DNA has an interesting post on endowment plans
A typical agent is likely to tell you, “Sir, the insurance company always declares a bonus of more than 4% (Rs 40,000) every year. So the bonus you get every year will be more than the annual premium you pay to the company.
So what is the problem?
The biggest problem with the bonus is that it does not compound, and is merely an accounting entry that accumulates. What this means is that in the above example, the bonus of Rs 50,000 would stay at Rs 50,000 till the 25th year, when the policy matures. This would be true of all bonuses declared during the term of the policy (if they are declared).
The returns from endowment plans can be around 6-7% and not anymore. Would you like to compare options? Read the full DNA article
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Dear Sir
Nowadays insurance itself becomes too complicated. People are bombarded with policy.
Only reliable term insurance to be chosen. But very few people opts for it. My father scolded me when i told that i am paying 8000/- p.a without any return. He said you are just wasting money.
I can’t convince him till date.
Regards
S.Das