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Investment in Bajaj Allianz invest gain policy

My name is Sujit Pandit, D.O.B 07/06/1990 working as a Engineer in a reputed company in Jamshedpur, my monthly salary is 20k per month. I have opened a plan of Bajaj Allianz (invest economy), in this plan I am investing 18k per year. I have successfully completed 3 years. But now I am getting confused about this plan, whether this plan is suitable for me or not, this plan is for 20 years. Since locking period is 3 years, so I want suggestion from your side that whether this will be good for me or not. Approx what will be maturity amount I will be getting, and should I will continue with this plan or not?

Sep 9, 2015 by Sujit, Jamshedpur  |   Life Insurance

You have not mentioned your cover or sum assured and certain other details of your life insurance policy. Based on your age, annual premium and your plan, as mentioned in your query, our guess is that your sum assured is Rs 500,000. Bajaj Allainz’s Invest Gain is an endowment plan. In case of an unfortunate death your nominee will get the sum assured. The maturity amount of this policy will be the sum assured plus accrued bonuses. As per bonus declared by Bajaj Allianz on March 31 2014, the reversionary bonus for Invest Gain is 2.25% and the terminal bonus is 1%. Bajaj Allianz may change the bonus rates in the future. To get a sense of maturity value, let us assume that the bonus rates are unchanged. Therefore if you continue the policy till maturity, i.e. for 20 years, you will get a bonus of 3.25% (2.25% Reversionary +1% terminal bonus) on your sum assured every year payable at maturity. Assuming your sum assured is Rs 500,000, at the time of maturity of your policy, you will accrue Rs 325,000 bonus in addition to Rs 500,000 sum assured. Therefore, your estimated maturity amount will be Rs 825,000 (to understand how to estimate returns of an endowment, please read our article, Know the returns from your Endowment Insurance Policy). Over the policy term you will pay Rs 360,000 as premium. Assuming you pay premiums throughout the policy terms, the returns on an annualized basis is 7 – 8% (internal rate of return). You have to decide for yourself, whether you are happy with the returns.

Since you are young, you can consider buying a term plan for your life insurance cover and invest your balance savings through systematic investment plan in a diversified equity mutual fund. You will pay much less premium for the same sum assured in a term plan and a diversified equity mutual fund can give you much higher returns over a 20 year investment horizon. If you are availing tax savings through the life insurance premium in Bajaj Allainz Invest Gain Economy policy, you can get the same tax savings by investing in equity linked savings schemes (ELSS) through SIP. Equity linked savings scheme is a diversified equity mutual fund with a 3 year lock in period, with offers tax savings under Section 80C.

If you want to discontinue paying premiums in your life insurance policy, you have two options. Since you are past the lock in period, you can simply stop paying the premiums and the policy will acquire a paid up value with reduced sum assured. You can also surrender your policy and get a surrender value depending on your premium payment. Read the policy bond carefully or discuss with your insurance agent to know what your surrender value will be.

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