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Nath Balakrishnan

HAVE you felt the need for a term assurance plan where the sum assured increases progressively with the plan's term to keep pace with your rising income stream, and yet offers the feature of paying a constant premium throughout?

This is the customer that SBI Life is attempting to target with the launch of its Shield Plan. Let's examine how this plan works.

Plan features

In its basic form, the Shield Plan is a pure term assurance plan that guarantees a payout to the beneficiary in the event of the policyholder's death; there are no survival benefits attached to this plan.

The difference with the Shield Plan is that unlike a pure term plan, under which the sum assured chosen at the outset remains constant, the sum assured can be bumped up in one of two ways:

Option 1: A five per cent increase in sum assured every year; this increase would be effected after each policy anniversary; or

Option 2: A 50 per cent increase in the sum assured effected once every five years.

In both these cases, the increase is a simple addition and there is no element of compounding involved.

The plan also offers a third choice in the form of a level term cover option, under which the sum assured would remain fixed over the duration of the policy; this option also entails the lowest premium payout.

In all the options, the premium to be paid over the duration of the term would remain constant.

To illustrate, let's consider a policyholder choosing a Rs 5-lakh sum assured plan over a 20-year term. Should he die after the completion of 12 policy years, his beneficiary would receive:

Rs 8 lakh under option 1; Rs 10 lakh under option 2; and Rs 5 lakh if one chooses the level term option.

Riders

The plan also offers the facility of appending a couple of riders to the basic plan. They include the `Accidental death and accidental total permanent disability' rider and the `Premium waiver benefit' rider.

If the policyholder dies due to an accident, the sum assured under the rider would be paid out; on suffering total permanent disability because of an accident, the rider sum assured would be paid out in 10 instalments.

If the waiver of premium rider has been chosen, subsequent premium payments on the base product by the policyholder, who has suffered accidental total permanent disability, would be waived.

Other benefits

Female lives covered under this policy would attract a lower premium.

A premium rebate would also be available if one opts for an annual/semi-annual mode of premium payment as well as for a higher assured sum.

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