IDBI Federal launches a 100 year term plan, whole life savings insurance plan. This is a non-linked plan in which one can get 2 payouts. First one at the end of policy premium paying term and 2nd one after completing 100 years. Till 100 years your life will be insured. Seems like this policy has lot of potential as life cover will be till 100 years. Let’s review IDBI Federal whole life savings insurance plan to analyze the benefits further or we have a better alternative to cover your life till 100 years.
Key benefits of IDBI Federal whole life savings Plan
- Life covers till 100 years. We will discuss whether life cover till 100 years require in India.
- Premium payment term is less that policy term. Lump sum benefit will be paid at the end of premium paying term.
- After completing 100 years of age policy holder will get additional lump sum benefit.
- One can get vested guaranteed addition and bonus as well.
- Premium paying term can be from 12 – 30 year max.
- On death of policy holder, his/her family will get highest of any one of them: 10 times of annualized premium or guaranteed sum assured or 105% of all the premiums paid as on the date of death.
- Guaranteed additions are added to your plan in the first 5 years at the rate of `50 per `1,000 of the guaranteed sum assured, provided each full annual premium is paid when due.
- Bonus rate will applicable from 6th year till end of premium paying term. Another bonus rate will apply after premium paying term till maturity. You can also go for accidental death benefit cover.
- Like all insurance plan income tax benefit under section 80C and 10(10D) is available.
- After 3 years of premium paying one can go for policy surrender.
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How much actual return this plan will give?
To understand the actual return on investment for this policy we will analyze the example data provided in IDBI website itself.
Mr. Ajay has decided to get this policy with life cover of Rs 5,00,00. In that case the details of the policy will be as below
- Age: 30 years
- Policy Term: 25 years
- Sum assured: 5,00,000
- Annual Premium (with ADB):`26,350
- Annual Premium (without ADB):`25,850
That means one have to pay total 26,350 x 25 = 6,58,750. This is 1.5 lakh more than the life cover. But you have to consider the life cover till 100 years in this case. Let’s see how much bonus one can expect in this plan after maturity.
In this calculation with guaranteed bonus you will get your invested money only after 25 years. Only different thing is from age 55 years to 100 year his life will be insured with 5 lakh life cover. Do you really think it’s the best way to fulfill Mr. Ajay demand? We have to check out the alternative ways to beat this plan and I am sure there is one.
Why one need life cover till 100 years?
If you talk about the life cover point of view I don’t think insurance is requiring till the age of 100 year. In most case everyone finish their liabilities by the end of 60-65 years. Your kids will grow enough to take their own life carry on. At that age one require hard-cash to enjoy the retired life. And one more thing is that these plans don’t provide a healthy life cover. So today 5 lakh may be a good amount but after 50 years do you think there will be any point of this life cover? In another case carrying a life cover may not be good for you also. Generally in old ages if your kids don’t support you and they came to know that you have a life cover than you can think what can be consequences. We can’t avoid these facts as well.
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Should I buy IDBI Federal whole life savings Plan?
I will simply say one thing, if Mr. Ajay split 26,350 and buy a pure term plan paying 6,500 yearly premiums. I think he can easily buy a life cover more than 50 lakh with this amount. And rest 20,000 if he invests in PPF for 25 years you can accumulate a huge corpus of around 17 lakhs (with 2 extensions of 5 years). You can check out the exact figure with any PPF online calculator. So after 55 year if Mr. Ajay had 17 lakh corpus then he can easily keep that amount in bank and enjoy a 3 times life cover with real-time money with him. If he plan properly at that age he can invest that amount in any MIS or other safe investment schemes and enjoy good retire life.
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So I think again it is proved that an endowment plans can’t really able to offer the best insurance cum investment plan to a person. There is always a better alternative with more return. What do you think about this plan? Do you think insurance is required till the age of 100 years?