IMA SSS
Why I opt out
Facts as on May 2024
Current premium for term insurance for a person aged less than 25 years for a sum assurance of 1 Cr: 5500 rupees/year.
This year’s total premium for SSS (all three): around 65500/year.
Assume we pay the premium for roughly 23 years
Which is the Better Choice? Term Insurance vs. SSS
Scenario:
A 25-year-old doctor is deciding between two options for financial security:
- Joining SSS plans, all three
- Taking a term insurance policy and investing separately
Doctor A: Chooses SSS
Joins all three SSS schemes at age 25.
Pays a yearly premium that increases over time, starting today with 65000/year.
Total premium paid over 23 years: around ₹35 lakh. ( Assuming a 7% annual increase (This is a conservative estimate since the premium is not capped).
Most important pointFor records, the premium was ₹12,000 per year 10 years ago, and the annual increase over the past decade has been 18%, well above 7%.)
On death, nominee gets ₹1 crore.
If she lives till 75: She still get nothing (of course!) and the nominee will get ₹1 crore (Equivalent to ₹3.5 lakhs of today’s money).
Doctor B: Chooses Term Insurance + Investment
- Takes a term insurance of ₹1 crore, paying just ₹5,500 per year.
- Invests ₹5,000/month in an ETF growing at 12% per year.
- Total premium paid for term insurance: ₹1.1 lakh over 23 years.
- If she dies between 25-47 years: Her nominee gets more than ₹1 crore from term insurance + the investment returns.
- Total corpus after 23 years (at age 48): ₹73 lakh.
- If she lives till 75: Her investments grow to ₹15.5 crore.
- In between age 48 and 75, she will get an amount between 73L and 15 crores whether she dies or not
- She may even opt out of term insurance at around 50 years of age and double the SIP to boost her retirement corpus, because she has got a ₹ 1 Cr corpus already available for contengencies.
Which is the Better Choice?
Doctor A (SSS Plan) vs. Doctor B (Term Insurance + Investment)
| Factor | Doctor A (SSS) | Doctor B (Term + Investment) |
|---|---|---|
| Total Amount Paid | ₹35 lakh | ₹1.1 lakh (insurance) + ₹5,000/month investment |
| If she dies before 47 | ₹1 crore to nominee | more than ₹1 crore (insurance) + investment returns |
| If she lives till 75 | ₹1 crore (fixed) | ₹15.5 crore |
| Flexibility | No flexibility | Can use investment returns anytime |
| Real value of ₹1 crore in 50 years | ₹3.4 lakh | ₹53 lakh |
Key Takeaways:
✔ Doctor B has much more financial freedom and security, whether she dies or not.
✔ Investing smartly beats paying high premiums for limited benefits.
✔ ₹1 crore in the future will be worth much less due to inflation.
✔ With investments, Doctor B can spend, donate, or leave behind a much larger legacy.
👉 Conclusion: Term insurance + investing is the smarter choice!