Khota Paisa

Review : Birla Sunlife Dream Plan

Posted in Reviews by khotapaisa on June 21, 2009

I must say that this is one product that took the insurance market with a surprise. It was (and probably still is) the only product with no premium allocation charges. That means that all the premium you pay is fully invested. Compare it to other ULIPs which deduct anywhere between 10%-60% of premium just in the first year. Add to this the fact that it offers a very low mortality charge and hence is a good alternative to term plans. Infact, it looks too good to be true. Last month, I asked my financial advisor as to how this product is able to maintain such low charges and why is there still no competitor to it? Well, I didn’t get a clear answer. But if you look deeper, it is not as good (still better of the lot) as it looks. On the term plan side of it, the minimum premium for a 1 crore policy (30 year old for 25 years) is 23050/-. The same cover from HDFC costs 19878/-. So, if you are looking to take Dream plan as a term plan (a lot of us do it), you better go for HDFC term plan. Even cheaper term plans are also there. On the ULIP front, the Dream plan manages to beat the competition. Though it has higher fund management charges, it still is the one of the lowest cost ULIP in market.

In short, this is arguably the best ULIP (on cost basis) out in the market. But if you plan to take it as an alternative to pure term plan, it may well not be a good idea.

Update on 29/11/2009Thanx to palash for pointing out the hidden lines. I did some recalculations and found that I has missed on the administration charges which are extremely high in this plan. So much that the return from the policy is significantly lower. Given this new light, I would recommend you against my earlier conclusion (as above).


4 Responses

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  1. Palash said, on November 10, 2009 at 9:40 pm

    You need to look more carefully into the charges applicable. The kill here is in the policy administration charges(PAC) which is calculated on the basic sum assured. Where as most ULIPS have a fixed PAC this one is variable. The rates are also quite steep.

    • khotapaisa said, on November 29, 2009 at 10:58 pm

      You are right Palash. I have updated the post accordingly.

  2. Dhanram said, on December 28, 2009 at 8:00 pm

    Hello Dear,

    I am looking to invest INR 200000 for 4 years.
    my age is 61. I have planed to invest Rs 50,000 in each of the following 4 funds.

    Reliance Regular Savings Fund – Balanced Option (Growth)
    Reliance Regular Savings Fund – Equity Option (Growth)
    Reliance Monthly Income Plan (G)
    SBI Magnum Contra Fund (G)

    Please suggest if it is ok.

    • khotapaisa said, on December 28, 2009 at 10:42 pm

      Dear Sir,
      Without analyzing your planned investments based on your age profile, I can tell you that your time horizon(4 years) doesn’t justify any investment in equity. Any investment for 5 years or less MUST NOT be in equity. I would suggest that you invest this money in safe instruments(debt funds, fixed deposits etc). Infact, given your age, you should not looking at any equity exposure for anything less than 10 years, unless this money doesn’t make much difference to your financial.

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