Option 1:
Suppose 30-year old Mr A opts for a policy involving
monthly premium payment : Rs 1000
Number of Years : 20 years.
The total premium paid : 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. )
Option 2:
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 highest income tax bracket, the total tax paid will be Rs 87,000 and the net interest earned after tax adjustment will be Rs 1,94,000, which is still higher than the returns offered by Jeevan Saral.
But not all investors need to pay the highest applicable rate of income tax as RDs don't attract TDS.
Option 3:
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 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.
Option 1 (Rs 1,00,000) or Option 2 (Rs 1,94,000) or Option 3 (Rs 3,53,000,) your choice?
http://articles.economictimes.indiatimes.com/2009-06-08/news/27665755_1_jeevan-saral-premium-policy
Suppose 30-year old Mr A opts for a policy involving
monthly premium payment : Rs 1000
Number of Years : 20 years.
The total premium paid : 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. )
Option 2:
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 highest income tax bracket, the total tax paid will be Rs 87,000 and the net interest earned after tax adjustment will be Rs 1,94,000, which is still higher than the returns offered by Jeevan Saral.
But not all investors need to pay the highest applicable rate of income tax as RDs don't attract TDS.
Option 3:
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 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.
Option 1 (Rs 1,00,000) or Option 2 (Rs 1,94,000) or Option 3 (Rs 3,53,000,) your choice?
http://articles.economictimes.indiatimes.com/2009-06-08/news/27665755_1_jeevan-saral-premium-policy
