Financial Daily from THE HINDU group of publications
Sunday, Nov 21, 2004
Financial Daily from THE HINDU group of publications Sunday, Nov 21, 2004 |
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Investment World
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Life Insurance Money & Banking - Life Insurance Columns - Insurance Corner Kotak Premium Return Plan Sowmya Sundar
In a premium back plan, if the insuree survives the term, he gets back all the premiums paid during the tenure as maturity benefit. Kotak Premium Return Plan does this.
Features
The plan has three tenures — 10 years, 15 years and 20 years. For each tenure, you can choose from a given set of monthly premium options. The sum assured will depend on the monthly premium chosen. On death, the sum assured less any unpaid premiums for the year is paid to the nominee.
Survival benefit
On survival to maturity, the maturity benefit that you get is a function of the term and the monthly premium. For a 10-year term, 100 per cent of the premium is returned. For a 15-year term, you get back 111 per cent of the premium, and for a 20-year term, 125 per cent. This plan does not pay any bonus. Most other similar plans return only the base premiums. This plan gives a marginal return on your premiums if you choose the 15- and 20-year terms. In reality, the premium paid for the such plans are much higher than that for a pure term plan. For instance, for a monthly premium of Rs 1,000 (Rs 12,000 annually) for a 10-year tenure, you get a sum assured of Rs 7 lakh if you are 30 years old. If you opt for a Kotak pure term plan for the same tenure, age and sum assured, the premium will be Rs 619 per quarter (or Rs 2,475 per annum). The extra premium that you pay for a premium-back plan is actually an opportunity loss. If you opt for a pure term plan and invest the balance Rs 9,525 (Rs 12,000 - Rs 2,475) elsewhere, you could get better returns. Moreover, your cost of insurance increases if you opt for a premium-return plan. If you want to go for maximum cover at minimum cost, you can go in for a pure term plan rather than one that returns premiums.
Readers are requested to compare products featured under this column with similar ones offered by other players.
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