This post is based on request from Akhil on “Suggest-a-topic” option. Max Newyork life insurance offers unique plan called “Premium Return Term Plan” where you would get your entire premium back at maturity. Generally term insurance plans comes with low premiums and offers high risk coverage, but insured would not get anything at maturity. Premium Return Term Plan from Max Newyork life insurance bridges this gap. Can we consider this Premium Return Term Plan from Max Newyork life insurance, or are there any major drawbacks in this policy?
Features of Max Newyork life insurance Premium Return Term Plan
- This is a traditional plan without bonus facility
- The term insurance plan offers a death benefit and maturity benefits
- Premiums to be paid for a period for 11 year period, but insurance plan coverage would be for 20, 25 and 30 year period.
- This plan offers 50% accidental death benefit apart from the base sum assured.
- Special discounts for females and high sum assured policies.
- You need to pay at least 3 annual premiums to get a guaranteed value under this insurance plan.
Benefits from Premium Return Term Plan
a) Maturity Benefit: Return of premiums paid for the policy.
b) Death Benefit: Basic Sum Assured would be paid to the nominee
c) Accidental Death Benefit: Basic sum assured + 50% of the base sum assured under this policy
d) Tax benefits: Premiums paid under the insurance plan is eligible to claim under 80C.
Eligibility for Premium Return Term Plan
- Minimum age for entry: 21 years
- Maximum age for entry: 55 years
- Maximum age of maturity: 75 years
Special rates and discounts
- Low premium for females for sum assured of Rs 30 Lakhs and above
- Special high sum assured discounts of Rs 1.3 for every Rs 1,000 sum assured for Rs 30 Lakhs and above
Sum assured Rs 30 Lakhs and above under this plan will be medically return.
How does this plan work?
Let me explain this with an example. Maithili at 30 years age want to buy this insurance plan for 25 years for Rs 12 Lakhs. She needs to pay premium for Rs 14,640 per annum for 11 years for a 25 year policy.
Scenario-1: Maithili pays premiums for 11 years. Here are the benefits what she would get.
- Maturity (after 25 years from policy date) – Refund of all premiums paid by her i.e. Rs 14,640 x 11 = Rs 1.61 Lakhs
- Natural Death: Base policy sum assured would be paid to the nominee (Rs 12 Lakhs)
- Accidental Death: base sum assured + 50% of the base sum assured would be paid to the nominee (Rs 12 Lakhs + (Rs 12 Lakhs x 50%))= Rs 18 Lakhs)
Scenario-2: Maithili pays premiums only for say 7 years. Here are the benefits what she would get.
- Maturity (after 25 years from policy date) – Refund of all premiums paid by her i.e. Rs 14,640 x 7 = Rs 1.02 Lakhs
- Natural Death: reduced sum assured would be paid to nominee (Rs 12 Lakhs x 11 years / 7 years = Rs 7.63 Lakhs)
- Accidental Death: reduced sum assured + 50% of red sum assured would be paid to the nominee (Rs 7.63 + Rs 7.63×50% = Rs 11.45 Lakhs)
Free look option
In case you are not satisfied with this insurance plan after making premium payments, you would have the choice to return this policy within 15 days and you can get your premium back after deducting necessary charges.
Happy looking at this policy, wait, see this before you make any such decision to buy this policy
I have taken a scenario of my friend who recently took the term insurance plan from ICICI Prulife for Rs 50L at age of 38. The premium was Rs 15,000 approx.
Now I also competed in premium return insurance plan at the same age for Rs 50L sum assured, the premium comes to Rs 74,000 to be paid for 11 years. At Maturity it offers 8.12 Lakhs after 20 years. Since majority of term insurance plans offer at similar rate with small variations (except LIC), it is immaterial whether you compare with ICICI Pru life or any other insurance company.
1) Assume that we consider 15K for term insurance plan (like my friend taken at ICICI) and balance as investment purpose, then max new York is paying 0.6% per annum as returns for balance amount (Rs 59,000) which is very low.
2) Assume that you consider any term insurance plan and pay Rs 15K as premium and invest the balance of Rs 59,000 in a bank FD which fetches you 9% returns (pre tax), then you would get maturity of Rs 29 Lakhs as against what max new York is offering as 8.12 Lakhs.
Read "Invest in FD" field to be invested as Rs 59,000 as Rs 15,000 would go for term insurance. You can invest only net amount
Now you know which one is better. Yes for younger ages, the premiums are lower and hence returns may be better than 0.6% per annum.
Concluding remarks: I felt Premium Return Term Plan from Max Newyork life insurance was one of the unique insurance policies which pay the premium back to us on maturity. However one should also consider higher premiums being charged for such insurance plans. My best choice is always taking pure term insurance plans and invest balance in any bank FD or mutual funds or high dividend yielding stocks.
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Premium Return Term Plan from Max Newyork life insurance