Is it true that Tata AIA Fortune Guarantee offers a guaranteed return of 150 per cent?
- T Krishna
Tata AIA Life Fortune Guarantee is a limited premium paying endowment plan, with a a premium paying term of five years and a policy term of 10 years. The plan offers guaranteed maturity benefit, depending on the age of entry and annualised premium amount, that varies from 138 per cent to 159 per cent of the total premiums paid. Do not get swayed by the term 'guaranteed' and those big numbers, pay attention to the details. The plan is not offering a guaranteed return of 138-159 per cent, it is only saying that you will get 138 to 159 per cent of the total premium paid if you pay all the premiums for five years and keep the money in the policy for another five years.
We have calculated annualised returns (for a 31-year-old, paying an annual premium of ₹50,000), and guess what? The returns work out to be only 5.20%. A person in the 30 per cent tax bracket would have made that return from a fixed deposit. That too, after paying taxes.
This article was originally published on October 16, 2015.
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