Sum Assured Vs Total Paid Premium
Many people have raised query that total paid premium in endowment policies (e.g. Jeevan Anand) exceeds the amount of basic sum assured and have confusion regarding relationship between sum assured and total premium paid during policy term.
One of the queries is as follows:
I purchased new jeevan Anand policy sum assured 500000 n tenure 21 yr .monthly i am paying 2408 with service tax from my salary. My policy started in Apr 16.my doubt is my total payment assured is may be 589000.has the agent cheated me?
For arriving at any explanation to this query or confusion, we need to understand the basis of calculating premium of endowment policies, and these primary parameter or basis for calculating premium are Age, Term and Sum Assured. Following table indicates the pattern of premium in endowment life insurance plans.
| Parameters | Change in Parameters | Change in Premiums |
|---|---|---|
| Sum Assured | Increase | Increases |
| Sum Assured | Decrease | Decrease |
| Term | Increase | Decrease |
| Term | Decrease | Increase |
| Age | Increase | Increase |
| Age | Decrease | Decrease |
Following tables indicates premiums of Jeevan Anand Plan (815) with different parameters different terms to explain it better.
| Age | Term | Sum Assured | Premium (Yearly) | Total Premium to be paid | Maturity (Approx) |
|---|---|---|---|---|---|
| 28 | 16 | 10,00,000 | 72,529 | 11,83,584 | 17,55,000 |
| 28 | 21 | 10,00,000 | 55,066 | 11,36,486 | 21,79,000 |
| 28 | 25 | 10,00,000 | 44,848 | 11,01,760 | 26,75,000 |
| 28 | 30 | 10,00,000 | 36,104 | 10,64,183 | 35,70,000 |
As per the above table, it is clear that premium for lesser term is more than that for higher term and total premium to be paid not to be confused with sum assured as it is minimum amount to paid to nominee in case of death of policy holder even single premium has been paid. Approximate returns against each case are also mentioned in the above table to understand the policy as a whole.
Note: It is important to select suitable term as per your objective e.g. you may choose lower term if your sole purpose is tax saving but it is advisable to have higher policy term in case of saving for retirement fund and tax saving purposes.
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