Axis Bank + Max Life Insurance Scam
WRT the controversial Max Life - Life Gain Plus 20 Participating Plan.
What they don't tell you when signing up is that it will take you 7 years to simply break even — even if you claim the 30% 80c IT deduction.
If you don't claim 80c, it will take you 11 years just to break even. That is, to simply get your premium amount back without any interest.
They will justify this saying it's because of insurance.
But the cost of insurance itself is very low.
If you're paying 1.1L premium for 6 years, you get insurance cover of 10L. If you buy just the term insurance instead, that costs less than 10k per year. So in effect, you're investing at least 1L per year.
At the end of 7 years with this plan, you will only be given 4.2L back.
Even assuming you claimed an 80c deduction of 30k per year for the 6 premiums — for a total of 1.8L — this is a break even of 6L after 7 years. You simply got your money back — after tax deductions and insurance costs — with no interest.
Thereafter, you will earn an interest of 10% on the 4.2L.
This is your best case scenario.
If you did not claim the 1.8L 80c deduction, you will have to wait for 11 years to get back your 6L; with no interest.
After 11 years, your 6L will start earning a 10% interest.
On the other hand, if you simply bought a 10L term insurance for 10k per year, paid 30k IT per year, and invested the remaining 70k for 6 years in a zero-risk FD of 6%, you would have more — 5.1L at the end of 7 years and 6.5L after 11 years.
In fact, it will take 12 years for this insurance scheme to catch up with the simple tax-paid, insurance-included, zero-risk 6% FD above; even assuming you claimed 80c.
If you did not claim the 1.8L 80c deduction for the 6 premiums, you will never actually catch up with the FD.
If you pay 10k per year for term insurance, and invest the remaining 1L per year for 6 years in a zero-risk 6% FD, you will have 7.3L at the end of 7 years and 9.3L at the end of 11 years.
In short, this scheme is worse than putting your money in a 20 year FD at 6% — and buying insurance separately — unless you claim 80c.
If you claim 80c, it's as good as insurance + investing in a 6% FD for 12 years.
After that, you get 10%.
What they don't tell you when signing up is that it will take you 7 years to simply break even — even if you claim the 30% 80c IT deduction.
If you don't claim 80c, it will take you 11 years just to break even. That is, to simply get your premium amount back without any interest.
They will justify this saying it's because of insurance.
But the cost of insurance itself is very low.
If you're paying 1.1L premium for 6 years, you get insurance cover of 10L. If you buy just the term insurance instead, that costs less than 10k per year. So in effect, you're investing at least 1L per year.
At the end of 7 years with this plan, you will only be given 4.2L back.
Even assuming you claimed an 80c deduction of 30k per year for the 6 premiums — for a total of 1.8L — this is a break even of 6L after 7 years. You simply got your money back — after tax deductions and insurance costs — with no interest.
Thereafter, you will earn an interest of 10% on the 4.2L.
This is your best case scenario.
If you did not claim the 1.8L 80c deduction, you will have to wait for 11 years to get back your 6L; with no interest.
After 11 years, your 6L will start earning a 10% interest.
On the other hand, if you simply bought a 10L term insurance for 10k per year, paid 30k IT per year, and invested the remaining 70k for 6 years in a zero-risk FD of 6%, you would have more — 5.1L at the end of 7 years and 6.5L after 11 years.
In fact, it will take 12 years for this insurance scheme to catch up with the simple tax-paid, insurance-included, zero-risk 6% FD above; even assuming you claimed 80c.
If you did not claim the 1.8L 80c deduction for the 6 premiums, you will never actually catch up with the FD.
If you pay 10k per year for term insurance, and invest the remaining 1L per year for 6 years in a zero-risk 6% FD, you will have 7.3L at the end of 7 years and 9.3L at the end of 11 years.
In short, this scheme is worse than putting your money in a 20 year FD at 6% — and buying insurance separately — unless you claim 80c.
If you claim 80c, it's as good as insurance + investing in a 6% FD for 12 years.
After that, you get 10%.
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