How to calculate interest rate on LIC policies?

#1
Let us say I take a policy from LIC where I pay 35000 per year for 20 years. If I survive the term of the policy, at the maturity I get 20 lakh. Now how do I calculate the interest I have earned?
 

praveen taneja

Well-Known Member
#2
Let us say I take a policy from LIC where I pay 35000 per year for 20 years. If I survive the term of the policy, at the maturity I get 20 lakh. Now how do I calculate the interest I have earned?
bro in 20 years u pay 35000*20=Rs7,00,000/
Now Rs 13,00,000 is not ur interest its from bonus which LIC gave u on ur investment and thats compounded approx 8% per year
u can calculate like this
First year its 35000
2nd year 35000*8%=2800+35000=37800/
3rd year 37800*8%=3024+37800=40824/
you can compute like this upto 20year
in compounding major benefit comes mostly after passing of 75% period in ur case after 15yrs so stay long earn much
hope I am able to solve ur problem
 
#4
Thanks for the explanation.
So if the interest rate is 8%, which is closer to what I may get in debt mutual funds, how to decide whether to invest in this LIC policy or in debt mutual funds or Fixed Deposit or NSC? Please advise! Please note that I will be investing in equity diversified mutual funds. However, to keep around 35% of debt instruments as part of my portfolio, I am trying to determine whether to go for LIC policy or debt mutual fund or Fixed Deposit or NSC?
 

PGDIMES

Well-Known Member
#5
First of all I want to remind u that Life Insurance policies are meant for covering life (basically a cost) rather than an investment tool. A person should take a life insurance if only he/she has any dependent(s) in his/her family who would be the beneficiaries in case of the unfortunate demise of the person. So it is prudent to take a term policy or a whole life policy instead of an endowment or a money-back(the most bogus of the lot) policy. The term policies give almost 10 times or more life cover over the endowment or money-back policy for the same premiums paid. In any case Life Insurance policies donot provide bonus/interest >10%(max).

One should suitably choose the life cover wanted in case of any unfortunate event and pay the least premium of a term policy or a whole life policy and invest the rest of his/her savings into a portfolio(very important) i.e. into a basket of asset classes namely, shares, bonds, debentures, mutual fund, commodities etc depending on his/her risk appetite.

Moreover to determine the rate of interest or bonus one can use this simple formula: F=A{(1+r)^n-1}/r
where A - Annuity or premium paid each time
F - Lump sum paid by Life Insurance company:thumb:
r - Bonus or rate of interest
n - No. of times premium paid
 

praveen taneja

Well-Known Member
#6
Thanks for the explanation.
So if the interest rate is 8%, which is closer to what I may get in debt mutual funds,
MUTUAL FUND & LIFE INSURANCE ARE NOT SAME
how to decide whether to invest in this LIC policy or in debt mutual funds or Fixed Deposit or NSC?
WHEN U WANT TO TAKE LIFE COVER GO FOR LI AND FOR INVESTMENT GO FOR MF OR PPF OR NSC:thumb:
Please advise! Please note that I will be investing in equity diversified mutual funds. However, to keep around 35% of debt instruments as part of my portfolio,
IF U WANT TO MAKE UR INVESTMENT BALANCED AND DONT WANT TO TAKE RISK GO FOR RELIANCE REGULAR SAVING BALANCE FUND GROWTH OR DIVIDEND OPTION WATEVER U LIKE:thumb:
IT CONTAIN 70:30 RATIO

I am trying to determine whether to go for LIC policy or debt mutual fund or Fixed Deposit or NSC?
PLS FIRST MAKE UR SELF CLEAR ARE U SAFE INVESTOR OR TRYING TO INVEST IN INSTRUMENTS WHICH ARE FOR TAX SAVINGS IN SECTION 80/D:confused:
 
#8
opening balance = Rs 0
payment/interval(yrs) = Rs 35000/-
No.of intervals = 20 (yrs)
closing balance = Rs 2000000/-
total payment = 35000*20 = Rs 700000/-
total interest = Rs 1300000/-


INTEREST = 9.9797%
 

vima

New Member
#9
how to calculate sum assured according its age in insurance


for example we have use only age, term,sum insured.and how to find annual premium amount
 
Last edited:

shanki99

Well-Known Member
#10
First of all I want to remind u that Life Insurance policies are meant for covering life (basically a cost) rather than an investment tool. A person should take a life insurance if only he/she has any dependent(s) in his/her family who would be the beneficiaries in case of the unfortunate demise of the person. So it is prudent to take a term policy or a whole life policy instead of an endowment or a money-back(the most bogus of the lot) policy. The term policies give almost 10 times or more life cover over the endowment or money-back policy for the same premiums paid. In any case Life Insurance policies donot provide bonus/interest >10%(max).
Are u an insurance guy?