Do you hold any Endowment or Money back plans sold to you by any of your relative , Neighbour or was it bought by your Father for you for your “Secure future” . Most of the people hold Junk Insurance Policies which are of no much use to them . Policies like Endowment or Money Back Policies hardly bear Inflation and have no ability to meet your long term goals like Child Education , Child Marriage or Retirement .
Note : All the points I have mentioned are generic and might be little different for different policies , but overall it would be similar. Also , points I am going to discuss are for people who are not happy with their policies and want to get rid of them . People who are very happy with their policies are advised to continue the policy .
I will discuss different scenarios and you can see which category you belong to . before that lets understand some basic things which you might not know .
Top Reasons Why you hold some Endowment Policies
- You were mis-sold that policy by an agent who promised moons and stars to you
- You bought that incredible policy because you wanted to save tax in some particular year and you were in a hurry
- Your Father bought it for you
- You bought yourself without understanding what it is
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what is meant by making a policy Paid up ?
It means that you will stop your further premium payments , but your Insurance cover will come down by the same ratio . So if you policy tenure was 20 yrs and cover was 10 lacs , and you have paid your premiums for 4 yrs and then make it paid up , then your cover c0mes down to 2 lacs , because you have paid for just 20% of tenure .
When you make the policy paid up then you receive all your premiums paid and Bonus accrued till that time (only if your policy has run for more than 5 yrs) at maturity .
What is Surrender value ?
Surrender Value is the amount which a policy will pay to policy holder if its terminated before the maturity period . Most of the Endowment and Money back plans don’t have any surrender value . Even after 3 yrs , the policy surrender value is very less , Generally its the “Net present value” of the amount you are suppose to receive at maturity . Read why Endowment Policy should be avoided
I have paid Premiums for less than 3 yrs
In this case you don’t have much option , Its great if you have paid for 1 yrs or less , You can/should just forget the money you have paid and start deploying your hard earned money in something better . Incase you ULIP;s you can continue paying because after 3 yrs the money you can get is equivalent to what is actual worth that time and you have much better control over how your money is invested . But anyways you have done a big mistake . See the list of top mutual funds you can invest in for long tem .
Its like cutting your infected finger and save your whole body to stink later
I have paid premiums for more than 3 yrs but Policy has more than half the tenure to run .
The best thing you can do is to make your policy paid up or take the surrender value and from now onwards put your money in something which you really understand and which can give you better inflation adjusted and post tax returns .
I have paid premiums for more than 3 yrs but Policy is close to maturity now .
Now its too late and you can let it run its whole tenure , You also have the option of making it paid up .
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Important Points
Point 1 # Paying 3rd Premium
In case you have paid the premiums for 2 yrs and thinking of surrendering your policy after that , then it makes no sense , because the amount you pay for 3rd year and what you get back after surrendering will be almost same .
For example , If your yearly premium is 30k , and you have paid 60k in 2 yrs and now want to surrender the policy , but you are afraid that you will not get anything back if you close the policy before 3 yrs and thinking of making 3rd payment, then it makes no much sense , because even after paying 3rd premium and then surrendering it , the surrender value will be close to 30-35k only . (surrender value after 3 yrs is around 30-35% of total premiums paid) .
Point 2# Getting Stuck
Most of the people just continue their policies because they think “Its very safe return and lets not take risk” . You are taking very big risk by continuing , its called risk of “loosing all the purchasing power” , agreed that its damn safe !! , what you you like to get 1 extra day in your old life , by sacrificing 1 hr everyday for a year . See how much your policy scores on Gfactor analysis
Point 3# Abandon those “Friendly Uncle” agent
Throw out those emotions , save them for your spouse and parents . Get rid of those agents from whom you bought those policies just because he is your uncle or papa’s friend .
Comments please , are you one of them who is stuck in those kind of policies and what is your next step , any other recommendation from your side ?
{ 108 comments… read them below or add one }
Manish..Thanks for sharing.
In my case i have just recently took the policy n still not one year is also completed.
What shd. be my next step.Paid up or surrender ??
After canceling out the insurance policy what shd be next step with same amount of money?I have paid premium of rs22k
Shd i do as below
1)Take term insurance
2)And rest invest in MF or ULIP.
Thanks Manish, It is a nice article. Can you suggest what I can do?
I have following three Policies.
1. Jeevan Anand (T.No. 149) Policy Term 76(Premium Payment Term 21). Sum Assured: 6lacs; Premium 30k; Accured Bonus: 1L; PolicyCommencementDate: 28/5/2004;
2. New Jeevan Suraksha – I (T.No. 147) Policy Term 26 (Premium Payment Term: 26); SUM Assured: NIL; Premium: 10k; CommencementDate 4/8/2004.
3. Maxnewyork Term Policy: 32L + 8L (Critical Illness) Premim: 10k; CommencementDate: 2007
Please let me know can I make the Policy paid up?
Please give your suggestions.
Thanks
siva
Thanks Manish for the work you are doing.
I have Following policies
1. Money Back => SA 25 Thousands =>term 20yrs =>Premium 1585 =>Started in 2000. In force.
2.Money Back => SA 1.05 Lacs =>Term 20 yrs=>Premium 6643 =>Started in 2006. In force.
3.Money Plus => SA 1 Lac => Term 20 yrs=>Premium 10000=>Started in August 2007. Only two premium paid.
4.Jeevan Chaaya=>SA 1.05 Lacs =>Term 18 yrs=>Premium 6458=>Started in 2008. In force.
5. Now Looking out for good term plan.
Please suggest what should i do with my old policies.
good work manish
the emotional uncle theory is the most relevant
one shoudl be ruthless while dealing with insurance affairs , paying least attention to cajoling done by these UNCLES
Hey Manish , Nice article .
I have a LIC endowment policy .
Do you know if it it possible to Surrender or make it paid up . Its in force since last 3 yrs .
or where can I find the info .(
I did not find any info on LIC website. I mailed to LIC customer care but no reply . And the Friendly agent (Father's friend) was of no help )
Thanks
Debashish
@yogi
You will not get anything if you stop it before 3 yrs. I think the best thing is to stop it and forget what you paid . Its like cutting your infected finger and save your whole body to stink later .
taking term policy should be done in any case .
@siva
It all depends on what are your future plans and how much is your risk appetite .
1. You can consider to make it paid up or take surrender value
2. Note sure
3. Continue (review if you have other cheaper plans than this)
@Sankalp
I have already told what can you do with your old polices .. you should do the same thing .
Look for appropriate cover through term plan .
@Aditya
Correct .. Have you experienced the trauma
Manish
@debashish
What is the name of the policy , you will have the details on the lic website for sure
Generally , these policies have surrender value after 3 yrs . Ask LIC and if no answer use RTI .
Manish
@debashish
By going to nearest LIC office can resolve ur confusion.
Visit Lic office if u don't get any information from any where.
I visited my branch office of LIC and they informed me to stop paying premiums and automatically my policy will become paid up. My policy is 4 yrs old. Is this information correct ?
Hi Manish,
This is a much awaited article. I think all the people in India should read it. Pls keep up the good work.
Dear readers plesse forward the link of this article to all ur friends n relatives. Lets help in manish's mission of educating india.
Thanks Manish your suggestion. I will contact LIC and check what to do.
Thanks
siva
Manish,
Here is where I am stuck. Please help me get out:
DOC 15/02/2003
Plan 14
Term 23
Paid Up Value 60,870.00
Accrued Bonus 63,600.00
Surrender Value 36,445.00
Loan Amount 32,750.00
sir, my policiy surrender value please. policy name-jivan aanand hyl policy dt-25/04/2003 to 22 years 6month primiums rs.5855=00 and one year primium rs.11710=00 total paid 7years rs.82000=00 and accrued bonus rs.82000=00 policy loan rs.37000=00 to last 7 month so please sir my policy close today whate net amount my hand cash oll loans and intrest cut net rs please me by.
Hitesh
U should talk to your agent on this .
Manish
@Anu
Thanks
@Siva
Sure , first ask your LIC agent , then nearest LIC office and then use RTI if required .
@Ninad
Better to take surrender value than making it paid up
manish
Hi Manish,
I am new to your blog and found very interesting. After reading your blog, I have closed my Jeevan Tarang Policy and thinking of any Term policy. What about SBI Life Shield? Pl suggest some choices. Thanks and keep it up your good work…
hi
Though this post is welcome one but i think you ignored certain basic facts before coming to this conclusion. Policies provide not only life coverage but also other benefits like pension schemes. Your assumption of investing less premia to cover via term policy and investing rest in mutual funds to generate better returns may not hold good in future as the past performance may not get repeated in the future. Second the returns are not adjusted for inflation.
Anyway if you take market performance for the last two years from 2007, there is no incentive for one to close policies and go in for investing mutual funds…
Please treat my views as alternative one and no offence meant please.
@mohandas
SBI shield is a good one .. You can also look for alternatives like Aegon religare and Kotak . The best thing would be to see which one is cheapest for you , see apnainsurance.com
@sriganeshh
Hi , I always take others views as alternative only , never an offence , feel free to put your views freely .
There are some basic things you have to clear .
- Not all Insurance policies provide Pension , There are specific policies which does , like Jeevan Tarang and not Jeevan Kishore.
- I agree with your note that "past return may not repeat in future" , but that is more of a concern when your time frame is small , With a long time frame like 20-30 yrs , There has been no case when something else other than equity has performed better .
Endowment policies returns dont even beat inflation !! , I just wonder in which case one should buy them for there long term needs .
The 2 yrs performance you are talking about is a special case . its 50% loss .. That has happened only 2-3 times in history in such a short span , And I accept that in short term it can happen again , but we are talking about a long term commitment here and not short term ..
With long term , I beg to differ than a return of -50% or even -10% is possible .
What do you think about this ? Feel free to give your views .
Manish
hi Manish,
nice to see ur reply.
My views are as under
1. Term insurance premia paid is not refundable. Then in that case why waste our hard earned money and give free cake to insurance cos.
2. Please see the link
http://www.ppfas.net/blog/?p=45
This is the research on SIP and one has to go really long say for 20 to 30 years to reap the benefit of modest returns. In such a scenario, it is better you go for mix of min term to cover sufficiently and balance put in other safe investment avenues which includes other insurance policies.
3. More theoritically, yields across asset classes are always same and higher or lower yields depends on the risk profile it enjoys….am i right?
leave it you…..thanks for taking my views positively…
sri
Hi Manish,
Nice article. I was financially illiterate about 6 years back, and got stuck with the JivanShree policy sold to me by a friendly neighbourhood Leech(sic). Then as I started exploring more avenues, I understood the trap I was in. Afer paying three years of premiums, which amounted to about 75k. I took the hard decision of discontinuing the policy. I know I have gained nothing, I will get this 75k back only at the end of the term 25 years later. But now I am utilizing that 25k pa to
1) Pay my term policy premium
2) Prepay my home loan.
Once home loan is done I will be using the excess to add to MF investments.
People take heart and make up yourminds to move out of these bad investments.
Thanks
Sujit
@sriganeshh
1. Regarding "Term insurance premia paid is not refundable. Then in that case why waste our hard earned money and give free cake to insurance cos." , You need to read this article :http://www.jagoinvestor.com/2009/08/why-people-dont-like-term-insurance-and.html
2. Please see the link
http://www.ppfas.net/blog/?p=45
This is the research on SIP and one has to go really long say for 20 to 30 years to reap the benefit of modest returns. In such a scenario, it is better you go for mix of min term to cover sufficiently and balance put in other safe investment avenues which includes other insurance policies.
I have done a similar study , see : http://www.jagoinvestor.com/2009/10/4-charts-which-will-change-your.html
What you suggest , also depends on risk profile also , what do you suggest someone who requires 15% to acheive his goals like Retirmenet and child education , how will he acheive his goals by investing in Endowment plans , you tell me ?
3. More theoritically, yields across asset classes are always same and higher or lower yields depends on the risk profile it enjoys….am i right?
Not sure what you mean here .. can you please get back with more clarity and other answers .
Manish
@Sujit
Perfect , thats mature and smart decision
You are doing great .. Inspired
Manish
I think most people things that taking endorsement plan will have four advantage.
1)Will get income tax relief under 80(C)?In case of endorsement plan tax relief will be more.
2)Some monet at the end of policy.
3)Secure investment
4)Loan in low interest rate.
as compare to outside.
These four things will not be possible with term insurance.
@Yogi
Very correct.
And the most important point which attacts them is Security and one which makes them jump into this is tax saving .
Manish
I tried to perform comparison between endsorement plan & term insurance,MF
combinations.
I am putting arnd 21,000 yearly in LIC Jeevan anand
and my term plan is for 25 year.After 25 yrs will get
12 lachs.I get 12 lachs by 5.9441 rate of interest.
Now suppose I leave this plan n took term insurance
and MF for 25 years.
suppose I put rs6,000 in insurance and rest rs15,000 in
MF/ULIP/SIP for 25 years.How much I will get is as below
rs15,000 yearly for 25 year.Suppose I get 8% interest growth
for over all 25 years then i get same arnd rs12 lachs.
(16lachs if over all growth comes to 10%.)
Amount which I get after 25 yrs is almost same in both cases.
and more over if I go for term insurance then i losse
income tax benefits.
Manish & all, Can u comment on this caluclation & let me know
how this term insurance & MF combination better than
endsorement plan.
@Yogi
Good work . Thanks for taking the pain of calculating this .
However ,let us concentrate on some important points here .
1. Why do you say that you loose Tax benefits if you go for Term insurance ? You get tax benefit for any kind of Life Insurance policies . Same with term insurance
2. Why are you getting conservative with returns from Mutual funds for 25 yrs time frame , you have taken 10% . I agree that its better to be conservative, but 10% is very conservative ,we have already seen that equity in 25yrs can give more than 12% easily (fingers crossed) .
Hence , you should assume atleast 12% . with that 22 lacs is what you get after 25 yrs .
3. This is most important , FLEXIBILITY !!
With term plan + Mutual funds , you have flexibility of stopping the life insurance policy , liquidating your money in case of emergency , increase decrease your investment and shift between the choices .
The main thing is 3rd point , Traditional policies are such trappy products , you cant do anything with them , you are just stuck there like a mouse in a cage .
share your points if any .
Manish
hi manish,
1.
If rs21,000 is invested in endsorement plan then will get 21,000 relief in income tax while
if take term insurance then will only get 6,000 relief income tax relief.
2.
12% returns will be achieved if some one has proper knowledge n able to invest correctly.All people can't get 12% and in order to get good returns u have to be attentive n need to invest time for this.
while in endsorement u can sleep n needn't to worry at all.
3.Flexibility is there for sure.Totally agree.
Give ur view on 1 & 2 point n anything else if its there.
Did calculation to enlarge the scope of discussion n to understand thing properly.
I was thinking if endsorement is really bad then why govt/lic encourage such things to come out in market.
As per my knowledge i think people choose more endsorement plan rather than term insurances.
@Yogi
1. Yes , you will get less tax benefit , but then you can invest the extra money in some thing else like tax saving FD or even mutual funds to get the tax benefit .
you have to decide what is important to you , getting tax benefit or getting right product for yourself .
2. 12% return can be generated without having much knowledge and time , Just start a SIP and do it for long term , This is what I also showed on my article which talked about long term returns from equity .
Why govt/lic encourages .
LIC is a company backed by govt , its not exactly the govt . There are different type of products and endowment is one of them , the worry is that they are not taking proper action on spreading Financial planning education .
manish
Thanks Manish.
Person which want to surrender there insurance policy.Below rule will be applicable for them.
The policy may be surrendered after it has been in force for 3 years or more
The guaranteed surrender value is 30% of the basic premiums paid
excluding the first year’s premium. Any extra premium(s) paid and
premium(s) towards Accident Benefit are also excluded.
So then i think its better to invest in ULIP then going for combination of term insurance & MF.
Manish,Which one is better ULIP or MF?
Hi Manish,
I am fan of Jagoinvestor and came across it some 10 days back.
This is my first comment rather query that i am alredy having lic endowment policy of sum assured 6 lacs (annual premium 22850/-) for 25 yrs. I have paid 4 premiums.
Kindly suggest wht i should do now.
Saurabh Pandey
@Yogi
Thanks for your information , but still i am not very clear on your justification why ULIP is better than MF + Term
@Saurabh Pandey
I think the best thing would be to surrender them and switch to Term , Its a tough decision to take I know
and a painful one , just other "right decisions" in life .
Manish
@Yogi,
On insurance point of view, ULIP policies never give you enough insurance coverage with low premium. From investment perspective, since large portion of money goes as commission in initial years, the compounding effect also goes in vain. So the ULIP will never match Term + MF combination.
@Saurabh
Just stop paying premiums from hereon. Your policy will be automatically converted into paid up policy. To understand about it, just read other articles of this blog where this topic is well explained. Then take a term plan for your insurance and go with right mix for investment needs.
@Manish,
Surrendering policy would give us almost nothing, but on the other hand keeping it would just make it grow 5-6% annually and after 20 years we’ll get money with no value. However, its really hard to surrender at this time because the mind will say, I’ve paid 4 premiums and I will get not even one premium amount!
@Govardhan
Thanks for your comments, May be I dont understand this part , but to get 5-6% , we have to continue the policy , Just by making it paidup , It wont grow , only the bonus accumulation might happen for the part we have paid as premium . ”
can you elaborate on that with an example or more details .
Manish
@Manish,
No, it is best to surrender the policy and get the cash value. The amount can be invested anywhere where we want – and it’d outgrow the amount if we had kept the policy live with paid-up.
However, my indication was that, it’s really hard to surrender the policy as the cash value may not even equal to single premium of the total 3 years paid. The psychological barrier of comparing the current situation [instead of analyzing what we'd get otherwise] with premium amount will make it difficult to take the decision.
It was confusing…
However, surrendering or converting to paid up policy are not the only options available.
If it’s an Endowment policy, there may be option to avail the loan benefit from it. The loan amount could be much higher than the amount we get if we surrender. If it’s an Endowment with MoneyBack option, the first MoneyBack may be due on 4th year.
Please go through the whole policy document and you’ll get some picture on how to discontinue the policy and calculate on what’s the best option for that.
@Govardhan
2 things
1. the psyÂchoÂlogÂiÂcal barÂrier : You are correct that its a tough thing .. Thats the reason that people who can take that difficult decision will get more than those who cant … Its not something every can do . Just because its a tough thing to do does not make it an option we cant take . But you are correct that most of the people are not able to do that .
2. Taking Loan , If you want to take a loan , you need to continue the policy in that case . Just stopping the policy and taking the loan will not do as Bank will make sure that the Worth of the policy is good enough . So even Loan option does not look best to me personally , but good that you suggest a new option .
I think Endowment polices are like puzzles which have no solution , Better leave it … My personal views
Manish
Seems it is a very actively participated discussion. Let me contribue my 2 cents. Offcourse, this is from my personal portfolio. The figures are from the website of LIC against my investment for the past 14-15 years.
LIC POLICY DETAILS (as on 15/12/2009)
Start Date Period Premium pa Paid up Bonus Fund Value Sur Val Loan Eligblty
Mar/95 20 2426 37500 42300 79800 50250 45000
Mar/95 25 1909 30000 45450 75450 34500 31000
Feb/96 20 2433 35000 38750 73750 45000 40250
It is evident from the above that the redemption is due in 2015,2016 & 2020. Pl advise which one will better- paid up or surrender?
Thanks,
Purnendu Bagchi
If policy has 5+ more year to go . then better make it surrender
Manish
Hi Manish,
I need some suggestion from you regarding making some of my LIC policies paid up….
1. I have an LIC endowment policy for which I am paying premium since 2001.So this policy is running since the last 9 Years now.
a> My first question is if I make this policy paid up will I get back the following amount at the end of the Maturity Period. Please verify and confirm.
Final Amount at Maturity Period
= Yearly Premuim x (No of Years Premium Paid) + Accrued Bonus till the date I made it Paid Up
b> Although I make the Policy Paid up will I be covered for the SA proportionate to the period I have paid premiums for it. And will this cover continue till the maturity period of the policy.
c> Do I need to inform LIC to make the Policy Paid up or that happens automatically when I stop paying premiums.
2. I have a Jeevan Tarang Policy for which I have paid premium for 2 Years and would like to make it paid up. But I came to know from your blog that I have to atleast pay premium for 3 Years to be eligible to make it paid up.
a> My question is since in that case my policy will only run for 3 Years and not 5 years
will I also get back the Bonus accrued till 3 years or only the premiums I have paid…
b> Although I make the Policy Paid up will I be covered for the SA proportionate to the period I have paid premiums for it. And will this cover continue till the maturity period of the policy.
c> Do I need to inform LIC to make the Policy Paid up or that happens automatically when I stop paying premiums.
Thanks,
Krishnendu
Good … you have asked it in a good format. i like it
Answers below
1.a : Yes
1.b : No , you will be covered for full SA for next one year of making it paid up. This is the rule with most of the policy now a days , better confirm .
1.c No you dont need to inform , Stopping the premium means it will become paid up .
2.a you get bonus only if your policy has run for minimum 5 yrs ,
2.b same as 1.b
2.c same as 1.c
Note : The better option would be to surrender the policy and take what you get now .. better to use that money to invest in normal equity or balanced funds . Remember if you are going to leave you money for long term . anything other than equity is risky
) .
Manish
dear manish
i cannot understand krishnandu’s questions 1b and 2b
can you explain what he really wanted to ask and what you understood pl
He asks “Although I make the Policy Paid up will I be covered for the SA proportionate to the period I have paid premiums for it. And will this cover continue till the maturity period of the policy.”
Suppose a person takes a policy for 20 yrs and has a SA of 10 lacs , now if he pays for 5 yrs and then makes the policy paid up , his question is that will his cover be 2.5 lacs (proportionate) till maturity .
Answer is YES and NO , some companies what they do is they give you insurance for full amount (1o lacs) for one more year and then your insurance ends . Some give insurance till maturity for proportionate amount .
I hope you got it ? No ? Ask again if you have not .
Manish
Manish,
Thanks a lot….Keep enlightening the Financially illiterate like me….
Thanks,
Krishnendu
Its my pleasure .. Keep commenting …
Manish
Hello Manish,
This site is a real eye opener. I have started to invest in 4 mutual funds via SIP from this new year and have opened a ppf account as well after going through your site. Thanks a ton for this site.
I was paying Endowment policy. I I have already paid 3 years. Should I go with paid up or surrender. My due date for this year is nearing.
Please advice.
Thanks,
Arun
Arun . I think you should surrender the policy . Make sure you calculate the IRR of the policy and see if you are happy with that or not .
Better start goal based investing through MF and ETF’s .
Mansih
Hello Manish,
I need your advice regarding my old LIC policies. I am 46 years old earning 1 lac per month. My wife is 45 years old earning 60K per month. we have 2 boysaged 17 and 14. I am having a housing loan of about 8 lacs. Another housing loan of 27 lacs is insured by SBI life. Both of us are having PPF, EPF accounts. No investment in stocks. No other liabilities except children education.
LIC policiy details are as follows:
Me
Policy name Sum Assured Premium Start Year Last payment Year
Jeevan Surakha 210,000 10,128 2001 2021
Jeevan Shree 500,000 27,600 1999 2015
Jeevan Anand 150,000 12,157 2006 2021
Ltd. Payment 150,000 9,409 2006 2020
Wife
Jeevan Sathi 100,000 4,692 1990 2015
Endow. Assur. 100,000 4,140 1997 2022
Jeevan Sneh 100,000 7,425 1999 2019
Jeevan Suraksha 200,000 12,318 2003 2019
Ltd. Payment 100,000 5,044 2006 2025
Jeevan Anand 100,000 6,004 2007 2027
After going throgh your blog, I am now planning to go for Term Insurance.
Please suggest me
a). Which of the above policies I should surrender, which I should make paid up and which I should continue?
b) I am planning to take Term Insurance of (30 lac + 30 lac) for me and (20 lac + 20 lac) for my wife? I am more comfortable with LIC than private players regarding claims etc. Your take? Kindly suggest.
c) Planning to invest 40K per month for me and 20K per month for wife in mutual funds by SIP for atleast 15 years. Kindly suggest the best products for a financially illeterate person like me.
d) Is there any security risk involved in using sites like Perfios.com?
e) Again what is the better option from using FundsIndia.com and using good old agent?
Please advice.
Thanks in advace.
Jayant
Jayant
thanks for your comment on this blog for the first time . I appreciate it
. Here are the answers
a) It would actually make sense to surrender all of them . This would help you save your future premiums to earn less and finally go in something which gives you returns like 12-14%
b) You can go with LIC . whoever I would not mind spliting it with one private insurer , but you go with LIC only . Why insurance for your wife ? Is anyone financially dependent on her ?
c) 60K per month in just MF would not be a good option . Use other products as well . Put some in ETF’s , Debt funds , PPF and majority in MF (60% + )
d) Its a personal call . there are people who use it and find it fine .
e) Again there cant be a definate answer . its a personal choice and how confortable you are . Fundsindia is used by many and they are happy with it .
manish
hi manish
i feel wife is also contributing to the family with her income and she definitely needs insurance till their son are independant.
you mean to say if the husband is getting paid less than the wife – the husband doesnot need insurance at all?
you dont know what his job is and when he is planning to retire
Gowri Shanker
Definately , the main learning we have to take is that Life Insurance is a replacement of financial dependence , so a person needs to take life insurance to the extent others are financially dependent on him/her
Manish
Sir,
I am having 4 policies from LIC ( my age is 36)
Name Sum Asssured Starting from Premium
1) Jeevan Mitra 1lacs 1996 3770
2) Jeevan Mitra 1 lacs 1996 4008
(Double cover)
3) Jeevan Surabhi 1lac 2001 9008
(Money back)
4) Jeevan Nidhi 1lacs 2004 11198
(Pension Plan)
should I continue the above policies or switch to private players like Tata AIG
I want to buy the life cover /accident policy with less premium and higher sum asssured.
Also kidly guide for kid’s policy
Thanks in advance
Regards Pratik
Pratik
I would encourage your to do the evaluation yourself and take decision , there is enough material present on the blog , else hire a financial planner . Also have a look at older questions from other readers and from replies you can find out what needs to be done in your case . See archive section
Manish
Dear Manish
I am Ramachandran, My age is 33.
Please guide me with following Pilicies..
1. New Bima Gold, SA:25Lac, Policy term:20years,Premium: 78k INR/Year, Start:2007
This year I have to pay another 78K as 4th installment. So that I will get 2lac back from LIC. 2. Jeeven Surabi, SA 15Lac, Policy Term:15Years, premium:1.08Lac/Year, Start : 2009
I have paid 2 installments.
After reading your article, I want to close/Paid up these 2 policies and get one Term Policy from LIC and another from SBI. Then I want to go for another installments with the remaining amounts.
Please guid me which is the right time to close/paidup for these 2 policies or shall I continue?
Ramachandran
You should find out the way by reading the articles on Surrender value and how much will it be worth , basically you are asking for Insurance Planning
. Cant be done like this .
Manish
My friend Ramachandran,
I am also in similar situation. I wasted so much amount on endowment policy for last 5 years and planning to take the surrender value back. I Don’t want to commit the same mistake by paying hefty premium for another 25 years(for such a low coverage).
in your case, check the surrender value. Ideally, if you surrender within 3 years the value you get back is 0. Better paid up the policy
good luck
Hi Manish,
Your article is an eye opener for me!
I have an endowment ULIP policy called AVIVA LIFE LONG.
Total tenure is: Till the completion of my 58 years of age.
My current age: 32 years.
Remaining tenure: 26 years.
Quarterly payment=5500/- i.e. 22000/- per year.
Till now I payed it for almost 4.5 years. Fund value is 93,357 rupees.
My current surrender value would be around 40k.
Could you please help me with this policy?
What shall I do with this policy?
Shall I say Paid-up and get whatever amount I get after 26 years?
Shall I surrender my policy and get that 40k now?
Kindly help me on this.
Regards,
~Krishna.
N Krishna
When will your surrender value get 100% ? may be after 5 yrs there is no surrender charge , check that .
Manish
Hi Manish,
Thanks for the immediate reply. 2 months back when I talked to Aviva customer care they told me that I need to pay till the completion of the tenure, Or else my surrender value would be less always. Anyways I will check with them once again.
If, My surrender value is half only always, Then what shall I do? Please advise me.
Regards,
~Krishna.
Not neccessary , your Surrender value is your Fund value and it can always become more than what you have paid, but you should not think in that way.
If you want to get out , you should just get out . You always have better opportunity with you to make best of it , rather than being stuck with it
Manish
Manish,
I think this is my first comment on your blog. I came across your blog and read few article…after reading article related to “why endowment policies are bad” I am literally shocked to see the calculations and how big loss I am into. I feel very bad about myself that I have put my such hard earn money into buying this policy 5 years back. I remember, I asked my agent about insurance policy which will suit my needs and coverage but he didn’t even told me about term plan. I am paying Rs. 30000 premium every year. I spoke with the agent and asked him as to why he never guided me about term plan and he was silent. What can I do at this stage? Now the surrender value is very less…just 45% of what i paid so far…I am not at all interested in continuing this policy and repeating the same mistake again for another 25 years and with low coverage. But I am literally feeling bad for the hard earn money i am going to loose now. Insurance industry is full of cheaters, it seems…white collar people will rob you officially.
I understand that I should have found out more information but what’s agents work then? he gets commission for guiding people for their insurance needs…isn’t it. He must have earn fat commission by robbing so many people…I just hate this mentality
I would like to thank you that after reading your article I understood correct meaning of insurance.
Dinesh
Sorry to hear your situation , but thats something you have to accept now , You are in bad shape but realising this is one thing which has great , think about millions of others who are continously paying their hard earned money for decades to earn pennies at the end .
You will loose 55% money , but thats the only way out and you should take it, atleast you will not suffer pain for future
. You can divert this money which you get and all the future premiums in something better , first preference is to gift your family a protection and confidence that even if you dont exist tomm , they can lead the life which you always dreamt of 
.
So take a proper term cover and then plan for your investments later.
Regarding Agents , yes their duty is to provide the proper guidance to clients and make commission on that , but sadly they just concentrate on commissions most of the times . So the best way in this world is to make yourself stronger with proper information .
Manish
Manish,
Each of your word is true. I am afraid that I understood the real definition of insurance now and not 5 years back. But anyways, I am going to stop that policy for good and definitely go for very suitable TERM PLAN with enough coverage. I will read your articles for more information. Another best thing i am going to do is to tell the same thing to 100′s of other people to save them from seeing future disaster.
lets educate everyone and save them from agents
all credits to you for opening my eyes…thanks
Dinesh
Wonderful that you understand the importance of Life insurance now
. Spread the word 
Manish
Manish,
Please give me your suggestion on following thing :
as I said I am having SBILift Sudarshan plan with increasing sum assured policy with two riders(accidental death + perm. disability/critial illness of 7 lacs) . Initially the base cover was 7 lacs. For this policy I use to pay premium of around Rs. 30,000 per year. I have inquire and confirm from the company and now after 5 years of policy the base cover(because of increasing sum assured feature of policy) is Rs. 8,40,000. (ride still has same coverage which is 7,00,000 lacs, it doesn’t change)
My agent says that if
–I choose paid-up option they will reduce the coverage with following formula
(base cover/policy years) * no. of premiums paid + bonus
e.g. (8,40,000/30) * 5 = 1,40,000. + bonus(which won’t be more than 60,000)
he said this is quite generic formula to calculate your coverage for rest of the years(remaining 25 years in my case) after you make it paid up.
– company(and agent) inform me that surrender value will be Rs. 80,881
Now,
what i think is even if we consider the figure as to be max Rs. 2,00,000 it wont be a good move to go for paid up option for the following reason.
I have explanation to give.
=> SBILife has one term plan product called SBI Life Saral Shield. With their online premium calculator I provided exacted figures of coverage(8.5 lacs) + 7 lacs of acc. death and critical illness rider.
and policy term of 25 years. the premium comes to be only
Rs. 3105.
Now, surrender value can pay for this premium for 26 years of term.(i.e. surrender value of 80,881/3105 = 26 years.)
Manish,
how do you think about this ? I fully understand that its my call to decide but trying to double check with you.
–Am I correctly calculating the things I explained you.
do you have any idea about how to calculate coverage in paidup option
thanks in anticipation
Dinesh
Dinesh
From Insurance point yes you are correct ,but you are forgeting that you will get the money also in your existing policy at the end if you make it paid up .
The agent has given the right formula it seems and thats the standard one with other companies also .
I would say that you should look at your scenario like this .
you are paying 30k right now , better take a term cover of the suitable amount you need ,why just 8-10 lacs ,take it for 50 lacs or 60 lacs, that would be the right cover for you i guess and what ever remains should go for your investments .
0verall you are correct in approach , you should not contiue the existing thing .
Manish
That’s a prompt reply
Money at the end of the policy in case of paid up… I didn’t know that or agent told me.
but the money will not grow…right?
i mean, so far I have paid premium of Rs. 1,50,000(30000 *5) will that grow also as per original policy feature ?
In my case, it was 5% guaranteed return on SUM ASSURED + bonus(so far 1.5% each year on base cover and NOT sum assured)
if they just return back 1.5 lacs after 25 years whats point. It will be of now value by that time. Isn’t it?
Definitely, I am going to purchase good cover above 50-60 lacs but for calculation purpose with existing policy cover I chosen small coverage figure.
Dinesh
Thats how it is , with paid up option , you get your premiums along with accumulated bonus at maturity and your insurance cover will be for next 1 yrs only , thats all .
Its all written in the policy document even at the time you took the policy . So now you have to take the decision of what you want to do next
.
Manish
Hi Manish,
After going thru this article, I understood what a big mistake i have done by taking LIC policy (my relative is agent!!!!!!!). details –
SI 3lacs, term is 15 years, premium 11500 half yearly payable.
So far i have paid 5 premiums ( total 58K). 6th installment is due on 15th of this month.
Pl advise -
1. If i discontinue without paying 6th installment – how much i can get?
2. If i surrender after paying 6th i.e. after completion of 3 years – how much i will get?
3. As you have rightly mentioned in this blog, term policy is better at this point of time. 50 lacs – iprotect would be better i feel.(iam 30 years old)
4. Is it better to make this policy paid up? If yes, how much i’ll have to pay to make this policy paidup?
Regards,
Pramod
Pramod
1. Zero . It actually depends on which policy you have taken , but most of them acquire a surrender value only after 3 yrs of premiums paid , so if you dont pay 6th premium , you dont get anything .
2. You will get 30% of all premiums excluding first year premium , this is 30% of your 2 yrs premium , which is 30% of 46,000 = approx 15k , but you have to confirm your agent for actual number , this is just approx .
3. Split in 2 companies , check if 50 lacs is sufficient or not ? Incase you dont own a home (without loan) , you might have to take much more than 50 lacs
4. You dont have to pay anything to make it paid up , after 3 yrs of premium is paid , if you discontinue the paying , it automatically becomes paid up , but better inform the company that you want to make it paid up . Also its possible only after 3 yrs .
Making it paid up is good or not , that you should compare with the case where you dont make it paid up .
Manish
Manish,
Thanks for your suggestion. Now i have a doubt,
1. If I stop paying premium after 3years and make it as paid up and keep the policy alive till it matures, after maturity will i get something?
2. If I keep on paying all the premium till 15 years (total premium will be 3.6lacs). I’ll get only 3lacs + bonus on maturity.
Suggest me, which option is better.
Regards,
Pramod
Pramod
Yes making it paid up means you get 3 yrs of premium back later but no bonus . bonus you get only when you have your policy runnign for 5 yrs, (check your policy for more info )
Do first option
Manish
Hi Manish, I am thinking of making my 2 money back policies paid up. But these policies provide some cover for permanent disability. What do u think I should do? If I make the policies paid up will those be covered for the rest of the policy period? Does any term insurance cover total permanent disability? Thanks again for ur valuable suggestion.
I replied you on facebook .
Manish
Hi Manish, I am thinking of making my 2 money back policies paid up. But these policies provide some cover for permanent disability. What do u think I should do? If I make the policies paid up will those be covered for the rest of the policy period? Does any term insurance cover total permanent disability? Thanks again for ur valuable suggestion. and help
Nayandeep
Yes, term insurance have sometimes a rider called accidental rider , which covers permanent disability .
Making your policy will stop the coverage .
Manish
Hi manish, I hav bought LIC health protection plus in 2010.premium rs.6000 yrly.But my date of birth is wrongly printed on the policy document.B.M. at LIC office told me that as my policy is ulip they cant do any change.i have given application to them.but all in vain.should i continue the policy. please help me. defmopq
Sanjay
I am not very sure on this . Its weird that you cant change your date of birth , but it can be issue in case of making claim if you die
. Because then things will not match as per documents .
Complain to Insurance ombudsman and cc to IRDA email id .
Manish
Thanks Manish,Its not a life policy.It is a health policy.and my DOB is wrongly printed on the health card also, sent by medicare TPA.
ok
Hi Manish,
The link to the topic of GFactor analysis http://www.jagoinvestor.com/2010/05/gfactor-your-decision-maker-for.html mentioned in this article is not available now. Although its too late after this article was published, is it possible for you to please share that article?
Thanks,
-Vivek
Vivek
I have updated the correct link , which is http://www.jagoinvestor.com/2010/05/gfactor-your-decision-maker-for.html
Manish
Thanks Manish for the correct link.
I came across your blog very recently (some 3-4 weeks ago) and I found it not only very informative but also very educative especially when it comes to financial discipline. I must thank you for the invaluable insights you give to people through this.
I also started thinking seriously about my ULIPs which I have purchased 4 and 5 years back and got few doubts related to the surrender /partial withdrawals from them.
What are the tax implications of :
1. Partial withdrawals
2. Surrender
of such policies. While I was reading different material over net, I gathered that the factors affecting the tax liability are
1. no. of years since purchase of the policy (less than 3 years, 3-5 years, 5+ years)
2. The annual premium to SA ratio: I guess it needs to be less than 5% from exit tax considerations.
However I did not get exact details related to these points at one place and I am getting confused.
It will be great if you can throw some light on this.
small correction in point 2 above:
I guess SA to premium ratio should be greater than 5
Vivek
See this http://www.jagoinvestor.com/forum/money-from-surrendered-lic-policy/1190/ for taxation issue
As per current rule it premium has to be less than 20% , but post DTC it has to be less than 5%
manish
i have taken enhancer policy from Birla Sunlife i have paid two premium of Rs 11998/- each but i do not know what is my fund value my 3rd premium is due now should i pay or not pay i am in dillema.
Kindly suggest
Sriram
What policy is it ? Is it ULIP ?
I think you can just stop paying the premiums incase you are not able to handle its swtiching facilities
Manish
Hi Manish,
?
I heard banks ask for a LIC policy equal to the educational/Home Loan amount when they sanction the Loan.
My father had to buy a junk policy about 7 years back to avail my Educational Loan from Central Bank.
Now I am yet to decide whether to surrender that policy[Loan amount already paid back] or make it paid up but i think quite a few people have to take endowment plans against their wish, only because they are availaing Loan.
is there any other way out than taking such junk plans in those cases
Anindya
Thats banks way of selling the policies , they ask you for it so that incase you dont have , they sell it to you . If you dont buy , they dont co-operate too much and decline your loans , there has been cases like these ..
manish
Hi Manish,
Firstly, thanks for all the information you have shared….I have saved this thread in my computer for over a year and now am returning for a question of my own.
I have an LIC endowment policy (sold by neighborhood uncle types!). Bought in 1996, maturing in 2015. Paid 9675/- for 14 years (total 135,450/- so far). Bonus shown on LIC portal is 158,000/- as of date. My questions:
1. I believe at the end of the policy, I will get total premiums paid till that date + bonus as of date. Is that correct?
2. If I surrender today, what do I stand to lose? Entire bonus + 70% of premiums paid?
3. Life cover is only 200,000/-. If I make it paid-up, what is the impact other than lower life cover (it is low anyway!)?
Looking forward to your reply.
Rgds,
Harkirat
Harikirat
1) Most probably, but still lets see which policy is it ? For example , if its jeevan tarang , you only get “Bonus” at maturity and pension there after each year
2) No , you loose 70% only if you stop LIC after 3rd year , after that the surrender value goes to 30%- 40% – 50% …. like that , so more its closed to actual maturity you will get more money , Also you get the bonus at surrender time (provided its more than 5 yrs)
3) No impact , its so low anyways
Manish
Thanks for your answers, Manish.
1) The policy details page mentions the plan as “The Endowment Assurance Policy (T No 14).
2) The website does not provide any surrender value. How can I find that out? I had read somewhere that even the bonus will not be paid in full if I surrender.
Just want to know if I should get out now or pay out the remaining 6 premiums.
Harikirat
yea its a endowment plan , the return from these policy will not be more than 6-7% in best cases , that too only when you run it for full tenure , If you surrender ,the returns might be low and if its done before 5 yrs , then the proceeds becomes taxable too
to find surrender value , the best thing i would do is ask agent that i want to surrender it and want to know about the surrender value
Manish
Yeah, guess I’ll check with an agent. The premium is not much but if I can offload, one less policy to manage.
Thanks for your inputs, Manish.
-Harkirat
Hi Manish –
I have one Future Plus policy from LIC bought in 2006 Paid 60000 till date FV = 79000.
Its open end policy just like MF with some Annuity feature attached to it.
What do you suggest its an MF for me with 25% return should I make additional Top ups till its maturity date to reap the benefit?
Thanks
Gaurav
Gaurav
Its not like MF , its a Unit linked policy and may be now as you are out of locked in period you are calling it like MF , because you can get out of it anytime .
But I would say if you dont understand it well , then better end the relationshiop and move to other simpler products
Manish
manish
I have taken jeeval saral from LIC and paying 73k premium per year. Just paid one premium. Is this policy worth? I am also looking at the term plan from 2 insurance companies with SA of 20 lacs each for 25 years. Please suggest best options.
Ashwini
Read this : http://www.jagoinvestor.com/forum/jeevan-saral-will-loyalty-addition-make-high-return/934/
In general endowment plans do not give high returns, so its same for you too
Manish
dear Sir
i have a market plus I ulip plan of LIC and already paid 12000 for 1 year.there is 3 year lucking period.shall i continue to pay for 2 more year or shall i stop investing?
Binod
You need to see how is it performing and then decide
Manish
dear sir
i am not sure how to get that data because in licindia.in site there is very little information there and also the nav is also bellow the value than when i was started
Res. Sir, I have 2 SBI life Policy Sudarshan-B. From 18/jul-2005. I paid regular Premium and my accured Bonus is Rs. 5093.75 till date for both polciy. Now I need to surrendar the policy due to my perosnal problem. 1)Policy is for 25 year & second is second is for 20 years Polciy premium yearly mode by Rs. 3435.00 & 2726.00 Total premium Paid till date is Rs. 20503.00 & 16273.00 Would you like to send me the surrendar value of the above.
Durgesh
What is the problem in surrendering it now . just go ahead and surrender it
Manish
Hi Manish,
I am planning to invest. by seeing other’s stories i m very afraid. i dont have much knowledge so i kept money in normal savings. my salary is only 35 k per month, out of which i can invest 15k per month. i have a 1 yr daughter. can u plz suggest me good options where i can splite my 15k per month and get -
1) insurance
2) returns after 20 yrs
3) children plan for daughter
Please tell me scheams and also which company would u prefer seeing past experiance for buying these policies
Atul
Dont worry a lot . If you have not taken too much actions till now , in a way its good that you didnt mess up your money in idiotic things .. But soon you should be now investing in sensible things .. with 15k a month you can achieve a lot like -
1. insurance coverage of 1 crore+
2. Health Insurance of 5 lacs for whole family
3. Good enough corpus for your daughter for after 20 yrs – investing in Equity mutual funds through SIP
Manish
Manish,
Thank you very much
I would be glad if u give ferther suggestion, i mean for Points 1, 2 , 3 which would be better path ( Which is the bank/insurance company & which policy )
Atul
There cant be a answer like this and better you do a through study on each properly and then take a decision . What homework have you done in each area ? Ask your doubts only after that
Manish
Hi,
I am also stuck in similar situation where i have purchase Kotak Money Mutliplier for my child. I have paid 2 installments (second by mistake) till now. This plan gives very less risk cover and its return value is also very low.
Now he has offered me to convert it to ULIP plan. Does it make sense? Also is it possible?
Gyanendra
Better not make second mistake by entering into something which you dont understand .. Better keep it simple and put more money in plain mutual funds .
Manish