Endowment Plan with Guaranteed return…!!!!
I have
discussed in my earlier blogs about endowment policies. In fact these types of
policies failed both purpose insurance coverage and return. Neither it provides
proper insurance coverage nor gives the good return. I get query about almost
on daily basis regarding guaranteed saving insurance plan. We Indian investor
always like “guaranteed “ word and often trap with this word. We pay a very
high price for this word.
One of my
blog reader has asked recently whether he should purchase ICICI prudential
guaranteed saving insurance plan. In my opinion, never invest in those product
which provide insurance and investment opportunity both. The selling pitch of
these products often so attractive that investor do not resist themselves from
such type of product.
The realty
of these products that it do not give the proper coverage and it also not give
the good return. This particular product gives only 5% return on your paid
annual premium and provide only 20-25 times insurance cover of your annual
premium. If you go with term insurance you can get up to 700 times insurance
cover of your annual premium.
For return
point of view if you have conservative risk approach and invest in other debt
product like debt mutual fund, PPF, bank FD and others the you will get easily
return between 8% to 10% return. If you want to lock your money for more than
10 year then equity investment can give you average 15% return. Many mutual
fund schemes like ICICI prudential dynamic fund, Birla SL 95 ELSS has given more
than 20% return also.
In
endowment product 5% return is not good return according to me after 15-20 year
investment. In endowment scheme who guarantee the fix return have many types of
expenses and hefty agent commission like 15% to 20%. It badly affects your
return on investment. Endowment guarantee plans are only beneficial to agents
who are selling this product through emotional sales pitch.
I would
like to advise all of my reader that they should avoid such type of products and
invest in those avenues which are capable to beat the inflation and provide
good return also. Liquidity is also the crucial factor at the time investment.
If you want more information
regarding investment or you have any other query about investment feel free to
ask us.
Warm regards,
Arvind Trivedi
Certified
Financial Planner
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