Plan Comparision

POSTED BY Chandrashekhar Subramanian 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.

Do let me know your comments

 

 

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

  

3 replies on this article “Plan Comparision”

  1. Dear Chandrasekhar, please check the below link –

    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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