the mortality charges would be low, has disappointed us. As a result, we Do Not Recommend Tata Aig MahaLife Gold Plan.
Update: 29th March, 2012
This review has generated lots of heat with many people disagreeing with what I have mentioned. I decided to give this plan a second look even though I was sure that the results would be the same but for the sake of double checking the review I researched everything about this plan and calculated the return afresh and given below are the results.
I could not find any illustration generator for this plan on the Tata Aig website initially but I searched deeper and found a link for generating illustration and created a illustration of 35 year old male for Sum Assured Rs. 1,00,000/- , Annual Premium mode, with no riders for the purpose of this post. You can have a look at the illustration here mahalife gold illustration.
Taking the data from the illustration I did my own calculation for the purpose of calculating the Rate of Return generated by this plan. I have only used one assumption for generating the illustration i.e. Annual Cash Dividend Rate of Rs. 30/- per thousand of Sum Assured.
Initially when I prepared the calculation for the original post I took a Cash Dividend rate of Rs. 20/- per thousand or 2% of Sum Assured as I could not find any data about it on the website of Tata Aig Life (Speaks volumes on the transparency of Tata Aig Life). I found our Tata AIG Mahalife Gold dividend rates here. The rates as per this article is given as below:
FY 2011-12 Rs. 26.4 per thousand of Sum Assured
FY 2010-11 Rs. 21 per thousand of Sum Assured
I this time decided to take a higher rate of dividend for my calculation, so no questions are asked about the authenticity of the calculation, so I adopted cash dividend Rate of 3% or Rs. 30 per thousand of Sum Assured.
As per my calculation the overall Rate of Return of Tata AIG Mahalife Gold Plan is 5.48% over a policy Term of, hold your breath, 65 years. What!!! are you sure!.
Yes I am, if you have any doubts you can go through my calculation and I would be happy to revise it if it is faulty. My rate or return of mahalife gold.
There is nothing which has changed from our original recommendation and we still do not recommend this policy due to low rate of return generated. However, you are free to take your own decision and I have provided all the information on which I based my recommendation above.
If you still do not feel satisfied with my analysis feel free to comment below, as you can see I gladly approve any honest criticism.
| Information | |
|---|---|
| Entry Age | 0-60 Years |
| Policy Term | Upto 100 Years |
| Paying Term | 15 Years |
| Minimum Premium | Rs. 2,500 |
| Maximum Premium | No Max |
| Allocation Charges | N.A. |
| Admin Charges | N.A. |
| Mortality Charges | Not Given |
| Loyalty Additions | Nil |
| Riders | NA |
| Yield Net of Charges | Very Low |
| Other Information | Guaranteed Cash Payment of 5% of Sum Assured from Year 10 Onwards. Annual Cash Dividend from 6th Year Onwards. Payment of Sum Assured on Maturity |
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Company has paid last year 2.64% as dividend and how come your calculation matches if u calculate with 2%
and more over this plan can beat the inflation because the returns are starting from the 6th anniversary and every year you are getting the returns, assume that the plan it self is paying the premiums from the 11th year to 15th year, literrally the payment is only 6 years in full and 7-10 yrs only 70%,(30% company themselves they are giving back)
as a whole life money back plan this plan gives life time tax free returns where it supports like annuity with tax free return
while paying also it gives tax benefit
@ Sasidhar
We were unable to find any information on bonus declared on this plan on the Tata Aig website (speaks volumes for transparency) and therefore assumed a bonus rate of 2% which is not too far off the declared rate of 2.64% also we found out somewhere that the declared rate of FY 2010-11 was 2.1% which is also quite close to our assumed rate. Also, before writing my reviews I had emailed all insurance companies if they wanted to provide information regarding reviews and I did not get a single response. So all in all its a fair review from my side.
As far as your sales rant quoted below
I have calculated the IRR or Yield Net of Charges of the policy as per the brochure on the website and what you are saying is just a Sales Pitch as the bonus is only accrued every year and cannot be used for offsetting the amount of premium due. Also, if premiums are not paid then surrender charges of the policy is quite high. So, all in all first calculate the actual IRR of the policy before providing such misleading information. I am calculating the IRR over the term of the policy whereas you are just manipulating the figures to show a rosy picture.
So all in all We Still Do Not Recommend this policy
I think Sasidhar is absolutely correct.
No one can pay yearly like this by taking a limited premium only for 15 years…
It will be better option for new born child.
@ Dhrubajyoti
Your are comparing facts with what your opinion is about this plan. We have presented the cold facts i.e. the IRR or Yield of the plan is 5.19% @ assumed bonus rate of 2% (which is quite close to what the company is actually declaring). When you look at this plan in the first look, the figures of this plan looks very appealing but when we digged deeper the overall return or this plan is only 5.19% over a very long term of 96 years. If you reduce the term by encashing out earlier the IRR or Yield would be even lower.
In our review also we have mentioned that the plan sounds so good on paper that we stop calculating the actual returns on the plan. On calculating the actual returns, your fixed deposit will give you better returns (even post tax) if compared to this plan. We only report what the actual facts are, if you like the plan please go ahead but facts cannot be compared with opinions.
nice analysis
Hi all,
I don know you are aware of the concept “Time Value Of Money” or not? It says Money in installements/lumpsump which comes early has more benefit than money comes later in lumpsump.
Here, in this plan if someone is getting returns at early stage of investment is very excited. Investors can put this money regurarly in Mutual Fund or Fixed Deposit RD Scheme.
So, instead of calculating returns and exploring your knowledge here, advise something which will be helpful for the investors.
Half knowledge is harmful.
Hi sudhir,
You are confusing Rate of Return of this plan (facts) with your opinion if the money is again invested in some other plans (then the Rate of Return for the whole portfolio is required to be calculated).
I agree that if any investor invests the money in RD etc. after receiving money from this plan then his overall return will increase but the money value that he would get at maturity will also be depreciated due to inflation.
Further, why should the investor invest in this plan at all, because if he invests directly in RD, FD etc. he can get better returns than this plan.
I have provided my calculation above, if you would be kind enough to provide you calculation instead of just giving blank opinions it would be better for the investors.
Regards,
I have read all above comments & Recommendations about TATA Mahalife Gold Plan & concluded that all above participants are commenting on the half knowledge about this plan. I have done calculations by considering actual facts & figures & last several years cash dividend records.
The company has paid the cash dividends of average 2.5% of the Sum assured but you need to see that these are falling in 6th policy anniversy to 10th policy anniversary. That means @ 30% of your annual premium company is giving back to you from 6th to 10th year.
Now from 11th to 20th year the cash deividend % is higher it will be between 3% to 6.2%. These cash dividends are depend on company performance & company performance is depend on what quality papers this scheme is holding. For your information TATA is holding Goverment Bonds with high yield rates. Now the current bond yield is high & it has come after almost 20 Years.
Along with cash dividend between 3 to 6.2% company is giving assured 5 % coupon on the Sum assured.
Now from 21st till 100th of the policy year again the cash dividend rate will increase between 5 – 9% plus the gaurenteed coupon of 5%.
Now you might be thinking how these cash dividends will be increasing after 6th,11th & 21st year. ans: this scheme is investing in Govt. Bonds & Govt. securities & current GB yield is at higher side. If some one will book a bond with a yield of 10% at price 1000 Rs & in future if bond yield will come down to say 8% then the bond price will increase to say 1200. Bond yield & bond price is inversely proportional.
Another very important fact is that dont forget your nominee will be getting the sum assured after the death of the life insured .
Actually speaking you will be paying till 15 years & company will be paying you back the complete amout you paid till 20 years. After 20 years you will be enjoying the annual payments till your death & after your death your nominee will be getting the complete sum assured.
I strongly recommend this policy & Invest it immediately as current bond yield is at high rate.
This is the best plan i have seen ever. Dont miss the bus of high yield.
For better understanding i am giving the approx illustration in below table for the premium of 1 Lac with SA 12 Lacks
Payout from your pocket Payin your pocket
100000
100000
100000
100000
100000
64000 36000
64000 36000
64000 36000
64000 36000
64000 36000
-32000 132000
-32000 132000
-32000 132000
-32000 132000
-32000 132000
-132000 132000
-132000 132000
-132000 132000
-132000 132000
-132000 132000
168000
168000
till 100 age or death
After death Nominee will get 12 Lacks
This is the best plan for youger people.
Regards..
Dear Mr Mukherjee,
Thank you for your reply. We have calculated the figures as per the illustration provided by tata aig itself as you can see from our calculation sheet and illustration attached.
GOOD ANALYSIS, Keep up the good work. and agents of TATA AIG stop arguing.
Check out some reviews for this product on other sites and the truth will be out in open… an excerpt from a Mouthshut user…
“So i took the policy of 500 Thousand and was paying approx 34000 Indian rupees as annual premium since past 6 years.
Now they have paid me the non Guaranteed bonus of 0.525% for 2008-09 and a 0.40% for year 2009-10.So effectively after paying 34000* 6= 2,04,000/- I get a return of only 2000/- only from the 6th year onwards.”
Another says…
“now i am in the 7 years of policy therefore i am eligible for geting non gurrrented bonus.I got only 1320/- rupees on my non gurarranted bonus. but my total investment is around 96000/- now you can imagine what a bad policy i have taken”
Nice review of Tata Aig MahaLife Gold here, made me wise!
Hi,
Today i got a call from chennai TATA regarding same plan, they are given the breakup as below and which is gaurented and the same is printed on the bond and that we can receive directlyre from IRDA.
AS MY AGE 40 YEARS IF I INVESTED 40k per anum for 15 Years(ie., 60Lak) the returns are
SA Rs.470000/-,
Accidental Benfit Rs.910000/-
Medcal Coverage Rs.455000/-
1.From 7th Year (ie., My Age 47) to 10th Year(ie., My Age 50) i will receive Rs.13400/- per year ie.,(3years) aprox Rs.40000/-
2. From 11th Year(ie., My Age 51) to 20the Year(ie.,My Age 60) i will receive Rs.55000/- per year ie., aprox(10 Years) aprox Rs.550000/-.
3. From 21st Year (ie., My Age 61) on wards upto my Age 100Years i will receive Rs.65500/- per year ie., aprox(40Years) Rs.2620000/-
My doubts are is really the above calculation is printed on the given bond as it is and really the bond is directly sent by IRDA to me.
If so why the executive not confidently confirming the same to me. And where can i get the details in actuals.
Hi,
The review is very helpful. Please guide me what plan is better for getting monthly pension plan after age of 55, currently Iam 29years old.
Fabulous forum and discussion
Seniors, I am thinking on lines of taking this policy and now holded back after this review, could you please suggest what policy holds good to invest now, this is my first investment and your thoughts would be highly appreciated
many thanks
VJ