Many of us invest in life insurance plans which provides guaranteed return for long term, but some times we overlook long term return under the shadow of word guaranteed return.
Lets take a look on TATA AIG MAHALIFE GOLD PLAN
According to company brochure minimum basic sum assured is 100000 your annual premium would be around 9150 and you have to pay this premium for next 15 year so you will pay total amount 1,37,250 (9150*15=137250) in next 15 years and company will start paying you guaranteed dividend from 10th year and non guaranteed from 6th year.
Guaranteed dividend : As name suggest this is the guaranteed dividend paid by the company to policy holder from the 10th year of policy inception. Which is calculated as 55 RS per 1000 RS basic sum assured here as we have taken 100000 as basic sum assured (BSA) in this case you will get 5500 per year till 85th policy anniversary (after you it will be paid to the beneficiary) so taking this in the account you will get total 3,70,000 as guaranteed dividend and 100000 as BSA after your death so against the investment of 1,37,250 your return is 4,70,000 (dividend+BSA after death)
Non-guaranteed dividend:If company do well in business it will pay non guaranteed dividend to the policy holder from 6th anniversary of the policy. For 6-9th anniversary it will be 31 Rs for per 1000 Rs basic sum assured for 10-19th it is 62 Rs and for 20th above it is 93 Rs If company is doing well all the 85 years you will get 669600 as a dividend and 100000 BSA total 769600
In between if insured death happens in less than 1,2,3,4 year than 10%,40%,60%,80% of death benefits will be paid.
Now take one of the easiest instrument for investment in to account, yes it’s bank F.D.
Suppose you have invested same amount 9150 in F.D. at first year and bank is giving 5% interest on it (we are taking average rate of interest for next 85 years because nothing is certain , current interest rate is 7.5% in FD and 8-8.5% in various government small saving schemes, We have taken compounding interest as we can add interest amount of FD in basic for next year)
If you are 25 year old and want to decide between policy and FD and you don’t want to wait for next 85 year lets see what you will get after 45 years when you will become 60 years old senior citizen
|Premium /FD amount||value of FD (At 5% interest rate)||Year|
|After 45 years||896008.0201|
As you can see if you invest same premium amount for 15 years in FD than you get 896008 at the end of the 45 years which calculated only at 5% interest rate which 13% more than non guaranteed dividend 90% more than guaranteed dividend.
And yes you can put this FDs as collateral against loan which is added benefit.
Choose wisely and invest well.