ULIP v/s Term + PPF combo

Dear Friends, I tried to generate a BI on LIC website for their Money Plus - I plan for the following data but I'm unable to generate the same.

Age 30
Male
Policy term 25Y
Prem. amount 50K yly
Sum assured 15L

For the same person, I generated a quote from LIC Anmol Jeevan Term plan, the prem. in this case comes 5732. Now instead of investing the remaining prem. of 44268 Rs. in a MF, I opted to invest in PPF, one of the most secured investment vehicle. At the end of the term of 25Y, the maturity amount in PPF is 34.95L Rs. i.e. almost 35L Rs. without riding any risk of Eq. market for a common person who don't understand all the financial nitty gritty.

Remember Money Plus -I is a Type 1 Ulip, so the family 'll receive only the higher of Sum assured or the fund value. But in this case for the combo of Term plan +PPF, the family 'll receive Sum assured of full 15L Rs. from the term plan & of course the fund value in PPF.

Now to equalize fully with type - 1 ulip, I opted for a split term cover like this, to save on mortality charges.

5L cover for term 25Y - prem amt. - 1911
5L term 20Y - 1614
5L term 15Y - 1406

In initial years the total prem. outgo is 3525 Rs. per annum, amt invested in PPF is 45069.

After completion of 9years the PPF corpus is already more than 6L Rs. so from 10th year, I stopped paying prem. for 15Y policy & diverted to PPF itself.

So the changed equation from 10th year is Term plan prem. outgo 3525 & PPF contribution 46475.

Again after 14 year the value of PPF is 11.87L Rs. so I stopped paying prem for 20Y policy & diverted this prem. too to PPF.

So the changed equation from 15th year is Term plan prem. outgo 1911 & PPF contribution 48089.

Finally after 17 years as the PPF value is 16.64L Rs. I stopped paying for 25Y policy & full money is going to PPF.

At the end of 25Y term, the PPF value is 36.55L Rs.

Plz. post ur comments.

thanks

Ashal

Jeevan Varsha - New Guaranteed Return Money Back Plan from LIC

Dear friends, There is a new money back product on offer from LIC with GTD. Returns. The plan is open for purchase from 16th February, 2009 to 31st March, 2009.  The prem. paid are eligible for Section 80C Tax benefits as well as money back & maturity amounts are also Tax free underSection  10 (10) (D). Here is the plan scan for benefit of all of you.

ELIGIBILITY CONDITIONS

Minimum Entry Age: 15 years (completed)

Maximum Entry Age: 66 years (Nearest Birthday) for 9 years term policy, 63 years (Nearest Birthday) for 12 years term policy

Policy Term : 9 years & 12 years

Premium Paying Term: 9 years

Maximum Maturity Age: 75years (Nearest Birthday)

Minimum Sum Assured: Rs. 75,000/- for monthly ECS mode               : Rs. 50,000/- for other modes

Maximum Sum Assured: No limit 

PREMIUM PAYMENT MODES: Yearly, Half-Yearly, Quarterly, Monthly (by ECS mode only).

Survival Benefits:

For 9 Years Policy Term

15% of the Sum Assured is payable at the end of 3 years.

25% of the Sum Assured is payable at the end of 6 years.

60% of the Sum Assured is payable together with Guaranteed Additions, and Loyalty Addition, if any, at the end of 9 years.

For 12 Years Policy Term

10% of the Sum Assured is payable at the end of 3 years.

20% of the Sum Assured is payable at the end of 6 years.

30% of the Sum Assured is payable at the end of 9 years

40% of the Sum Assured is payable together with Guaranteed Additions, and Loyalty Addition, if any, at the end of 12 years.

Death Benefit:

In case of death of the life assured during the policy term, the full sum assured is payable irrespective of the survival benefits paid earlier.

On death during the policy term excluding last policy year: Sum Assured with accrued Guaranteed Additions

On death during last policy year: Sum Assured with accrued Guaranteed Additions along with Loyalty Addition, if any.

Guaranteed Addition :

The policy provides for Guaranteed Addition at the following rates:

Rs. 65 per thousand Sum Assured per year for a policy of 9 years term.

Rs. 70 per thousand Sum Assured per year for a policy of 12 years term.

I calculated the return generated by this policy for a healthy male aged 30 years & sum assured of 10L Rs. with annual prem. Mode (to get highest rebate on tabular prem. Thru annual prem. Mode & high sum assured) for both term 9 & 12 years. For 9Y policy the prem. is 153909 Rs. per annum & for 12Y policy the prem. is 157094 Rs. per annum. Now plz. Go thru the following calculation. Here I had assumed the money back received from the policy ‘ll be reinvested till maturity of policy to earn post tax return of 8%.

1. 9Y Term

A. Total prem. paid over the policy term = 1385181 Rs.

B. 1st M/B (Money Back) after 3Y = 150000

C. Value of B at policy maturity (after remaining 6Y) = 238031

D.  2^nd M/B after 6Y = 250000

E. Value of D at policy maturity = 314928

F. Final M/B at policy maturity = 600000

G. Gtd. Addition @ 65 Rs. per annum per 1000 SA = 585000

H. Loyality addition (not Gtd.) = 50000

I. Total Maturity amount =  C+E+F+G+H = 1788000 Rs. appx.

For an annual prem. of 1.54L Rs. The I above (maturity amount) is @ 5% rate of return only.

2. 12Y Term

A. Total prem. paid over the policy term = 1413846 Rs.

B. 1st M/B after 3Y = 100000

C. Value of B at policy maturity (after remaining 6Y) = 199900

D.  2^nd M/B after 6Y = 200000

E. Value of D at policy maturity = 317374

F. 3^rd M/B after 9Y = 300000

G. Value of F at policy maturity = 377913

H. Final M/B at policy maturity = 400000

I. Gtd. Addition @ 70 Rs. per annum per 1000 SA = 840000

J. Loyality addition (not Gtd.) = 75000

K. Total Maturity amount =  C+E+G+H+I+J = 2210000 Rs. appx.

For an annual prem. of 1.57L Rs. The K above (maturity amount) is @ 5.62% rate of return only.

 

Conclusion –  From the above calculation, everyone can see itself that the returns generated by this policy r not that much impressive as it looks on first glance. For lower Sum assured say 1L or 2L Rs. & for higher age the returns ‘ll be even lower. Also there is no guarantee of Loyality addition which I had considered in my calculation.

Plz. Don’t fall in the trap of gtd. Returns offered by this policy. It’s making wealth for LIC & it’s agents only, not for U, the Policy Holder. 

Home Loan Principal Repayment & Section 80C

Does the Principal prepayment of home loan can considered for deduction in Income Tax 80C section along with normal Principal payments paid as part of the EMI?

Dear, any partprepayment of principal 'll also be eligible for 80C benefit within the over all limit of 1L Rs.

thanks

Ashal...