Recurring Deposit or Jeevan Saral ? Which is the best?
You all might have heard about and has an idea of what is meant by recurring deposits schemes, acquiring small amounts of money and investing it for long term and to reap better returns at maturity. So this post would analysis some point which would tell us Recurring Deposit or Jeevan Saral ? Which is the best?
The usual players in the field were banks and post offices, now there is a new entry to this sector… any guess? Its the LIC or the Life Insurance Corporation of India. The LIC has started a special plan called “Jeevan Saral” which is famous now, Its launch was a couple of years back.
Jeevan Saral can be termed as a simple assurance plan where the policy holder choose the amount and also the mode of the premium payment. It also gives the policy holder protection from death which is of 250 times of the monthly premium, that he pays. With the age of the policy holder the terms also changes. The benefit at death includes the total risk cover plus the loyalty bonus if any. There is also promise by the LIC about the returns of premium which excludes the first year premiums and extra rider premiums.
Jeevan Saral is a highly liquid instrument to the policy holder when compared with other insurance policies. On completion of five years the policy holder is liable to receive 100% of the Maturity Sum Assured, the value of the MSA is given by the LIC. This will only be liable for those policies that have not even made a single default with the premium. From the tenth year bonus are payable which is combined with granted maturity benefits. As for LIC is concerned the Loyalty additions that they provide depends on the profit that LIC makes each year, so they would not be able to disclouse them at the start of the policy.
If we are to compare Jeevan Saral with recurring Deposit, we could see some differences. Jeevan Saral rate of returns is not granted, but there is loyalty addition at the time of surrender/maturity, which varies every year. while recurring Deposit (RD) has 7-7.5% compounded interest quarterly. If we take the case of Jeevan Saral we would get life cover for 250 times of the monthly premium while RD offers you with loan facility. The minimum tenure for Jeevan Saral is 10 years and the maximum can be up to 40 years which depends upon the age of the policy holder. RD makes the minimum tenure to a year and maximum for ten years.
Minimum amount that is required in RD would be minimum of Rs.10 for post office and Rs.100 for banks, Jeevan Saral takes the minimum amount at Rs.250. For both of them there is no maximum limit. If you are making a premature surrender then Jeevan Saral would bring in 80% of the MSA (Maturity Sum Assured) after three years to four years followed by 90% in the fifth year while in the case of RD the interest penalty differs from bank to bank. Jeevan Saral would come under Section 80C offering tax benefit for an amount of Rs.1 Lakh while RD has no such benefit. For the interest in the income that is received through Jeevan Saral there is no tax under Section 10D while in the case of RD its taxable but does not have TDS.
The documents that is required for opening of the Jeevan Saral would require photocopy of PAN card, age proof and address proof. While RD would require no documents for post office while bank have their norms as per KYC(Know Your Customer)
Update Of Interest Rates- Update On Sep-05- 2011
|1||Tamil Nadu Mercantile Bank||1 year to less than 2 years||10.25%|
|3||Karur Vysya Bank||1 year to 2 years||10.00%|
|4||Karnataka Bank||1 year to 2 years||9.75%|
|5||South Indian Bank||1 year to 2 years||9.75%|
|6||Corporation Bank||6 months onwards||9.50%|
|7||Punjab and Sind Bank||500 days||9.55%|
|8||Indian Bank||1 year to 3 year||9.25%|
|9||J&K Bank||2 years to less than 3 years||9.50%|
|10||State Bank of Travancore||1 year||9.50%|
|11||Bank of Baroda||444 days||9.35%|
|12||Vijaya Bank||2 years to less than 3 years||9.35%|
|13||Andhra Bank||1 year||9.40%|
|14||Axis Bank||1 year to less than 14 months||9.25%|
|15||Bank of India||555 days||9.25%|
|16||Central Bank of India||555 days||9.40%|
|17||ICICI Bank||790 days||9.25%|
|18||IDBI Bank||500 days||9.50%|
|19||Indian Overseas Bank||1 year||9.25%|
|20||Kotak Bank||700 days||9.40%|
|21||Syndicate Bank||250 to 364 days||9.75%|
|22||Canara Bank||555 days||9.50%|
|23||State Bank of Patiala||555 days||9.75%|