Thread by @Kiran24Rajput

Buying Life Insurance Endowment Policies is not an Investment

Thread 👇
(Real Story)

In 2009, Golu returned to India after working for a local organization in Middle East & Africa for 6 years. His uncle ‘Jeevan’ under the garb of ‘Relationship, Wealth Creation & Pension’ approached him to brief on investment options.
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Jeevan was neither a certified financial planner nor has any knowledge on investments. He is just an insurance agent.
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With little pursuance helped Jeevan to visit Golu’s house along with his development officer ‘Anand’. Though the latter was looking professional, he too did not have any knowledge on investments. Both had an objective to sell endowment policies.
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The rosy picture was painted ~ pay monthly/ quarterly for 30 years, you will have pension & huge money paid in the form of bonus. Jeevan & Anand were confident of Golu’s ability to pay quarterly premium for 30 years.
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Golu request for a week’s time, unfortunately Golu did not spend quality time on research as he was confident his uncle is shrewd, don’t cheat him & buying policies from India’s most safe organization.
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Golu ended up buying 13 policies, with quarterly payment of 17,028/-, mere insurance coverage of 15.9 Lacs. The presumed investment journey started for Golu, only to realize after 7 years that his decision was wrong.
(13 policies)
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Quick Analysis ~ y it was not an investment, what alternatives Golu have after paying for 7 years?

Annual Golu’s spent on polices: 68,112 /-
Ideal option is Golu should buy a term insurance & rest invest in MF.
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Let’s assume Golu buys Term Insurance for 18,112, the balance 50,000 he will invest in Multi-Cap MFs.
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Returns Golu earned in both the cases:

Investing 68,112 /- in Endowment Policies (30 Years):
Sum Assured: 15.9 Lacs
Bonus: Jeevan &Anand never mentioned what bonus Golu earns after 30 years, they just said huge. Let me take the huge sum as 15.9 Lacs equivalent to sum assured
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Total sum Golu earn's after 30 years: 31.8 Lacs only (just add inflation & see the fun) & mere coverage of 15.9 Lacs, if something goes wrong with the policy holders in 30 years.
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Investing 68,112 /- in Term & MFs:
Term Insurance: 18,112 annually, no returns
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Balance 50,000 invested in Multicap MFs monthly at 13% rCAGR (23 Years, less 7 years): The returns are double here, approx. 70 Lacs & the insurance coverage during 23 years is 10 times more than the ‘13 Endowment Policies’
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Today Golu is pretty happy having a term insurance, medical insurance outside the work and his monthly SIP in multicap MFs.

End

my apology for tagging you ~ @dmuthuk @KalpenParekh

bad experiences are v expensive, most middle class make this mistake of buying 'Endowment Policies' as an investment. Let them be aware its not an investment.

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