We all are aware that Life Insurance Corporation of India (LIC) is coming out with Initial Public Offering (IPO), they have filed their Prospectus with SEBI. There is an interesting table regarding the Expenses incurred by LIC and it has become the talk of the town.
There is a table in the picture below which talks about – How much an Insurance company charges as fee from its policy holders? Well you will be really shocked that the fee for 1st year can be upto 80% to 90% and the least they can charge is 60 to 70%. From the second year it is just 15 % to 20% of the premium paid. Imagine you pay a premium of 1 lakh, from your 1st year premium payment 80,000 to 90,000 shall be taken away as charges and the rest will be invested, from 2nd year onwards 15,000 to 20,000 will be taken as charges and the rest invested on your behalf.
These are the limits prescribed by IRDAI the governing body of Insurance Companies. So, next time if someone comes to you asking you to invest in a Insurance company, just say NO and thank me later.
My recommendation in Insurance is just take a pure term cover and invest the rest in Mutual Funds, Bank Fixed Deposits, PPF etc.
Happy Investing!
R♥Vi
Source – LIC Prospectus filled with SEBI. This is not a recommendation to buy or sell. Fund Wallet is a AMFI registered Distributor of Mutual funds.
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