ICICI Pru IProtect Smart Life Cover: Review

Term insurance is the simplest and cheapest form of life insurance. However, financial institutions are not always happy with simplicity. And there is always this race to outsmart competition. Hence, the insurance companies have started to offer packaged term life insurance plans, which offer a host of ancillary coverage. One such plan is ICICI Pru IProtect Smart Life Cover Plan. ICICI Prudential is aggressively marketing this plan. Nothing wrong with that. Apart from plain vanilla life cover, the plan offers coverage for terminal illness, accidental death, critical illness and permanent disability.

In this post, I will review ICICI Pru IProtect Smart Life Cover plan and discuss all the riders and coverage in detail.

Review: ICICI Pru IProtect Smart Plan

ICICI Prudential IProtect Smart Term plan is a term life insurance plan. There is no investment benefit. In addition to a regular life cover, it also offers a host of additional benefits. Some of the benefits are inbuilt into the plan while the others can be purchased for an additional premium.

There are four options available in terms of coverage.

Apart from death benefit, Terminal Illness and waiver of premium on Permanent Disability are inbuilt features. You can opt for Accidental Death Benefit and Critical Illness riders if you so desire. These riders come at a cost.

Inbuilt Riders (Part of Base plan)

1. Terminal Illness Benefit: If you are diagnosed with a terminal illness (likely to lead to death), the insurance company will pay out the Sum Assured to you. You can use the money as you wish. The policy will lapse after payment of such benefit.
2. Waiver of Premium on Permanent Disability: In case you get Permanently Disabled due to an Accident, all future premiums will be waived off by the insurance company. Please note there is no payout from the insurance company. Only permanent disability due to an accident is covered. Disability due to natural causes such as paralysis is not covered.

Do go through the product brochure or policy wordings for better understanding.

Optional Riders (that you can purchase)

1. Accidental Death Benefit Rider: In case death is due to an accident, the nominee gets double the Sum Insured. So, if your basic Sum Assured (Death benefit) is Rs 1 crore, your nominee will Rs 2 crores (Rs 1 crore basic death benefit + Rs 1 crore Accidental Death Benefit).
2. Critical Illness Benefit Rider: If you opt for this benefit and get diagnosed with a critical illness, the insurer will pay your Critical Illness Sum Assured. Do note Critical Illness Sum Assured has to be chosen separately and it need not be equal to base Sum Assured. The maximum Critical Illness cover under the plan is Rs 1 crore.

The rider covers 34 critical illnesses.

Must Read: Do you need Critical Illness Insurance Plans?

Critical Illness rider is an accelerated rider i.e. your Death Benefit goes down by the amount of Critical Illness benefit paid. Supposed the Sum Assured under your plan is Rs 1 crore and you have added critical illness benefit of Rs 10 lacs.

In case you get diagnosed with a critical illness, insurance company pays out Rs 10 lacs and Sum Assured (death benefit) goes down to Rs 90 lacs. Critical Illness also cover gets over. From the next year, you will be charged only for term cover of Rs 90 lacs (there won’t be any further charge for Critical Illness Rider).

There is a good illustration about such a case in the product brochure. You can go through it.

Death Benefit Payout Options

After demise of the policyholder, the nominee can get the payout in three different ways. Let’s consider Sum Assured of Rs 1 crore.

1. Lump sum: Entire Rs 1 crore will be paid as lump sum.
2. Income option: 10% of the death benefit is paid every year i.e. the nominee will get Rs 83,300 per month for 10 years i.e. Rs 10 lacs per year for 10 years. Total payout of Rs 1 crore over 10 years.
3. Increasing income: 10% of the death benefit is paid in the first year. Payout increases every year by 10% every year. So, the nominee gets Rs 83,300 per month in the first year, Rs 91,667 per month in the second year (Rs 11 lacs in the second year), Rs 1 lac per month in the third year (Rs 12 lacs in the third year) and so on. Total payout of Rs 1.45 crores over 10 years.

Additionally, at any time, the beneficiary has the option to convert all or part of the monthly income into lump sum. The lump sum value, in such cases, will be arrived at by discounting the monthly payouts at 4% p.a.

 Must Read: You may need an Income Replacement Term Insurance Plan

Life Stage Protection (Only for Life option)

Life insurance requirements keep fluctuating during your life. Certain life events such as marriage or birth of a child can increase your life insurance requirement. ICICI Pru IProtect Smart plan allows you to increase your Sum Assured by up to 50% at the time of marriage (maximum Rs 50 lacs). Additionally, you can further enhance your life cover by 25% each (maximum Rs 25 lacs) at the time of birth of each of your two children.

So, if you start with a cover of Rs 1 crore before marriage, you can enhance it to Rs 1.5 crores after marriage, to Rs 1.75 crore after the birth of first child and Rs 2 crore after the birth of second child.

Additional Sum Assured comes at a cost. You have to pay extra premium for increase in Sum Assured.

Must Read: How you can reduce life insurance premium through laddering

 Premium Comparison with Other Life Insurance Plans

You can see the premium of income plan is the lowest and the increasing income plan is the highest.  With a few calculations, you (30 year old non-smoker male) are paying Rs 5,668 for accidental death benefit rider and Rs 4,168 for Critical illness rider.

As far as base plan (Life) is concerned, you will find quite a few plans in the range of Rs 8,000-10,000 per annum.  Therefore, premium for the base plan (Life) is on the higher side but you must understand there are two in-built riders in the base plan.

 I have expressed reservations against Accidental death benefit rider earlier in this post.  I don’t see much value in this rider. If you are fine with the cost, you can go for it.

Coming to Critical Illness Benefit, you need to compare the plan against standalone critical illness plans. You can compare critical illness plans based on three parameters viz. cost, no. of illnesses covered and survival period.

This rider covers 34 illnesses, which is on the higher side. Typically, critical illness plans have survival period. So, you need to survive for a fixed number of days before the insurance company makes the payment. If you don’t survive the period, the insurance company does not pay. I am still at loss why you would have such a rule. The good part about the rider is that there is no survival period (I couldn’t find in the policy wordings), which is a major positive.

About the cost, standalone critical illness will be cheaper in the initial years but will get more expensive in the later years.  With this rider, you will always pay the same cost (as long as you don’t exhaust the cover). Which is cheaper? I leave the maths to you.

Points to Note

Death benefit is quite objective. The insurer pays up when the policy holder passes away. However, with other features, you need to establish that the insured event has happened.  To establish terminal illness, the policyholder must be, in opinion of two specialist doctors, is unlikely to survive for more than 6 months.

Permanent disability is defined as inability to perform three of the 6 mentioned activities in daily life. Mentioned activities are mobility, bending, climbing, lifting, writing and blindness. There is severity attached. For instance, mobility is defined as the ability to walk a distance of 200 meters on flat ground. Disability must be verified by a company empanelled medical practitioner. You know what that means.

Coming to critical illnesses, there is severity attached to each critical illness. So, you might think you had a heart attack in real life but it won’t be heart attack as per insurance policy. Such things leave a lot of subjectivity in the matter.

Do note this happens with all critical illness plans or personal accident covers. Insurance companies need to put things down in writing to avoid undue litigation. Hence, this issue is not specific to ICICI Pru IProtect Smart Term plan.

I suggest you read the policy wordings for better understanding of the plan.

Must Read: Do you need a Personal Accident Cover?

Tax Benefits

Premium paid for life insurance (base Sum Insured and Accidental Death Benefit is eligible for tax deduction under Section 80C. Premium paid for Critical Illness Benefit Rider is eligible for tax benefit under Section 80D.

What I like about ICICI Pru IProtect Smart?

1. It gives you various payout options (lump sun, income or increasing income). I would have preferred an additional explicit option where you can take part amount as lump sum and remaining as monthly payout.
2. It gives you an option to increase life cover at various life stages such as marriage and birth of a child. Though you can always purchase an additional cover, but it is good to have an option to enhance cover within the same plan. This option is available only under Life

What I don’t like/care about in ICICI Pru IProtect Smart?

1. Waiver of premium on permanent disability: Though waiver of premium on permanent disability is a good feature, what you need is a personal accident cover and not just the waiver of premium. In case of permanent disability, you wouldn’t just face problems in paying life insurance premium. You need money to make up for the loss of income too.
2. Critical Illness Benefit Rider is an accelerated rider.
3. The insurer has named one of the options “Life & Health” which can be a bit misleading. There is no health cover but merely a Critical Illness cover. Do note Critical Illness benefit rider is not an alternative to a comprehensive health plan.
4. Accidental Death Benefit Rider: You should always have adequate life cover. The cause of death is immaterial. Just because someone dies due to an accident does not mean that the person has a higher life insurance requirement. I agree accidental death is sudden but so is death due to a heart attack.

PersonalFinancePlan Take

It is difficult to find flaws when you are talking about a pure term plan. It is good to have options. ICICI Pru IProtect Smart Plan does exactly that. Some of the features do not add much value but it’s still acceptable.

In my opinion, terminal illness benefit and waiver of premium on permanent disability don’t really add much value. Unfortunately, these are part of the base plan and can’t be done away with.

I would not recommend Accidental Death Benefit rider. So that rules out Life Plus and All-in-One options.

ICICI Pru IProtect Smart plan is as good (or as bad) as any other term plan. There is nothing special about it. So, if you are planning to purchase a term plan and are comfortable with ICICI Prudential Life Insurance, you can consider Life plan. It is slightly expensive than other plans but I personally am fine with that.  You can also enhance your cover under this plan at the time of marriage and birth of children.

Critical Illness Benefit Rider looks good and reasonably priced. If you are planning to purchase a critical illness cover and a term life plan, you can consider Life & Health plan.

Please understand I am not saying you need a critical illness cover. All I am saying is if you think you need one; ICICI Pru IProtect Smart plan offers a good option.

Just keep one thing in mind. If you are opting for Critical Illness benefit, I would suggest you opt for a higher Sum Assured. For instance, if your life insurance requirement is Rs 75 lacs and you opt for Critical Illness cover of Rs 10 lacs, go for Sum Assured of Rs 85 lacs.  This will ensure that you are adequately covered even if the critical illness benefit is exhausted.

Copying this table from one of my earlier posts.

Disability rider, in above table, is different from waiver of premium on Permanent Disability.

Image Credit: Ilya, 2009. The Original Image and information about usage rights can be downloaded from Flickr.

What do you think of ICICI Pru IProtect Smart plan? Do let me know about your experience, observations and inputs in the comments section.