"Non-linked non-participating individual savings life insurance plan" (Rel Nippon). Is it good or bad?

[rogerthat]

Hello TF fam,

During some deep diving discussions about long term investments one of my friends "confessed" that he has signed up for something that he deeply regrets doing now. No, it is not a ULIP but something like a ULIP that is not market linked. It is called Reliance Nippon Life Nishchit Samrudhi, a "Non-linked non-participating individual savings life insurance plan" as advertised by the company.

They have signed up to pay 2.25 lakhs every year for 10 years, after which they will receive 1.8 lakhs per year for the next 29 years (not liable for tax apparently?). At the same time a life insurance with 30 lakhs SA will be running paralelly for the entire policy term. This amount will be paid out either as death benefit or maturity benefit in case of survival at the end of the policy term (my friend will be 85 by then).

My friend now feels he was Shanghaied into signing up for this, and wants to quit. He has only paid two premiums until now. There is a surrender option but the surrender value and terms are shit and he might end up losing 3 out of 4.5 lakhs he has paid until now.

I am not very literate on these matters and would like to help him out. Would appreciate any help on a course of action. Is this a good policy and should he continue or not? If not, what should he do?

 

[SamPtnk]

No just surrender your XIRR is just 6.25 which is barely above inflation
Take the 3L as loss and invest 18.5k pm in a index fund 2.22L per year
After 10 years stop the investment and withdraw 15k pm via SWP from next year.By that time LTCG would easily give more than 2L as exemption so no taxes on withdrawal
At the end of 30th year you will still be left a 8.3 cr corpus even after withdrawing 1.8L yearly for all those years

 

[rogerthat]

No just surrender your XIRR is just 6.25 which is barely above inflation
Take the 3L as loss and invest 18.5k pm in a index fund 2.22L per year
After 10 years stop the investment and withdraw 15k pm via SWP from next year.By that time LTCG would easily give more than 2L as exemption so no taxes on withdrawal
At the end of 30th year you will still be left a 8.3 cr corpus even after withdrawing 1.8L yearly for all those years

Thank you! Sounds like a sensible thing to do. Would've done the same too.

Thing is that he enormously risk averse. Guess that's what drove him to take this policy in the first place. Guy has only CC which is ICICI APay and that too he uses only on Amazon after thinking 10 times 🙂. Probably need to make him understand that index funds are as safe as they get.

 

[VasukiVasuki is verified member.]

Hello TF fam,

During some deep diving discussions about long term investments one of my friends "confessed" that he has signed up for something that he deeply regrets doing now. No, it is not a ULIP but something like a ULIP that is not market linked. It is called Reliance Nippon Life Nishchit Samrudhi, a "Non-linked non-participating individual savings life insurance plan" as advertised by the company.

They have signed up to pay 2.25 lakhs every year for 10 years, after which they will receive 1.8 lakhs per year for the next 29 years (not liable for tax apparently?). At the same time a life insurance with 30 lakhs SA will be running paralelly for the entire policy term. This amount will be paid out either as death benefit or maturity benefit in case of survival at the end of the policy term (my friend will be 85 by then).

My friend now feels he was Shanghaied into signing up for this, and wants to quit. He has only paid two premiums until now. There is a surrender option but the surrender value and terms are shit and he might end up losing 3 out of 4.5 lakhs he has paid until now.

I am not very literate on these matters and would like to help him out. Would appreciate any help on a course of action. Is this a good policy and should he continue or not? If not, what should he do?

If u surrender u get money after 5 year I guess at banks intrest rate
Don't put more money
Let it go lapse

 

[curious_cc]

First thing on these type of policies is that rerun you would get will be tax free under section 10 10 D. So, you can compare it with FD rates.

Second thing if you dont want to continue then pay the premium till 3 years and then email the company to convert your policy on paid-up basis. This way you don't have to pay any further premium and at the end of 10 years, you will receive the same befits on pro-rata basis of the premiums paid i.e. 30% of Rs. 1.80 lakh.