Life Insurances 260 views
Just imagine if a 25 year old young man who recently got a job realizes that now he becomes a source of income for his family, but he also needs to make sure that his family will get the benefits in case of his unfortunate demise. However, after doing the thorough research, this gentleman realizes that even the cheap term plans do not come with any assured returns. Today, he is young, thus an effective term plan must give him the coverage of at least 45 years. And, in case of his survival, this huge investment will give no returns to him.
This is the reason that he prefers to go with an endowment policy offering guaranteed returns. With this, his life will remain insured, and in case of his survival he will get the premium amount along with the interest.
Well, these days, this form of insurance policy has gained a lot of limelight, basically targeting the young conservative investors, especially those who are looking for better returns than just the regular savings accounts, instead of not having the risk appetite to choose the market-linked insurance plans. Moreover, those people who prefer to choose the life insurance with maturity benefits, usually find it difficult so as to predict their returns.
However, unlike bank accounts having a straight-forward interest system along with deductions, it would not be wrong to say that return-based insurance plans are available with plenty of charges and bonuses.
So, here is a step-by-step guide so as to help you calculate your returns on your insurance.
1.Read the Offer Document Carefully
It is really very important to read all the offer documents carefully, and create a note of all the charges as well as bonuses. And then create a below table:
Well few charges are deducted by the banks, insurance providers or last, but not the least government. However, the final amount is actually your premium after the deduction of the charges. Not only this, in fact interest is also applied on this amount. Actually, balance is the amount that is being added to your account at the end of the every year.
2. Make Your Calculations
When it comes to calculations on the charges, it may vary from year to year. Let's understand this thing through this example:ICICI Svings Suraksha gives 5% of the maturity benefit as a bonus for the first 5 consecutive years, whereas, LIC Bima account comes with 2.75% of your premium for the first year, and from second years it starts charging 7.5%. All you need to do is just subtract all the charges and taxes from your yearly premium so as to get the final amount. You can also add any interest or bonus, if it is applicable. But, be careful because so as to know whether the base amount is your premium or it is your sum assured.
- Rinse, Repeat
Start doing the same calculations for the next year, and the year after that. Well, the only difference you will find is the balance of the first year needs to be added to your final amount for the next year.
Suppose if your insurance policy term is 10 years, the value in the balance column, when the column of the year shows 10, will actually your maturity benefit.
Moreover, if you subtract the sum of all the premiums from your maturity benefit amount, it would be easy for you to know your net returns.
4.Consider Variable Additions
When it comes to interest an bonuses, they generally guaranteed additions, but there may also the variable additions which you cannot predict. Thus, it would be best, not to take them into the consideration while doing the calculations for you final amount. Yes, because it may be 10% as advertised by the insurance provider,or it may also be 0%.
Thus, you should only consider the guaranteed bonus into the account when it comes to start planning your long- term investment.
- Ask the million Rupee Question: Is your plan worth it?
Suppose if you invest Rs. 1 lakh as your annual premium under the LIC Bima Account 2 plan, it would not be wrong to say that after 10 years your guaranteed maturity benefits will reach at Rs. 12,63,911. However, it is very obvious that if you invest in something more traditional such as fixed deposit or provident fund, you will get the higher net returns. But, the downside to these options is the fact that they do not provide you with the death benefit along with the additional benefits.
Well, this is one of the prime reasons why large numbers of people prefer to invest in term plan with low premiums so as to avail the benefit for their family, along with a fixed deposit that offers higher returns to you in the future.