I had previously written a post about LIC Jeevan Aastha policy. You can find it here.
Some (infact all!) of the comments did not agree with my opinion. I would like to answer each of the questions posed by the comments posted.
- I am against Insurance/Insurance companies
I have nothing against Insurance or Insurance companies. Infact I believe that everyone should have himself and his family covered against all types of calamities. Every one should a proper life insurance, accident insurance, mediclaim, home insurance etc. One should also have a proper plan for his/her retirement in place. So you see I recommend everyone to insure himself/herself appropriately.
What I am against is the mis-selling practiced by the Insurance companies and Insurance agents alike. The previous sentence is more true for ULIPs, where mis-selling is more prevalent.
I am also against combining Insurance and Investment. When you combine Insurance and Investment either you don't get sufficient insurance or you miss out on the yield.
- I want to malign LIC
I have no doubt about the service quality and track record of LIC in claim settlement. But you can't ignore the fact that our govt has in the past ( also in the present stock market crisis ) used LIC to shore up the market. You can read one very informative article by Sucheta Dalal .
If the track record of LIC in claim settlement is very good, this does not mean that it cannot be accused of some other mistake it has committed. Its like saying a politician cannot be charged of corruption cases, simply because he runs a charitable school.
- LIC Jeevan Aastha is the best Insurance product
Here again I would like to repeat my previous statement, don't combine Insurance and Investment. If you want to buy Jeevan Aastha as an investment product go ahead and do it. But somebody should not be duped into thinking that it is an Insurance product. A gullible person who buys this with a Basic Sum assured of Rs. 9 Lakhs, may be under the impression that his life is insured for Rs. 9 Lakhs. But in reality, second year onwards, the assured amount would be only Rs. 3 Lakhs+
So I will just rename my previous post to "LIC Jeevan Aastha - Do not buy as an Insurance product" for more clarity.
- and Last of all, a comment says that I am a CA
I would like to reiterate the fact that I am not a CA. Please read the complete disclaimer about this site here.
Thursday, December 11, 2008
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I have read your 'do not by as a Insurance product' and some viewer's comments. I do not personally agree with the expressions which both
ReplyDeletesides have expressed in stronger terms than necessary.
The only problem I find is LIC has behaved like
any other small commercial trader who put 'conditions apply' in small prints on ads.
LIC has done worse than that - there is no transparency at all on the product's terms. In one of their pamphlets giving the premium chart
there is no mention of 1/6 of BSA becoming MSA
though they have brought the word MSA on the front side without telling what is MSA. This has totally mislead proposers to think the maturity value is 1.5-3-6 lakhs and so on. This when they realise after 5 years it will be a shock for them. Being one of the prime Govt corporation, LIC should have been more responsible and ensured the transparency of their product by giving all facts of the terms in whatever papers they may publish on the product. They shud not leave any aspect misunderstood by investor, which will be a breach of confidence/trust.
K.N.N.Moorthy
Hello Mr. Moorthy,
ReplyDeleteVery well said. There was a short delay in approving & publishing your comment as I had gone on a vacation.
The comments should be on the design and suitability of the product for a certain section of investors and should explain the aspects like taxation, investment returns, comparision with similar products available in the market. Criticising or prasing a product on the basis of personal experiences is not useful if understanding the product by the investors thinking about investing in the product. If somebody is saying that LIC is collecting the money from the public to shore up the markets, there must be some proof to substantiate the statement. Misselling is reported by all companies alike, no exception. Selecting an Agent is yet to be learned by the investors. Websites and forums like this should endeavour to thoroughly study and explain the scheme to the investor and allow them to take the decision.
ReplyDeleteHello Mr. Desai,
ReplyDeleteI would like you to read the comments posted by an Anonymous user in my previous post. He has done a wonderful job of calculating the possible returns which could be generated by LIC Jeevan Aastha.
Please follow the below links to read the user's comments and my replies.
1. First Comment
2. My first reply
3. Second Comment
4. My second reply
I hope you will find these useful.
I can't ( and I don't ) have proof for everything. I had used Sucheta Dalal's article as reference to which I have provided a link in my article above.
An article in India Today.
ReplyDelete5.91 crore LIC policies discontinued in 7 years
From the article:
"In fact, such a large number of discontinued LIC policies show that the insurance company launches campaigns time-to-time to raise the number of policies and attract newer cases giving many lucrative offers to its agents. But number of discontinued policies is so high and the amount already paid against those policies seems also very high."
This India Today article goes on to show how LIC fools people.
whats ur advise on new LIC’s Jeevan Varsha is a close ended Money Back Plan with Guaranteed Additions.open till 31/3/09
ReplyDeleteHi Chinmay,
ReplyDeleteI haven't done an analysis myself for LIC Jeevan Varsha, but Amit has posted his findings about Jeevan Varsha here. Worth a read!
One of my LIC endowment policy has recently matured and the return is only of about 4%.it was a 20 years policy.lic has given me a return of only 4% in those times when NSC and PPF were giving a return of more than 13%.I Think if one is looking for insurance one should always go for term policies.for investments there are other avenues like FDS.Endowment policies are not good for investment purpose.
ReplyDeleteHello CA,
ReplyDeleteI have been searching for a recurring deposit maturity calculator online. I am yet to find one which accommodates yearly installments and quarterly compounding. Can you point me to a link?
Thanks..
Hi ASP,
ReplyDeleteHere is the calc you need:
http://www.moneychimp.com/calculator/compound_interest_calculator.htm