Hi Sreekanth,
I am looking at investing in Lic policy. I am planning for the combined policy of Jeevan anand+jeevan labh (25 years term). The premium is on the higher side and so is the maturity amount shown in the illustration. When i calculate the IRR it is working out to be 6.54%.
Also i am looking at a policy of jeevan labh separately where in the IRR for the 25 years term is working out to be 7.74%.
Now my question
The maturity amount after 25 years is calculated say on bonus of 50 rs/ every 1000 sum assured for this year, will it be same 50 rs for all 25 years term. I was told that the bonus amount will remain same. Even if the bonus for this plan is declared as 55 rs or 45 rs next year i will not gain or loose any amount in the final maturity amount. Also the FAB shown in the illustration will not decrease ( it may remain same or increase only). is this claim by the insurance agent right? if its so then i think its a better option compared to bank FD which is giving interest rate at 6.5-7.5% currently and which looks like going down to 4-4.5% in future years. Pls comment and guide. other members in the forum are also requested to give their ideas and views
Thanks in advance.
5 Answers
Hi,
Kindly note that Bonus rates or FAB may not remain same every year.
Yes, most of these kind of mentioned traditional life insurance plans can give returns of around .
May I know your purpose of buying insurance? Is it for life cover?
The interest rate scenario may not remain same and do note that life insurance is a long term product.
You may kindly read below articles and revert to me;
https://www.relakhs.com/traditional-life-insurance-plan/
https://www.relakhs.com/lic-bonus-rates-2016-17/
https://www.relakhs.com/lic-jeevan-labh-plan-table-no-836-features-review-returns-calculation/
https://www.relakhs.com/insurance-importance-life-health-accident-covers/
Hi Sreekanth,
Thanks for your answer and clarifications.My idea for investing in LIC is long term goal ie for my daughter education (15 yrs from now) and marriage (25 years from now) and also my retirement.
let me give a brief about me and my investments.
I am a marine engineer with annual package of around 25 lakhs. I am 35 yrs now. My wife is a home maker aged 30 and we hv a daughter 3 yrs old.I try to finish my NRE status every financial year by sailing minimum 185 days. Even if i complete my NRE status in a financial year still i file income tax return with ZERO tax.
I have done some savings till now with the basic ideas which i had regarding different products and financial planning. Now i want to improve it and grow it.
My savings pattern till now is as follows.
1.Currently most of my savings are in bank FD.
2. I hv opened a sukanya samriddhi acc for my daughter-1,50,000 yearly( Maturity in 2037)
3. PPF acc in my wife's name-1,50,000 yearly (15 yrs maturity in 2032).
4. Lic jeevan saral policy with yearly premium of 1 lakh. projected maturity value in 2032 around 49 lakh.
5. I hv recently applied for a term insurance of 2.20 crore in TATA AIA sampoorna raksha plus. In this policy the total term is 30 yrs(ie upto my 65 yrs age) and premium paying term is 10 yrs with yearly premium around 55,000. This policy is with return of premium option if i survive after 65 yrs of age. In case of any risk 1 crore will be paid lumpsum to my family and 1% of SA( ie 1 crore= 1,00,000 ) will be paid monthly for 10 years to the family. so the total benefit in case of risk is 2.20 crore. The process of policy issue is in progress.
6. I hv very less amount invested in mutual fund.
7. I am planning to start Mutual fund SIP of around monthly 10,000. Please suggest some good funds and proportion of allocation in each.
8. I don't hv any other commitments as of now. But would look for buying a property/house in future.
Now my question-
1. Considering the decline in rate of interest in Bank FD i am also planning to open post office account in my wife's name and start NSC and KVP. How do u recommend it?
2. I was shown a LIC plan new jeevan anand(50,00,000lakh SA)+jeevan labh(25,00,000SA). New jeevan anand 25 yr policy term and 25 year PPT. jeevan labh 25 years policy term and 16 year PPT. The premium for this is around 3,50,000 per year for 16 years and then reduces to around 2,35,000 for next 9 years. On maturity after 25 years(ie wen i will be 60-61 yrs age) the projected maturity amount is around 2crore. If this illustration amounts are to be considered to be guaranteed, then the IRR works out to be around 6.5 % which looks much better than future bank FD rates. So do u recomend this product to me.( considering my long term goals)?
3. I am a moderate risk taker only. so i want to invest today in some product which shows me a guaranteed maturity amount after 15, 20, 25 years term which i can say is fixed for my daughter's education, marriage and my retirement. in that way i can be somewhat relaxed thinking that, ok i hv at least some corpus, if not full for the particular purpose cos we cannot predict inflation for next 25 years). So what kind of investments do u suggest me?
Please give your expert advise and suggestions on the above mentioned points and questions.
Thanks in advance.
Ramakrishnan.
Dear Mr.Sreekanth,
In continuation to above post i would like to add that i hv also taken a helth insurance covering my wife and kid from MAX BUPA of 15 lakh individual and 30 lakh floater policy.
Hi,
1 - Kindly read below article regarding why one should avoid investing in FDs/RDs for longer period ;
https://www.relakhs.com/avoid-fixed-deposits-rds-for-long-term/
2 - Sukanya & PPF are good long term savings options.
3 - Once you get your Term insurance policy bond, you may discontinue your existing LIC policy and divert this premium to your long term goals, can consider other better alternative investment options.
Kindly read :
https://www.relakhs.com/traditional-life-insurance-plan/
https://www.relakhs.com/how-to-get-rid-off-bad-life-insurance/
4 - Do you have Permanent disability cover?
5 - As you are already contributing to PPF & SSA, suggest you not to allocate high amounts to post office schemes (KVP/NSC).
6 - Suggest you to not to buy traditional plans life Jeevan Anand / Jeevan Labh. Kindly do not mix insurance with investment. In most of the scenarios this leads to erosion of your wealth.
7 - Kindly go through below articles and you may revert to me with your analysis ;
https://www.relakhs.com/retirement-planning-calculator-3-easy-steps/
https://www.relakhs.com/calculate-kids-education-goal-amount/
https://www.relakhs.com/mutual-funds-subject-market-risks/
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