Life insurance policy

POSTED BY Sateesh ON August 1, 2012 5:21 pm COMMENTS (6)

Hi Manish,
I am very much impressed by your work of helping all of us in solving complex financial issues. Thank you.
I am 38 yr old NRI and have one term policy of 10lacs from SBI life.
Now I want to increase the cover. I contacted one agent, he offered me endowment + term combined plan from LIC having 1 and 1/2 times accident cover. That is to pay premium 2.4lacs per year for first 10 yrs, then for next 10 yr it will decrease to 1.9 lacs like that for 35 yrs. It will cover from 80 lacs to 1.3 crores. After 30 yrs on maturity i will get 90 lacs, and 1 cr after another 5 years or else take 1.9cr after 35 yrs. One advantage is i can withdraw upto 10 lacs after first 10 yr, then gradually every year there is chance to withdraw upto 90lacs till 30 yrs (it is useful for children\’s higher education or else even to pay premiums!) It looks interesting as it is saving and insurance. I only have to pay for first 10yrs later i can withdraw from the policy and pay, of course they deduct that money instead of 90lacs I wIll get 50lacs after 30 yrs and 1cr after another 5yrs. Hope mentioned this plan as clearly as possible.
But according to most of your blogs, you recommend to go for term and invest in others like FD, MF…
Here I m bit confused (as I am not a disciplined investor) wether to go for this policy or just take another pure term policy of 1cr from LIC for 30yrs (here it is coming nearly 60000 pa). I feel if I take
above policy, I will have one way of saving and insurance cover that I wanted.
Any input on this will be appreciated.
Thanks again,
Best regards,

6 replies on this article “Life insurance policy”

  1. BRSINGH says:

    Term plans are cheap and give the required cover. For example my age is 34 and i have Bharati AXA term plan of cover 1Cr and i pay rs 10K premimum. If you suppose buy this the premimum will not be more than 12-14K for you. Suppose its 15K also. Now if you are ready to invest 2.4L per year and if you buy this term insurance then you will have 2.25 left to invest. If you simply save this much money without investing also you could save 78.75L in 35 years. But if you invest this amount 2.25L every year in MF whihch gives on an average of 15-20 % return then it will be a huge amount after 35 years.

    I dont think i would opt for the above SBI policy endowment + Term. I had 4 LIC endowment policies and i have closed all of them. Specially endowment plans are simply crap. They combining this with Tearm to simply confuse people.

    1. Sateesh says:

      Hi BR Singh,

      Thank you so much for your input and sharing your experience with endowment policies.

      I agree with you to go for pure term policy. I do some research on pvt insurance companies and will start term policy very soon.
      Regarding MFs, I am hesitent to go with them as we see market is not at all coming up. Bank NRE FDs are giving 9.25% pa interest. How about going with FD for 10 yrs?. When I contacted SBI, they advised to take FD for 1-2yr, because interest rates may hike after 1-2 yr upto 11%. But, again we dont know it may fall down to 8%. By going through all this and thinking so much, I feel I am wasting time!. I have decided to start with one FD of 5L for 5 years.
      Can you please give me more details about future of MFs?. It may help me to invest in MFs.

      Thanks again,

      Kind regards,

      1. Dear Sateesh, Term Plan part is already discussed hence not commenting. Regarding your fear for MFs. So you w’d enter in the market via MFs only when the Nifty ‘ll be say 8K or Sensex ‘ll be say 25K not now. Am I right? Should I say anything more?

        You decide. Regarding NRE FDs, you never know when the interest rates ‘ll turn but one thing is sure, the current rates are near peak & any upward movement from here onwards seems unlikely.



        1. Sateesh says:

          Dear Anshal,

          I got your point!. Thank you.
          I wil go for FD as I have decided and rest for SIP.


      2. BRSINGH says:

        Hello Satish,

        You can have some amount of money as FD for shot term i.e max 5 years. In long term the fixed deposits do not give better return. It is because, suppose you are doing a fixed deposit for 5L for 10 years but the inflation also increased by 6 to 7 % on an average every. So your actual return is just 2 to 3 % which is not a good return. So fixed deposits in long term merely maintains the current value of the money in future.

        For example if you do a fixed deposit of 1L today at 9% interest then after 10 years it will be around 2.43L. Now if you consider 6% inflation every year then the same 1L will equivalent 1.81L. So your actualy return is around 64 thousands after 10years. So do you think FD is a good investment?

        So you need to invest money in those products which gives good results like Mutual Fund because one expert will be managin your money and if you look at the history also they give 15-20% return in long term. Definitely there is a risk but you invest your money via SIP where you give only 3K every month and when you feel that the fund is not doing well then you can exit from it. MF is somehting which gives return in long term so you need to be patient and dont overwhelmed by the market condition. The market can not be good forever and can not be bad for ever.

        1. Sateesh says:

          Dear BR Singh,

          Excellent!!. You made it clear and simple.
          Now I understood some hidden things of long term investment and not to fall into the trap of agent’s recommendations!. These tips by you and from this website made financial planning interesting. I am going to work on it. I will get back to this forum, if I have any questions.

          Thank you,
          Keep up the good work!. God bless you.

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