### Plan Comparision

POSTED BY ON September 21, 2012 12:23 pm COMMENTS (3)

I compared two traditional plans and below are the details

Traditional RD/FD Vs ICICI Pru Guaranteed Savings Insurance Plan

If i invest the same amount of money in RD/FD(Assuming every year I deposit 1 L for Seven years after the maturity) for 7 years and leave it for 15 years i will get 2.9 L extra than this.

·         The only benefit i could see in your plan is this has insurance cover for which there is no amount being deducted like admin or mortality charges etc like ULIP, this insurance is free

·         The biggest benefit which they claim is that the maturity amount after 15 years is “Tax Free” the reason they are saying is if the insurance cover is 10 times the premium amount then the maturity amount is tax free, he mentioned some section for the same which I don’t remember. Is this true ?

·         If the Maturity amount is tax free then this plan has an edge of 2.3 L than the traditional plan

I know if we invest in Mutual Funds or ETF the returns might be higher however the reason for comparing this with RD/FD is the amount which is being invested is also being invested in Debt funds etc so comparison with RD/FD to me makes more sense.

 Calculation of the premium paid for ICICI Pru Guaranteed Savings Insurance Plan with 8% interest, below is the table S.No Premium Principal Every Year RD with 8% Int Int Amt Total with Int Regular Additions @ 3.5% 1 100000 100000 8 8000 108000 24500 2 100000 208000 8 16640 224640 24500 3 100000 324640 8 25971.2 350611.2 24500 4 100000 450611.2 8 36048.896 486660.096 24500 5 100000 586660.096 8 46932.80768 633592.9037 24500 6 100000 733592.9037 8 58687.43229 792280.336 24500 7 100000 892280.336 8 71382.42688 963662.7629 24500 8 963662.7629 8 77093.02103 1040755.784 24500 9 1040755.784 8 83260.46271 1124016.247 24500 10 1124016.247 8 89921.29973 1213937.546 24500 11 1213937.546 8 97115.00371 1311052.55 24500 12 1311052.55 8 104884.204 1415936.754 24500 13 1415936.754 8 113274.9403 1529211.694 24500 14 1529211.694 8 122336.9355 1651548.63 24500 15 1651548.63 8 132123.8904 1783672.52 24500 Total 700000 8% int after 15 years 1783672.52 367500 Insurance Cover 1000000 Total Regular Additions 367500 Sum Assured 700000 Maturity Additions 420000 Annual Premium 100000 Sum Assured 700000 Maturity Value after 15 years 1487500 Same in FD with 8% interest after 15 years 1783672.52 RD is better than this only diff is insurance which shld be taken care by the term policies (To separate Insurance from Investments) 296172.5203

 Description Recurring Deposit GSIP Annual Savings 100000 100000 Payment Term in Yrs 7 7 Maturity Term in Yrs 15 15 Rate of Return 8% 8% EBI Maturity Value 1783673 1487500 Less:- Income Tax @ 30% 535102 Tax Free Post Tax Maturity Value 1248571 1487500 GSIP Advantage 238929

http://www.iciciprulife.com/public/Life-plans/GSIP.htm

It’s clearly written there that returns in this plan are not gtd. Whereas in case of RD, your returns are gtd. Should I say more?

Now a shock for you, for that 7Y prem. Paying & receiving maturity after 8 more years, the maturity amount is not at all tax free. Yes you read it right, not tax free. The reason is Sum assured is = Prem. paid * prem. pmt. term. So for 7Y term, the sum assured can not be 10X of prem. amount & hence can not be tax free.

Thanks

Ashal

1. Chandrashekhar Subramanian says:

Thanks Ashal, this clarifies

2. Ramesh says:

1. What if the govt changes the IT rules to include only those Ulips with insurance amount = 20x and not 10x?
2. What about comparison with PPF? Tax free status.
3. What about liquidity in this plan, as compared to RD/FD?

Anyways, the insurance component is pathetic to say the least.

Think.

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