Term insurance is the simplest form of life insurance. You pay premiums, and if you pass away, your nominee receives the sum assured. However, to stand out, insurers have added multiple bells and whistles that can make choosing a policy overwhelming.
This is why we apply proprietary screeners to the term insurance plans available in the market and read through policy fine print. In this report, we review Tata AIA Sampoorna Raksha Promise.
Who should buy & for how long?
Before delving into the specific policy’s details, let’s cover the basics. Term insurance provides financial protection to dependents. If you don’t have financial dependents, you don’t need term insurance. Your coverage duration should match the period your dependents rely on your income. For example, a 35-year-old planning to retire at 60 should ideally have coverage until retirement. After retirement, if they don’t have a guaranteed pension, their accumulated assets will support their household, making term insurance unnecessary. (You can use our term insurance calculator to work out how much insurance you need)
Term insurance policies are typically bought for life. Therefore, we evaluate insurers offering the policy on three metrics before recommending any plan – claims record, solvency ratio and persistency ratio. Tata AIA Life Insurance scored well on all of these.
Tata AIA Life Insurance is a joint venture between Tata Sons and AIA Group. As per latest IRDAI data (available only for FY23), Tata AIA’s claim settlement ratio was 99.01% by number and 94.52% by value, both exceeding the industry averages of 98.39% and 93.6% respectively. The company’s latest public disclosure (September 2024) shows an improved claim settlement ratio of 99.7% by number.
The insurer maintains a healthy solvency ratio of 1.96 against the statutory requirement of 1.5. The solvency ratio captures the insurer’s capital buffer which ensures financial stability and sustainability of the business. Its persistency ratios (policy continuation rates) are also at 76.28% (37th month) and 68.13% (61st month), significantly above industry averages of 61.7% and 50.6% respectively. These ratios indicate that Tata AIA has more customers staying on beyond 3 and 5 years.
Policy Basics
Let’s now look at the basic features of Tata AIA Sampoorna Raksha Promise.
Eligibility: Available for individuals aged 18 to 65.
Premium Payment Options:
- Regular pay (throughout the policy term)
- Limited pay (fixed number of years)
- Single pay (one-time lump sum)
Sum Assured: Minimum Rs.25 lakh; maximum is subject to underwriting.
Variants: There are two variations:
- Life Promise: Pure term insurance with no survival benefits.
- Life Promise Plus: Returns the premium (excluding taxes and loadings) upon survival.
We recommend Life Promise since it has the lowest premium, making it cost-effective. Life Promise Plus may be useful in rare cases when the stars are aligned 🙂 check out the premium section to see if this is applicable to you.
Note: The brochure also mentions Joint Life Promise and Joint Life Promise Plus for couples; however, the insurer has confirmed that these have not yet been launched for the public.
Premium Payment Options
The policy offers 3 payment modes. Single, Limited, and Regular. For example, a 35-year-old male buying a Rs.1 crore policy until 75, premiums can be:
- Single premium: Rs.3,83,952
- Limited premium (10 years): Rs.49,379 annually
- Regular pay (40 years): Rs.22,918 annually
We recommend opting for regular pay. It offers advantages due to the time value of money – you don’t have to make big upfront payments. Since there are no additional death benefits based on early premium payments, there’s no real advantage to front-loading your payments. You get the same coverage either way!
Premiums
Based on our analysis, the premiums for Tata AIA Sampoorna Raksha are about 10-15% cheaper than competing products. The first-year regular premiums of the policy including GST for a cover of Rs.1 crore stand as below for both the policy options
Interestingly, pure term insurance is subject to a GST of 18% and the option with return of premium is subject to a lower GST of 4.5% for the first year, 2.25% for the subsequent years. This makes some buyers opt for the return of premium plans. But do note that GST rates may change in the future and this advantage may disappear or even reverse; but if this is a risk you’re willing to take, check the premiums of both the options before purchase and make a decision.
Here is a comparison of premiums (including GST) for the Life Promise option against pure term insurance policies from other insurers for different age groups,
Key Policy Features
A few highlight features of Tata AIA Sampoorna Raksha Promise are as follows:
Accelerator Benefits: This is an inbuilt option of the policy. If diagnosed with a terminal illness, 50% of the sum assured is paid immediately, and future premiums are waived. The remaining sum is paid upon death.
Payout Options: The policy provides 3 kinds of payouts. Lumpsum, staggered, and a combination of both. For example, you can opt to:
- Rs.1 crore at once.
- Rs.10 lakh annually for 10 years.
- Rs.50 lakh lump sum + Rs.5 lakh per year for 10 years
- For the staggered payments, you can also opt to get increasing payouts.
But if you opt for a staggered payment option, your premium will be calculated after discounting the death benefit at 4% per year.
For example, let’s say you opt for Rs.50 lakh payments in 2 years instead of a lumpsum payout.
Effective sum assured = Rs.50 lakh + [Rs.50 lakh discounted for a year at 4%]
= Rs.50 lakh + Rs.50 lakh / (1+4%)
= Rs.98.08 lakh
Hence the premium for receiving two Rs.50 lakh payouts a year apart, is equivalent to the premium for a lumpsum payout of Rs.98.08 lakh upfront.
While this may feel like saving on premium, the discount you’re being given is for the time value of money. Your nominee can probably invest the lumpsum at much higher rates than this 4%.
The nominee also has a choice to commute the staggered claim payouts into a discounted lumpsum. The policy fine print states that this discount rate would be higher of 4% and [SBI 10-year term deposit rate + 2%]. As of today, this would be 8.5%. This is a stiff discount which will materially dent the size of the payout.
To simplify, it is better to decide at the time of taking a policy whether your nominee would be better off with lumpsum or staggered payouts. If your nominee can manage and invest a large corpus at one go, opt for lumpsum payout. As explained above, if you opt for staggered payouts and the nominee decides to commute them later, the high discounting rate works against them.
Coverage Enhancement Options
A typical term insurance freezes the coverage at the time of purchasing the policy. But as your income and liabilities increase, you should be enhancing your life cover. Tata AIA Sampoorna Raksha offers two options to do that:
#1 Life Stage Option: Typically, any increase in the sum assured in a life policy requires fresh underwriting, where the insurer will re-assess the risk of giving you a policy. This can lead to higher premiums being loaded, based on changes in health circumstances or sometimes even rejection of the higher sum assured.
The Life Stage option, however, allows you to increase the sum assured without fresh underwriting for all of the life stages, except during home loan disbursal:
- Marriage: 50% of base sum assured
- First child birth/adoption: 25%
- Second child birth/adoption: 25%
- Home loan disbursal: 100% (up to loan amount, requires underwriting)
There are no additional premiums for opting for this Life Stage option. Once exercised, the cover and premium will increase. The insurer requires you to stick to this option for at least 5 years. Later, you can surrender this and revert to previous cover and premium.
We recommend you opt for the Life Stage option at policy purchase, even if you wish not to increase the cover later.
#2 Top-Up Option: This option allows increasing coverage by 5%-20% (non-cumulative) at a time of your choice, However, this is subject to underwriting.
Other Features
Other features that enhance this policy are as follows:
- Flexi Pay Benefit: After five years of premium payments, you can delay one premium payment by up to a year without policy cancellation. Once availed, the five-year counter restarts. Be careful opting for this as any miscalculation may end up terminating your policy.
- Instant Claim Payout: For policies of Rs.1 crore and above, once three policy years are completed, Rs.3 lakh is paid within a day of claim intimation, with the balance after verification. This may help your nominee with any immediate cash needs.
Final take
Tata AIA Sampoorna Raksha Promise is a policy from a trusted brand with a good claims record and strong financials. The premiums are reasonable. The Accelerator Benefit is a useful built-in add-on that disburses 50% of the sum assured upon the diagnosis of a terminal illness. While the various options and features make the policy somewhat complex, most of you will be better off choosing the Life Promise option with regular pay and opting for the Life Stage benefit on sum assured.
