Today I analysed the 2 plans offered by Max Life.
1. Term Insurance plus Fixed monthly income for next 10 years on death of Insured. Lets Call it Plan ‘A’
2. Just plain term insurance. Lets call is Plan ‘B’
Lets take some figures here. For a person ‘XYZ’ of Age 30 and term of 20 years and SA 1 Cr and the monthly income of Rs 40,000 the premium comes to Rs 9,000/- (With Service Tax). Now for same numbers but without Monthly income plan you will get approx 1.38 Cr insurance in same Rs. 9000/-.
In plan ‘A’, on insured person demise family gets Rs 1 Cr immediately and Rs 40K per month for Next 10 Years.
In Plan ‘B’ on demice of person insured family will get Rs 1.38 Cr immediately. Now if we put this additional Rs 38 Lacs on reverse mortgage (Similar to Home Loan EMI where you pay monthly EMI for 10 Years so that entire loan amount is paid/exhausted at certain interest rate) you can generate this Rs 40K per month at just 4.84% annual interest rate. It means that if you put this money (38 Lacs) on interest @4.84% interest rate and keep withdrawing Rs 40K every month the entire money will last for 10 Years.
And now if can put it at better rate say 7% (Assuming paying the income tax on the interest earned) you can get Rs. 44121/- per month instead of 40K for next 10 years or you can get same 40K per month but for next 11.5 years instead of 10 years.