Table of Contents
- Introduction
- What Are Guaranteed Return Insurance Plans?
- Understanding IRR (Internal Rate of Return)
- Real Example: ₹1 Lakh Premium with ₹25 Lakh Promise
- How to Calculate IRR Yourself
- Should You Invest in Such Plans?
- Final Thoughts
Table of Contents
Introduction
In recent times, many financial influencers like Labour Law Advisor have taken it upon themselves to make the public jagruk about misleading financial schemes. One trending topic is insurance plans with guaranteed returns.
They often sound tempting: invest ₹1 lakh a year and get ₹25 lakh later. But what’s the real return? That’s where IRR (Internal Rate of Return) comes in.
What Are Guaranteed Return Insurance Plans?
These are life insurance plans that promise a fixed sum after a certain number of years. The marketing highlights large payouts, but hides the low actual return.
Understanding IRR (Internal Rate of Return)
IRR tells you the real annual return you’re getting after all premiums and benefits. For example, if a plan gives you back ₹45,000 per year after several years, your return could be much lower than expected.
In one popular case discussed by Labour Law Advisor, the IRR came out to only 5.3%.
Real Example: ₹1 Lakh Premium with ₹25 Lakh Promise
Here’s how the plan works:
- You pay ₹1 lakh per year for 12 years
- From the 13th year to 30th year, you receive ₹45,000 annually
- In the final year, you also get ₹1 lakh back
Sounds good? But the IRR calculation shows just 5.3% — less than many mutual funds or even PPF!
How to Calculate IRR Yourself
You can use Excel:
- List all cash outflows (like -1,00,000 for each premium year)
- List all inflows (like +45,000 from 13th to 30th year)
- Add the final year return
- Use the formula:
=XIRR(values, dates) - Format as a percentage — that’s your real return
This gives a true picture of the plan’s performance.
Should You Invest in Such Plans?
Only if:
- You don’t want risk
- You’re okay with low returns
- You want life cover + disciplined saving
But for better returns, consider mutual funds, PPF, or SSY (for girl child) — all have higher IRRs and flexibility.
Final Thoughts
Don’t fall for shiny numbers. Always calculate IRR to know what you’re really getting. Thanks to finance educators like Labour Law Advisor, more people are learning how to protect their hard-earned money.
Stay jagruk. Stay safe.
