(Insurance for whole life) which is a better option and why?
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(Insurance for whole life) which is a better option and why?
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Jeevan Saral is an endowment policy with maximum term of 35 years and maturity age of 70 years. Tata AIG Invest Assure Gold is an Unit Linked Insurance Plan (ULIP) which invests mainly in the share market.
They can not be compared.
Hi.
JEEVAN SARAL IS A GOLDEN PEACOCK AWARDED PLAN.WHICH GIVES HIGH RISK COVER-
IN LOW PREMIUM
LIC Jeevan Saral vs RD – PPF
Jeevan Saral is nothing but an endowment assurance plan where the policyholder simply has to choose the amount and mode of premium payment. The plan provides protection against death throughout the plan term to the extent of 250 times of the monthly premium. For example, anyone opting to pay a monthly premium of Rs 1000 will get a risk cover of Rs 2,50,000 during the policy period.
Suppose 30-year old Mr A opts for a policy involving monthly premium payment of Rs 1000 for 20 years. The total premium paid will be Rs 2,40,000 at the end of the 20th year, which assures maturity sum of Rs 2,73,500 and loyalty addition at the rate announced for the corresponding year. (The average rate at which the bonuses were offered for the past five years was around 5-6%). So if we assume that 6% loyalty will be paid in the 20th year, the total lump-sum earnings at maturity will be around Rs 3,48,000. Thus, the net earnings will be around Rs 1,00,000 in 20 years.
Instead, Mr B opens a recurring deposit with a PSU bank for 20 years. (The maximum RD period offered is 10 years, but we have assumed RD of 20 years to make it comparable). The deposit rate offered by most banks for 10 years is 7% per annum compounded quarterly.
So, the amount receivable after 20 years will be around Rs 5,21,000. Thus, the interest earnings will be Rs 2,81,000, much higher than the guaranteed returns on Jeevan Saral. But one should not forget that the interest income on RD is taxable. Assuming Mr B is in the 20% income tax bracket, the total tax paid will be Rs 58,000 and the net interest earned after tax adjustment will be Rs 2,23,000, which is still higher than the returns offered by Jeevan Saral. Also RDs don’t attract TDS.
Now consider Mr C, who opts to make monthly investment of Rs 1000 in PPF account for 20 years. He enjoys tax benefit under sec 80C similar to Mr A. At the end of 20th year, he receives almost Rs 5,93,000. Thus, the net earnings for Mr C will be Rs 3,53,000, which will be absolutely tax-free. Moreover, these assured earnings may be much higher than the unassured receivables of Mr A.
To sum up, if one is looking for a pure long-term investment with periodical payout, traditional fixed investment avenues such as RDs and PPFs score for insurance based investment plans. As for risk cover, one may go for pure-term policies which have very low premiums.
A healthy 30-year male will pay Rs 3,700 as annual premium for a Rs 10 lakh pure term policy for 20 years.
HMT