What do we think when we think of life insurance? I guess endowment plans!!!
This is what one of LIC agents told a couple of days back.
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Manish Sir,
XXX is the best policy.Its features are:
Tax Bft:Deduction u/s80C of Income Tax Act,1961.
Period Covered:For first 20 years(with premium)
After that upto Age of 70 years
(without premium)
Premium: According to Age
Bonus : Rs. 6000 p.a.
Addl. Incentive : Rs. 20,000 after 20 years
Accidental Death : Double the policy amount.
If you take Rs. 1 lakh policy you will get Rs. 2,40,000 after 20 years (if you don\'t die).
If death takes place your legal heirs will get Rs.1,00,000 more then the due amount.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
I calculated premium for sum assured 100,000 for 20 years tenure for me. It comes around Rs. 5660. So if I "invest" 5660 yearly, I will get a tax benefit and my family will get 100,000 or 240,000 depending upon the situation.
Give me a break! My life if worth 240,000? What would my dependents do with 240,000? After all life insurance is a way to protect my from financial loss in future if I don't survive.
How much protection is needed can be roughly estimated; but for the sake of fun, lets take it 10,00,000. For me the premium comes whooping 55,000 per year. Is it really worth?
I guess the 20,000 bonus and 6000 bonus part can be easily ignored. It is just a marketing gimmick.
If we look at historical performance of any endowment policy, none has given more than 6-7% returns compounded annually. If we take the best case scenario of 7% and pay 5660 per year, what I get in the end is 5660*(1+0.07)^20+5660*(1+0.07)^19....5660*(1+0.07)+ which comes around 2,48,276. This is what I get in the end if I survive; If I lose my life in between my family would be showered with 1-2 lakhs and nothing more. This return doesn't not even beat inflation and the insurance amount doesn't cover anything. It wont last even 6 months for my dependents.
By now I have established that endowment policies are not suitable for me. I understand 2,48,000 will not have any meaning after 20 years; So let me think about a plan that doesn't give me anything if I survive but gives a good protection in my absence. Take any term plan for example. I am taking icici's iprotect for illustration purpose.
Sum assured (50,00,000) (this is what my family gets if I die)
Policy term (30 years) (till I am 60) (makes sense, I am sure I will not have any dependents after 60)
Premium only 5600!!!
We dont need to be a finance guru to understand the difference between 100,000 and 50,00,000. The only problem is that I don't get anything if I survive. I lose 1,50,000 over the period of 30 years in this case.
disclaimer: I am not saying that endowment policy is bad and term plan is good. I am not also marketing ICICI's iprotect plan. My only concern is think before you buy!!!
This is what one of LIC agents told a couple of days back.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Manish Sir,
XXX is the best policy.Its features are:
Tax Bft:Deduction u/s80C of Income Tax Act,1961.
Period Covered:For first 20 years(with premium)
After that upto Age of 70 years
(without premium)
Premium: According to Age
Bonus : Rs. 6000 p.a.
Addl. Incentive : Rs. 20,000 after 20 years
Accidental Death : Double the policy amount.
If you take Rs. 1 lakh policy you will get Rs. 2,40,000 after 20 years (if you don\'t die).
If death takes place your legal heirs will get Rs.1,00,000 more then the due amount.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
I calculated premium for sum assured 100,000 for 20 years tenure for me. It comes around Rs. 5660. So if I "invest" 5660 yearly, I will get a tax benefit and my family will get 100,000 or 240,000 depending upon the situation.
Give me a break! My life if worth 240,000? What would my dependents do with 240,000? After all life insurance is a way to protect my from financial loss in future if I don't survive.
How much protection is needed can be roughly estimated; but for the sake of fun, lets take it 10,00,000. For me the premium comes whooping 55,000 per year. Is it really worth?
I guess the 20,000 bonus and 6000 bonus part can be easily ignored. It is just a marketing gimmick.
If we look at historical performance of any endowment policy, none has given more than 6-7% returns compounded annually. If we take the best case scenario of 7% and pay 5660 per year, what I get in the end is 5660*(1+0.07)^20+5660*(1+0.07)^19....5660*(1+0.07)+ which comes around 2,48,276. This is what I get in the end if I survive; If I lose my life in between my family would be showered with 1-2 lakhs and nothing more. This return doesn't not even beat inflation and the insurance amount doesn't cover anything. It wont last even 6 months for my dependents.
By now I have established that endowment policies are not suitable for me. I understand 2,48,000 will not have any meaning after 20 years; So let me think about a plan that doesn't give me anything if I survive but gives a good protection in my absence. Take any term plan for example. I am taking icici's iprotect for illustration purpose.
Sum assured (50,00,000) (this is what my family gets if I die)
Policy term (30 years) (till I am 60) (makes sense, I am sure I will not have any dependents after 60)
Premium only 5600!!!
We dont need to be a finance guru to understand the difference between 100,000 and 50,00,000. The only problem is that I don't get anything if I survive. I lose 1,50,000 over the period of 30 years in this case.
disclaimer: I am not saying that endowment policy is bad and term plan is good. I am not also marketing ICICI's iprotect plan. My only concern is think before you buy!!!
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