Page 41 - IC23 life insurance application

Plans with profit are much costlier than plans without profit. Let us compare

endowment plans no.11 which is without profit to endowment plan with profit plan

no.14. As we have seen above, the annual premium per thousand for age 30, term

20 yrs, in case of plan no.14 is Rs.51.50 and in case of plan 11 it is Rs.33.20. This

difference arises due to bonus loading i.e. the special advantage for participating in

the profit. This bonus loading has increased premium almost by 55% which is quite

considerable.

Similarly we can compare the premium of Jeevan Mitra plan with profits with Jeevan

Griha plan without profit to appreciate the significance of bonus loading. A person

aged 30 of term 20, shall pay Rs.55.20 under Jeevan Mitra plan, but shall pay

Rs.33.80 under a Jeevan Griha Plan. The only difference between the two plans is

that while the former is eligible to get bonus, the later is a without profit plan and thus

not entitled to any bonus. A discerning prospect can always compare this differential

with the expected rate of bonus payable at the end of term, to decide whether to go

in for a with profit or without profit plan. However income tax is always an important

factor to calculate the profitability of any investment and has to be taken into

account.

The cost of a plan also depends upon when and how often payment has to be made

to the insured. In money back plans, Jeevan Surabhi and Jeevan Sanchay plan, the

total sum assured is paid in instalments - a portion being paid every 4th or 5th year

and balance paid at the end of term. Risk amount remains unaffected by these

instalment payments. A person aged 30 for a 20 year term, in an ordinary

endowment plan when sum assured is paid only once, either at death if earlier or on

expiry of the term, pays an annual premium of Rs.51.50, he has to pay Rs.66.80 p.a

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