If there is one thing that attracts anyone to LIC’s new offering, the Bima Account 1 or Bima account 2, it’s the word ‘Guaranteed returns’. Insurance, plus guaranteed return of at least 6%, in this time of tax saving period, what else does one need?
Now, if LIC has given an assurance of 6%, it ‘will’ stand up to that. But hold on, 6% of what is the key thing here. It’s not 6% of your total premium amount but its’ 6% of your Bima account, which is made up by premium amount plus top-up amount (if any) minus all the charges applicable for Bima account. And these charges are obviously quite heavy in the initial years.
Look at LIC’s Benefit illustration table for Bima account 2 for more details:
If you were paying a premium of Rs.15000 annually, the amount in your Bima account (simply call this as your balance) at the end of the year (after deducting all the charges) with 6% guaranteed interest is Rs.11278.
Similarly, it only at the end of 5 th year that the balance in your Bima account (Rs.78249) goes past your total premium paid amount (Rs.75000), assuming you didn’t add any top-up premium in between.
At the end of 15 years, after paying Rs.2.25 lakh premium amount, the balance in your account is Rs.3.3376 lakhs, which is what, around 4% growth, by my rough calculation?
So any savings bank account would give 4%, so why invest in a Bima account, one may ask? And if one can invest Rs.15000 a year regularly for 15 years, they may well invest in a RD which will earn you even higher interest, say 8% per year.But the thing is, insurance is NOT an investment, it is an assurance to your family. In case of the unfortunate event, a bank account would just give back the money it has in their account where as Bima account would give you the balance in the account plus the Sum Assured amount; and these are completely tax free, for those who receive the amount.