CALCULATION OF RETURNS OF LIC AND MUTUAL FUND WITH COMPARISON

In respect to continue our previous day discussion about                                                                 LIFE INSURANCE VS. MUTUAL FUND, today we make discussion in numeric figures to make understand better:

Let see if a person   aged 25 years and purchase both of Life Insurance Plan and also invest in mutual fund what he will get   

                 LIFE INSURANCE PLAN                                                  MUTUAL  FUND

Here we take life insurance from Life Insurance Corporation of India which is giant company in insurance sector in India. Taking very popular New Endowment plan (814) calculation is here under	In Mutual Fund we will invest in Equity Fund.
Life insurance term: 25 years Annually premium : 6074 +Taxes (calculated by LICI table) Sum assured:   150000/-	We will take the same years and same amount as per life insurance plan for comparison .
Total premium paid :  155411/-                     First year  (6074+273)= 6347/-  second year onward (6074+137)=6211/-                                                                                                                            what we get at maturity after 25 years is: SUM ASSURED:                   1,50,000/- BONUS:                                1,80,000/- F.AB:                                      49,500/- TOTAL                                  3,79,500/- (N.B: All the above calculation taken from LICI table )	Total investment amount during 25 years is (6074/- x 25 years )=          151850/-  In long term we assume 15% rate of return Now by calculating we will gate MATURITY AMOUNT=           14,86,380/- TOTAL DEPOSIT=                     1,51,850/- TOTAL RETURNS=                  13,34,530/-

By calculating above all of us absolutely think that Mutual fund is much better than traditional plan, but wait there are some questions that may arise in our mind, let discuses:

1.       If the person unfortunately died after paying 2 year amount i.e. at the age  27 year old, then what his nominee will get:

In LICI nominee will get full amount of Sum Assured  i.e. 150000/- by paying 2 years premium i.e.                                 (6347/- +6211/-)= 12558/- only.

In Mutual fund no one can determine in short term case due to subject to market risk. So nominee may get below the investment amount.

2.       Tax implication on maturity amount:

The maturity amount is full of tax free. No need to pay any tax on maturity amount.

On maturity one must pay 10% tax on capital gain above rs. 100000/-

So we see that Life insurance plan is very important to protect our valuable life and mutual fund is vital for our wealth creation. So do not confused .

To make our portfolio we should take proper decision that would be discussed in next blog.