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POSTED BY ON April 4, 2012 4:06 pm COMMENTS (8)
Last year 13/04/2011 I started a LIC policy jeevan mitra triple by paying 28531 per/year for 7 laces SA with accidental and permanent disability benefits.
Now I am going to stop this policy and left the money I paid to LIC.
I will break 28531 from this year onwards to i term plan (7500 for around 50 laces cover) and will invest 21000 in PPF.
Will it be good decision in term of return and insurance? If possible please explain.
OR
Will it be bad decision in term of return and insurance? If possible please explain.
Also let me know if bonus and final additional bonus is given regularly on this policy as per past records?
Please do not suggest about MF as I am already investing in that.
Please provide your valuable answers on these points.
Thanks in advance.
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My age is 29 and policy term is of 30 years. married and 1 kid of 2 years. Please provide good suggestion as i am very confused.
Dear Yogesh, that 21K Rs. invested in PPF @ 8% interest ‘ll become 25.7L Rs. in next 30Y.
Apart from this, yiur life is covered for 50L Rs. for next 30Y & that’s an added advantage for the situation, if you are no more in between, your family ‘ll have 50L Rs. from Sum assured of Term Plan & another maturity value from that PPF investment.
Thanks
Ashal
Hi Yogesh,
Could tell us your age and LIC policy’s term of insurance?
Dear Yogesh, please use exl. sheet to calculate.
Thanks
Ashal
Dear Yogesh, before I comment any more on this topic, my idea is, the comparison should be among equals. So instead of 50L Term plan, please select the prem. of 7L Term plan (the sum assured offered to you by LIC in the Jeevan Mitra Triple Cover). Now do calculate the remaining prem. amount in PPF. For volatility in PPF rates in future, please take 8% return rate as base for your calculation. Please calculate on your own & post your findings. If you are unable to calculate please reply back.
Had you noticed, I have not given a simple Yes or No answer. I want you to do some work on your own & then to decide on your own based upon your own findings. 🙂 🙂
Hope you won’t mind it.
Thanks
Ashal
Bhushan,
LIC is of simple interest type. PPF is compounding. Put in other words. 8.5 % of LIC and 8.5% of ppf would lead to different amount of wealth. In case of PPF it would be way to high.
Pls do not assume that PPF rates remain constant. In fact, on a broad note, you will always find that LIC yield and PPF rates are always close to each other.
Currently LIC yields 7.5%+ while PPF is 8.5%+.
The difference is the cost of insurance.
So only question is, do you want to pay 1% as insurance cost or not !
Yogesh,
You have taken right decision. You have paid too high a premium for insurance. By doing this (shifting to term plan and investing rest in PPF), you will not only get higher insurance, but also probably higher returns. Returns from insurance companies historically have never been higher than 8%. In case of PPF, u can get tax-free returns of higher than 8% in many years depending on the interest rate scenario (currently it’s 8.8%).
So don’t worry, your decision is right.