Recently, I received a proposal for the popular HDFC Life Sanchay Par Advantage, a traditional insurance-linked savings plan that promises guaranteed payouts, a sizable life cover, and tax-free returns.
On the surface, the numbers look very impressive — large cumulative payouts, substantial maturity benefits, and a comforting insurance cushion.
But when you take a closer look, break down the actual yearly cash flows, and compute the real rate of return (IRR), the story changes quite dramatically.
In this post, I’ll show you:
✅ What the plan promises
✅ A year-by-year cash flow table
✅ A graph of cumulative balances
✅ And finally — why even with the maturity benefit, the actual return (IRR) is quite modest.
The Proposal Highlights
| Parameter | Value |
|---|---|
| Product | HDFC Life Sanchay Par Advantage |
| Annual Premium | ₹5,00,000 |
| Premium Paying Term | 6 years |
| Life Cover | ₹52,50,000 |
| Payout Period | 20 years (starting right after year 1) |
| Annual Payout | ₹1,05,200 (can be monthly) |
| Maturity Benefit (Year 20) | ₹37,25,000 |
| Total Payouts + Maturity | ₹58,29,000 over 20 years |
Sounds impressive, doesn’t it?
The Hidden Picture: Cash Flows Over Time
Let’s lay out the cash flows year by year.
In this plan:
- You pay ₹5,00,000 in year 0 (start), then
- From year 1 to year 5, you pay ₹5,00,000 each year but also start getting ₹1,05,200 payouts immediately, effectively reducing your net outgo to ₹3,94,800.
- From year 6 to year 19, you receive ₹1,05,200 each year.
- In year 20, you receive ₹1,05,200 plus the maturity benefit of ₹37,25,000.
Revised Cash Flow Table
| Year | Cash Flow | Cumulative Balance |
|---|---|---|
| 0 | -₹5,00,000 | -₹5,00,000 |
| 1 | -₹3,94,800 | -₹8,94,800 |
| 2 | -₹3,94,800 | -₹12,89,600 |
| 3 | -₹3,94,800 | -₹16,84,400 |
| 4 | -₹3,94,800 | -₹20,79,200 |
| 5 | -₹3,94,800 | -₹24,74,000 |
| 6 | +₹1,05,200 | -₹23,68,800 |
| 7 | +₹1,05,200 | -₹22,63,600 |
| 8 | +₹1,05,200 | -₹21,58,400 |
| 9 | +₹1,05,200 | -₹20,53,200 |
| 10 | +₹1,05,200 | -₹19,48,000 |
| 11 | +₹1,05,200 | -₹18,42,800 |
| 12 | +₹1,05,200 | -₹17,37,600 |
| 13 | +₹1,05,200 | -₹16,32,400 |
| 14 | +₹1,05,200 | -₹15,27,200 |
| 15 | +₹1,05,200 | -₹14,22,000 |
| 16 | +₹1,05,200 | -₹13,16,800 |
| 17 | +₹1,05,200 | -₹12,11,600 |
| 18 | +₹1,05,200 | -₹11,06,400 |
| 19 | +₹1,05,200 | -₹10,01,200 |
| 20 | +₹38,30,200 | +₹28,29,000 |
So by the end of 20 years, you have a gross cumulative balance of about ₹28.29 lakh — i.e. your payouts plus maturity exceed your total outgo by this amount.
The Real Return You Earn
Now let’s compute the effective IRR (internal rate of return) on these cash flows.
- Over 6 years, you invest a total of ₹24,74,000 (after adjusting for payouts received during premium years).
- Over 20 years, you get total payouts + maturity of ₹58,29,000.
So approximate CAGR is:
≈ (58,29,000 / 24,74,000) ^ (1/20) – 1 ≈ (2.35)^0.05 – 1 ≈ 4.4% p.a.
This means your effective compounded return is approximately 4.4% p.a. tax-free.
Why Do Such Plans Look So Lucrative?
Insurance sales illustrations often:
✅ Highlight large cumulative payouts like “₹58,29,000”,
✅ Emphasize tax-free income,
✅ Focus on the big life cover of ₹52.5 lakh,
✅ Present it as a “risk-free assured income.”
What they usually don’t show clearly is:
- The actual yearly cash flows which are modest until the final year.
- The impact of locking your money for 20 years.
- How a 4.4% return lags inflation, which averages 5-6% over long periods.
Bottom Line: Should You Go for It?
So with the maturity benefit, the product is like a long-term tax-free FD yielding ~4.4%, with bundled life insurance.
If you value the insurance and the forced discipline, it might suit you. Otherwise:
✅ For insurance, a simple term plan of ₹52.5 lakh would cost just ~₹6-8k per year.
✅ For investment, diversified equity or balanced mutual funds over 20 years historically yield 10-12%, much better beating inflation.
If you still like such plans for the psychological comfort of “assured money,” that’s perfectly okay. But at least go in fully aware:
| Feature | HDFC Sanchay Par Advantage | Term Plan + Equity SIP |
|---|---|---|
| Life cover | ₹52.5 lakh bundled | ₹52.5 lakh for ~₹8k/year |
| Total 6-year outgo | ₹30 lakh | ₹30 lakh into SIP + minimal for term |
| Expected corpus @20 yrs | ~₹58 lakh (4.4% IRR) | ~₹1.1 crore (12% SIP CAGR) |
| Flexibility & liquidity | Locked for 20 yrs | Withdraw anytime from SIP |
They are insurance-led savings products — not true investment plans.
Your money could work much harder for you elsewhere.