Today I had nice discussion on LIC policies with one of their agents. One policy seemed particularly good, Jeevan Mitra (table no. 133):
Premium: 1,19,000 per year
Term: 30 years
Insurance: 1.2 Cr for accidental death, 90 lacs for natural death, 30 lacs for disability
Sum at maturity: 1,08,00,000
Ignoring insurance, the rate of return is 6.75%.
However, if we include insurance and assume an equivalent term insurance would cost 28,000 per annum (high by any standard).
Net premium => 1,19,000 - 28,000 = 91,000.
The rate of return is 8.25% and is tax free. Pretty good except that the money gets locked up for 30 years. Alternatives can be PPF, higher returns and lesser locking 15 years.
Therefore, Term insurance + PPF is BETTER than LIC endowment policy.
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Final value of this return is always indicative, so dont go by Sum at Maturity...
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