ICICI Pru Pinnacle Review

Here is one more Unit Linked Pension Plan (ULIP) in India. As you know that I hate ULIPs and I will show you later on in this article that why I hate it. Insurance and Investment is the worst combination that investors do. Now, let us first of all discuss that What ICICI Pru Pinnacle really offers and why you should not buy it?

Let me tell you that what’s new in Pinnacle. Well, this fund guarantees you the highest NAV on daily basis, in the first 7 years of the fund. Here is what exactly the fund offers.

In this product, the fund will guarantee the highest Net Asset Value (NAV) recorded on a daily basis, in the first 7 years of the fund, subject to a minimum of Rs.10. The guarantee will be applicable only at maturity. The period of 7 years starts from the date of launch of Pinnacle Fund and will end on the completion of 7 years . (24th Oct 2009 to 24th Oct 2016).

How Does the Policy will work?

Well, in this policy, first of all you will have to select the premium amount and sum assured for the policy. From this they will deduct the premium allocation charge and the rest of the amount will be invested in the Pinnacle fund which will primarily invest your money in equity for the growth.

You will have to pay the premium for the first 3 years only. Now, I have gone through the Brochure of this scheme but they have not mentioned anywhere that how much premium charge they will deduct and how much money will go towards the long term investing. Sounds like an opaque fund.

See the above illustration given in the brochure of the scheme. According to the illustration, A 35 years old male is paying Rs.3 Lakh of Annual Premium for 3 years. The term of the policy is of 10 years and the Sum Assured is Rs.15 Lakhs.

Now, after thee 10 years at the rate of 6% p.a. and 10% p.a., he will get Rs. 11.62 Lakhs and Rs.16.22 Lakhs respectively.

Now, What I don’t like about the policy is the sum assured. Well, for paying Rs.3 Lakh of annual premium, you are getting just Rs.15 Lakh of the Life Insurance Cover. While in case of any Term Insurance Policy, by paying just Rs.20,000 every year you will get a life insurance cover of Rs.75 Lakhs.

So Which is better? And you can invest the rest Rs.2,80,000 in some good equity diversified mutual fund and if we assume that the fund will give you just 10% annual return, you will still end up with Rs.20 Lakhs after 10 years (If you invest Rs.2.8 Lakhs for first 3 years in the fund and than stop investing in it). Now, the ICICI pru Pinnacle will give you just Rs.16.33 Lakhs after the end of 10 years and the the life insurance cover of just Rs.15 Lakhs.

Now, just think that if you will die than do you think that your dependents will survive on the Rs.15 Lakhs only? I don’t think so.

The only problem with ULIPs is that they don’t provide much life insurance cover. Even after buying ULIPs, you will have to buy one more term insurance policy to cover your life insurance. Because Rs.15 Lakh of Life Insurance is not at all sufficient.

So in my opinion, you should go for Term Life Insurance + Equity Diversified Mutual Fund Combo. Rather than paying Rs.3 Lakhs of heavy annual premium to buy just Rs.15 Lakhs of Life Insurance Cover and get Rs.16 Lakhs after 10 years, it is advisable to pay Rs.20,000 every year to buy Rs.75 Lakhs of pure term life insurance cover and invest rest of the money in 2 or 3 good equity diversified mutual funds.

What Do You Think?…..