Max Life Partner Plus is true to the company logo “Your Partner for Life”. The product will literally tie you for a lifetime to give any returns. Max’s immediate annuity product offer rates half of what is offered by most players. Is this retirement planning or ruining your retirement?
Raj Pradhan
Three years ago Suresh Sawant (name changed) purchased Max Life (formerly called Max New York Life) Partner Plus in the name of his daughter, who was 15 years old. The product was sold by friendly neighbour’s housewife, who also dabbles in Amway, the controversial multilevel company marketing highly expensive consumer products. The premium payment term is 20 years with policy term of whopping 60 years. Premium of Rs5,000 per year gave SA (sum assured) of Rs67,444. Suresh’s daughter does not need life insurance, but that’s lesser of Suresh’s worry.
When Suresh’s daughter turns 61, she will start receiving Rs5,058 per year for 15 years. What is the value of Rs5,058 per year after 45 years? It is a mere Rs104 at an inflation of 9% per annum. At age 75 years, Suresh’s daughter will get SA of Rs67,444 (again a meaningless real value of Rs383 after 60 years). The bonus declaration is prerogative of insurance company and hence Suresh and his daughter will be at complete mercy of the insurer for an extraordinary amount of time.
Based on the 6% and 10% benefit illustration allowed by the Insurance Regulatory and Development Authority (IRDA), the non-guaranteed returns may be Rs7,20,971 to Rs34,96,396. It can be lower than Rs7,20,971 as the only guarantee is Rs67,444. Assuming non-guaranteed return of 8%, the corpus at the end of 60 years will be Rs16,24,353. Adding Rs5058 paid for 15 years (61-75 age) will be Rs17,00,223.
If Suresh had put the premium of Rs5,000 in a recurring deposit (RD) renewed for 20 years (same as premium payment term) and then put the corpus in a fixed deposit (FD) renewed for 40 years, Suresh’s daughter would have got guaranteed Rs49,70,783 assuming only 8% p.a. interest rate —290% more!
Such an extreme long-term life insurance product will certainly see many surrendered policies. While we suggest that blindly surrendering may be a blunder and insurance companies make huge profits from surrendered policies (Read the cover story of the 8 March 2012 Moneylife issue ) in the case of Suresh, surrender makes sense if he (or rather his daughter) is not willing to stick for the extraordinary long-term of 60 years. It will save them from throwing good money on a wrong product. The guaranteed surrender value of traditional products is atrocious. You get only 30% of the premium paid minus first year’s premium. It surely makes for decent profits for the insurer.
At this time, Suresh is the nominee for the policy. If the policy is continued, at some point his daughter will have to nominate someone else (her future spouse or children) as almost certainly, Suresh who is in his 40s will not be around after 60 years. God knows what will be the name of Max Life after 60 years.
The policy document has a nice standard letter and signature of Analjit Singh, founder and chairman of Max India Limited. “The company agrees to pay the benefits under this policy on the happening of the insured event, while this policy is in-force”. It is surely a policy that will take lots of efforts to keep in-force.
When Max Life has set entry age of 91 days to 55 years for Partner Plus, what can we expect from Max Life‘s “Aapke Sachche Advisors”? The advertisement campaign message is that mis-selling is a thing of past. Max Life advisors are supposed to give right life insurance advice, great tips and much more. Can the advise be sachcha if the product is jhootha?
Max Life Partner Plus offers customers from age of three months to 55 years opportunity to reap benefits at age 75 years along with meagre guaranteed money-back benefits. Does a baby of three months really need life insurance and that too wait for a whopping 75 years to get endowment benefits? That’s a wait of a lifetime for something not worth waiting. In an era wherein even the insurance company partner (New York Life) has parted ways after a decade, why is the product still sold to someone who is made to wait for seven decades under the guise of retirement planning? The product slogan of “Retirement ho toh aisa” may just throw a nasty surprise on you.
The other retirement product offered by Max Life today is Immediate Annuity product. You will be astonished that Max Life’s immediate annuity rates are half of what is offered by most insurance companies. The “return of purchase price” option gives the beneficiaries the purchase price after the death of the annuitant; the purchase price is locked for the annuitant as there is no surrender option in annuity product. A gullible saver may just fall for Max Life‘s “Aapke Sachche Advisors” to have corpus locked at half the market annuity rate for a lifetime. It is high time Max Life revises its paltry annuity rates or IRDA forces Max Life to do so. It’s not just an imperfect product; its horrendous product.
Max Life Immediate Annuity product will surely give you exactly the opposite of what it claims on its website advertisement: “A powerful annuity plan to meet your post retirement financial needs, ensuring you absolute peace of mind in the golden years of your life”.
Read the cover story of 15 December 2011 Moneylife issue for details of annuity products