The phrase 'Gold Plus' would conjure up images of a frequent flyer travel programme or a special credit card but no, this is one is a product from an insurance policy. The brochure further reads: "Don't we always wish for that something more? A bigger house, a plush set of wheels, holidays in exotic lands. Here's something that makes sure you get all that and much more". Intriguing choice of words but one may wonder, "Am I looking for an insurance policy or a personal loan?"

Like other unit linked insurance policies, Gold Plus will cover your life, while giving you an opportunity to grow your investments for the medium term. However, there is a stark departure from a normal insurance policy where they claim that insurance is for the long term whereas mutual funds are for the short term.

By launching Gold Plus, Birla Sun Life Insurance seems to queer this pitch by saying that "insurance is also for the short term".

This ULIP offers a life cover for a period of only eight years, while paying premiums for three years. Like in other ULIPs, this plan has seven fund options, which also includes one with 100 per cent equity known as the Maximiser. Some of the tenets of the policy include:

• Investment is available at a net asset value of Rs 10
• You can pay any premium for the first year and for second and third years, you can pay a very low premium of around Rs 10,000
• 100 per cent equity option will allow excellent growth
• Withdrawals - after three policy years, a minimum of Rs 5000, two partial withdrawals are free in a year
• The policy can be surrendered any time during the policy term but if it is surrendered within the first three years, the payment will only come once the first three policy years are over
• Surrender charge is zero after the third year

The minimum sum assured for this product is 5 times annual premium and maximum sum assured.

Charges

In addition to these charges, there is a fund management charge from 1 to 1.25 per cent and mortality rate (the cost of your risk cover), which will increase based on the component of equity in it.

The policy administration charge is Rs 18.4 per Rs 1,000 sum assured up to Rs 50,000. An additional Rs 4 per Rs 1,000 will be charged in the first three policy years, only on the excess sum assured over Rs 50,000.

The overall cost in the first year excluding (fund management charge and mortality rate) is around 10 per cent at least, since policy administration charge is around 1.84 per cent in the first three years and 1.44 per cent subsequently.

Now let's see the impact of costs on your returns with an illustration for a person aged 35 with a sum assured of Rs 30 lakh (Rs 3 million). The survival benefit works out to Rs 283,000 at an investment value of 6 per cent, which yields a negative return of 0.82 per cent.

At 10 per cent the return is slightly at 3.38 per cent. The returns are lower because of the costs. Now, the question is how will a policy holder buy a bigger house or take vacations in exotic  locales?In general, most ULIPs neither qualify as good investments nor provide adequate cover.

Though this plan is attempting to position itself as an investment tool, the returns are not good enough. It is expensive at just under 10 per cent cost (premium allocation charge + policy administration charge) in the first year and slightly under 6 per cent in the second and third years of allocation.

After the fourth year, you still pay an allocation charge of 1.48 per cent besides the fund management charge and mortality charge. This is one Gold Plus that you can comfortably miss.