Personal Finance Blog India –

Invest Once – From Bharti Axa Life Insurance

You may have seen advt of Bharti Axa – Invest Once where investor is looking for investment option.One suggest deposits, one gold and one stock market.As shown in advt, investor have some issue with either instrument.Interest income is taxable for deposits,Gold prices are bearish and one can’t predict about stock market.This plan is shown to overcome the limitations of these instruments.

What is Bharti Axa Invest Once :

  • As name Invest Once indicates,this is single premium plan.There won’t be any compulsion about future installments.
  • Traditional plan : so there won’t be any stock market exposure.
  • Policy Term : either 05 yrs or 10 yrs.
  • Death benefit: Death benefit of 125% of single premium (110% if age of policy holder is more than 45 yrs.).Sum assured can be enhanced up to 10 times of premium by paying some additional premium as per mortality table.
  • Maturity Benefits : Guaranteed additions @9% for 10 yr term & @7% for 05 yrs period.
  • Benefit u/s 80C for premium paid up to 10% of sum assured.So  complete premium will be  eligible u/s 80C, if sum assured is 10 times of premium paid.
  • Service tax @ rate of 3.09% of premium is payable.

Few important points to remember:

  1. For Tax Free maturity, policy holder need to avail sum assured at least 10 times of premium to make maturity eligible for section 10 (10d).Tax Free maturity is essential if policy holder is expected to be in 20-30% tax bracket.
  2. 9% Guaranteed additions is not same as 9% Deposit rates:

Flow of Guaranteed Additions Vs.Deposit Interest

  • Flow of Guaranteed additions:
Base premium considered : Rs.5 Lakh

Cumulative Guaranteed Additions (G.A.)@ 9% For 10yrs Term

G.A. After 1st Yr : 45,000
After 2nd Yr 90,000
After 3rd Yr 135,000
After 4th Yr 180,000
After 5th Yr 225,000
After 6th Yr 270,000
After 7th Yr 315,000
After 8th Yr 360,000
After 9th Yr 405,000
Last Yr 450,000
Maturity :Base premium + total Guaranteed Additions: 500000 + 450000   9,50,000
  • Deposit Interest Cash Flow
Deposit : Rs.5 Lakh

Deposit Rate: 9% compounded Quarterly

Flow of cumulative  Interest received

After 1st Yr : 46,541
After 2nd Yr 97,415
After 3rd Yr 1,53,025
After 4th Yr 2,13,810
After 5th Yr 2,80,255
After 6th Yr 3,52,883
After 7th Yr 4,32,273
After 8th Yr 5,19,052
After 9th Yr 6,13,908
Last Yr 7,17,595
Maturity :Base deposit + total interest received: 500000 + 717595   12,17,595

One can see  compounding effect is missing from guaranteed additions from insurance plans.

But deposit interest rate will subject to 10% tax deducted at source and interest is completely taxable as per investors tax slab while maturity amount of insurance policy will be tax free if conditions of section 10 10(d) are met.

Buy “invest once” Or not:

This plan is convenient for:

  • Risk averse investors.
  • who falls in high tax bracket.
  • Current deposit rates for 10 yrs period are around 7-7.5%.Rates are still expected to fall further.For high tax bracket (20-30%) individual net interest will be too low around 4-5%.

After considering service tax, premium payable for 10 times sum assured ,this plan will offer you Tax Free,net return ( in terms of compounding) around 6% with additional death insurance for period of 10 yrs.Buy if you are agree with it.

Invest-Once Brochure To view more details

Category: Insurance


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    Information provided on this blog is for general purpose only & not investment advice.Please take advice of SEBI Registered Investment Advisors before taking any investment decision.
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