Aegon Religare Guaranteed return plan:Review and comparison with Jeevan Astha

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As far as Insurance companies are concerned, after ULIP policies Guaranteed Return plans seems to be next happening thing.

Much before the Life Insurance Corporation of India(LIC)’s “Jeevan Astha”, Aegon Religare Life Insurance came out with their Guaranteed return plan which gives compounded annual guaranteed return of 7.2%.

Features of the policy are almost same as that of “Jeevan Astha”.

Let us take a quick review of Aegon Religare Guranteed Return plan.

  • Min. Premium is Rs. 50,000.
  • Max. Premium is Rs. 4, 00,000.
  • Min age is 90 days.
  • Max. age is 45 years.
  • Min/Max term is 7 and 10 respectively.
  • Sum assured is 5 times the single premium.
  • Only Single Premium mode is allowed.

Maturity Benefit:

7.2 % Guaranteed Annual return on single premium paid.

For eg. If you pay a single premium of Rs. 50,000 for a term of 7 years, your maturity amount is Rs. 81,345. Similarly for 10 year term it is Rs. 1,00210.

Following table shows maturity value for 7 year and 10 year term.

Premium

7 year

10 year

Rs. 1,00,000

Rs. 1,62,690

Rs. 2,00,420

Rs. 2,00,000

Rs. 3,25,380

Rs. 4,00,840

Rs. 4,00,000

Rs. 6,50,760

Rs. 8,01,680

Death Benefit:

In case of death nominee would receive 5 times the single premium amount.

For eg. If Single premium is Rs. 50,000 then deah benefit amount is Rs. 2,50,000.

In case of child below age of 7 years death benefit would be higher of surrender value or single premium paid.(See table of GSV below).

Surrender:

After 2 completed years policy can be surrendered.

Below table shows the Guaranteed Surrender Value % of Single Premium and eg for a Single premium of Rs. 50,000.

Policy year

GSV as % of SP

3rd

100%

Rs. 50,000

4th

107%

Rs. 53,500

5th

114%

Rs. 57,000

6th

123%

Rs. 61,500

7th

131%

Rs. 65,500

8th

140%

Rs. 70,000

9th

150%

Rs. 75,000

10th

161%

Rs. 80,5000

Loan:

Loan is allowed and min. amount is Rs. 25,000 and max is 80% of Surrender value.

Interest rate will be decided by company from time to time.

Tax Benefit:

Premium paid is eligible for tax deduction as well as maturity amount is tax free.

Medical test is not required.

Like all insurance policies it provides free look up period of 15 days and you may cancel the policy if you are not satisfied with the terms and condition of policy.

Single premium by you is paid back to you canceling the cost of stamp duty.

Conclusion:

If we Compare Aegon Religare Guranteed Return plan with LIC’s “Jeevan Astha” This policy can serve as a good alternative to it.

This score over LIC’s Jeevan Astha in term of

  • Low Surrender charge.
  • Premium not depends on age.
  • Uniform Death benefit thought term.

However it lags behind in term of

  • Surrender only after 2nd year.
  • Death benefit is 5 times SP in first year compared to 6 times in Jeevan Astha.
  • Rs. 50,000 min. SP compared to Rs. 25,000 of Jeevan Astha.
  • No Loyalty Addition.

This policy is also available only till the January 31st 2009.

Brief Comparison table;

ARGP

LIC’s Jeevan Astha

Min/Max Entry.

95 days/45 years

13/60 years.

Min/Max Term.

7/10 years

5/10 years.

Min/Max SP.

Rs. 50,000

Rs. 25,000

Annual Return

Compounding annually 7.2%

9% of Maturity SA for 5 year term

10% of MSA for 10 year term.

Maturity Benefit:

Both policies provide almost same return.

  • LIC gives 9% and 10% return based on MSA but is not compounding
  • AR gives 7.2% return compounding annually.

Maturity value for a Rs. 50,000 Single premium in

  • ARGP is Rs. 1, 00210.
  • LIC it is Rs. 1, 00,000. However SP paid here is Rs. 48,975 for age 35 year as

Premium depends on age.

Surrender:

LIC’s Jeevan Astha allow surrender after 1st year itself but AR’s GRP allow only after 2 year.

However surrender charge is almost nil in AR’ GR while LIC charges 10% of Single premium.

Both the policy pays guaranteed addition accrued while surrender.

Death Benefit:

First year death benefit in case of LIC is 6 times maturity SA however it is 1/3rd for rest of the term.

In case of AR it is 5 times thought the term.

According to me if you want fixed return on your investment plus tax benefits then instead of NSC and Tax saver FD both the policy are a good option(Read why) at least for this financial year as there is no maturity tax as well as it provides flexible surrender terms and insurance cover.

Answer to comment:

I received one query as AR is giving Min. Guaranteed return of 62% and max. is 100% so which one is better LIC or AR.

Here comes the answer

The min. 62% return is for 7 years term and 100% for 10 years term.

Take an example from this post.

For 7 years term of SP Rs. 50,000; maturity value is Rs. 81,345; that is return of Rs. 31,345; in percentage term it is 62% of Rs. 50,000. Same in the case of 10 years term where maturity amount is nearly double which is 100%.

LIC also guarantee the same return and hence according to me both the policy offer almost same return.

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