Returns: LIC vs Gold vs Nifty

[jcc19240]

Recently my father's LIC Money back policy policy matured and he received a return of around 126000 INR, although he considered this a success even after investing an amount 6560 every year for 20 years, I was skeptical around the return.

So I decided to compare that with returns of other famous investment vehicles like Nifty 50 and Gold.

There was a moneyback from the policy every 5 years considering that, here is the result of such comparison from 2001 to 2021

Summary:

Return on Gold : 12%

Return on Nifty: 15%

Return on LIC: 5%

(calculation attached with G Sheet)

Note: The comparison is made with absolute data based on actual dates and values

If you want to calculate the same for your ULIP/ LIC, here are the steps to follow:

1. get Nifty date wise NAV from VRO
2. Gold price date wise from Google
3. LIC returns in actual
4. feed to a spread sheet like Excel and use XIRR formulae

Thanks to @crixus123 for helping out with the calculation

 

[ania]

@jcc19240 As said by lic officials.

Policy is not an investment, it's insurance against any unforeseen circumstances.

Yet most are marketed for investment purposes.

Which policy was it though?

 

[harland206]

@jcc19240 The only knowledgeable people who say Life insurance policies (other than term insurance) are good investment are insurance salesmen.

And I know that EVERY insurance agent knows that because to be an insurance sales agent, you have to attend a course and they teach you this there. They straight up tell you that term insurance is better for the customer but the "investments" options are better for the agents and the companies

 

[petra8586]

@harland206 LIC being monopoly there used to huge bonuses, which sometimes used to be equivalent to sum assured. So there was a time when this was sold as investment and it kind if stuck.

Thats is one of the reasons for popularity of LIC in previous generation and trust as it is a government company.

 

[cgi2099]

@petra8586 I have read that lic pays like 50 60% of installment premium. That's too much compared to general insurance

 

[petra8586]

@cgi2099 Sorry i did not get what you mean here.

 

[cgi2099]

@petra8586 If the premium for term, endowment is 100 then the commission paid to agent by LIC is around 50, 60rs. The same for motor, health insurance is around 15, 20rs. More the commission, more incentive for agent to sell the policy

 

[petra8586]

@cgi2099 Its about 30 to 33% for first 2-3 years then drops.

If LIC was paying 60% commission, they would not sustain for long.

 

[ania]

@cgi2099 It's definately not that much. It's about 30-40% for first year then it keeps on dropping.

 

[elsiejo]

@harland206 reason agents push to endowments policies is because they get a commission fee everytime you pay a premium.

it is extremely profitable to the "agent".

whenever any professional pushing hard for something by instinct your alarm bells should be firing off.

 

[harland206]

@elsiejo It's definitely not a small amount! This was 15 years ago but the standard commission I used to get was one time 2% for term insurance but on the other it was 15% for the first year's premium and it reduced a little over the next few years

 

[gash]

@jcc19240 Some people are mentioning how term insurance is best form of life insurance. That is absolutely true but remember life insurance (of any sort) is only necessary if you have financial dependents.

 

[gisherjohn]

@gash An exception.
Your family may spend everything they have, on your treatment. In that case, having a life insurance would help them after your demise.

 

[kolijack]

@gisherjohn Term insurance is not a replacement of health insurance.

 

[guariglio8195]

@gash I am with you on this. If your partner is independent and if you have a big enough corpus to back them up for a few years at least, then why bother with insurance. Personally I would prefer to be more valuable when I am alive than dead.

 

[kolijack]

@jcc19240 Why crappy (insurance + investment) bundled plans haven't been made illegal yet is beyond my comprehension. These people clearly prey on the financial illiteracy and stinginess of the Indian working class who is not comfortable with not getting anything back after paying term insurance premiums.

Chhate huye madarchod hai ye insurance wale. How can you go to sleep at night knowing that your full time job is to convince people to put their hard-earned money into provably inferior products?

 

[cheskamint13]

@kolijack I would definitely not sleep well...
Stealing/corruption is less evil. Kinda feel angry parents are so gullible

 

[paulm7]

@kolijack Where should i invest/spend to save taxes ? What should be 1st,2nd option to save taxes ?
Should i foremost invest 1.5L in ppf ? I would have 2.5L taxable after continuing PF @12%.

 

[kolijack]

@paulm7 I am sorry, I am the wrong person to ask this. At my income level, I have decided that it is basically worthless for me to spend my energ trying to save tax. I don't even claim HRA.

 

[paulm7]

@kolijack cool.