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Hello,

My name is Yogi, staying in Bangalore. My parents stay in one of the village in Maharashtra. One of friend of my father is LIC agent. He asked my father to make LIC policy on my behalf as he needed some financial support. As I was flying away from home for education, I couldnt think much on this transaction. This was back in 2007. I was 25 years old in 2007.

 

I am paying sum of 42000/- per annum for LIC Jeevan Anand Policy. Recently after coming back to India, I tried to check up details about what happened. I wanted to access online policy details hence approached local office and caught up with same agent. Asked him about details of what has been done with my policy.

 

It seems agent went ahead and did things for his own benefit. My parents are in old age and didnt catch selfishness of agent. He created 11 policies on my name and my sum of 42,000/- gets divided in such a manner that all 11 policies get paid. After discussing with agent, he said that I made 11 because there are 12 months in Year and you will get money each month !!!! This is disastrous explaination. He did this knowlingly and to raise count of policies he made.

 

I dont wish to have 11 LIC policies on my name. I feel thats unnecessary. I have been thinking of cancelling all other 10 policies and making up only one policy – easy to keep track of and access.

 

Can you please suggest what shall I do?

1. whether I continue having 11 policies? Which I personally feel wrong option

2. Or shall I cancel 10 (or different number) and make it one policy?

Your inputs are appriciated.

Regards,

 

Yogi

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13 Answers

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1 Ramesh May 24, 2011 at 5:34 pm

@ Yogi

Jeevan Anand policies are endowment policies. From what I sse from your details
Your needs:
1. To have an adequate life insurance policy, for your dependent parents.
2. To have easy access to monitor / manage / pay premiums for your policy.

Currently, you are paying 42k per year, to probably get an insurance cover of around 10 lakhs (<– this is just a guess). And having 11 policies is tedious and complicated.

Advise:

Remove all your LIC jeevan anand policies.

Have a single term life insurance policy of a reasonable amount. The amount should be the primary guide and not the premium. You can either go with LIC or with some other online insurance policies available nowadays. eg, an online policy from ICICI for 30 lakhs @ 27 years for 25 years will have a premium of Rs. 3510 (+taxes=roundabout Rs 4000) per year. so approx. 1/10th the price and 3x the cover.

hope this helps you.

Reply

2 Dominic Prakash May 25, 2011 at 7:52 am

Straight to your question.

Just go ahead and cancell all your LIC policies. There are couple of sites provide ‘surrender value” and none of them are right (in my case). Take one of your policy to a nearby LIC office and get the authentic surrender value and submit two set of surrender forms.

You will be losing some money but its worth it.

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3 trupti June 4, 2011 at 12:56 am

if you are thinking to cancel 10 policies and have only one policy as a substitute to those 10 policies then that’s NOT possible. Insurance is always an contract.

But yes! you can cancel all or individual policies as you want. (same thing again, you can not combine them together now as one policy)

I would suggest you to simply surrender all the policies. You need much better coverage. Its always BEST to go for simple term plan. Premium will be less and coverage will be very good.
Invest remaining amount in good MF or put it in PPF. That’s much better than endowment or moneyback option

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4 Shivakumar A June 8, 2011 at 9:23 am

No doubt, Jeevan is the best plan.
Term Insurance is available upto 65 years only. No returns on maturity.
But Jeevan Anand give you Guaranteed returns and Life cover after maturity of the policy also.

No guaranteed returns on ULIP. charges on ULIP is also deductible from your investment.

Charges are :-

Premium Allocation Charge:
Fund Management Charge (FMC)
Policy Administration Charge:
Surrender Charge:
Switching Charge:
Mortality charge
Rider premium charge
Partial withdrawal charge
Miscellaneous charge

After all these, If the market falls, your investment will further go down.
What will you give to children in case the market goes down.

So, Plan accordingly.

Reply

5 Ramesh June 8, 2011 at 11:23 am

@ Shivakumar

You mean to say there are no charges in Jeevan policies?

LIC only gives bonuses (reversionary, terminal, etc) and not guaranteed returns (those policies which provided guaranteed returns are no longer there).

ULIPs are way better than the completely opaque endowment policies that are there in the market, because of “better” transparency and potential use of both equity and debt markets.

Sorry to say, but it is really pathetic to bring children into financial decisions.

Ramesh

Reply

6 Shivakumar A June 9, 2011 at 8:14 am

Mr Ramesh,

Well said “Children into financial decisions”.

Don’t get confused. Update yourself.

I think you are new to investment. Many people have burnt their finger by investing in ULIP. Now those people have started coming to LIC.

If someone takes an LIC policy, from first day he is insured.
Unlike ULIP, charges are separate for insurance cover.
I agree lic also charges but very very less.

LIC gives not only givens guarantee on investment along with guaranteed returns,financial additional bonus and Insurance cover also.

After all Guarantee by Government of India under LIFE INSURANCE CORPORATION ACT, 1956

Pls visit “http://www.licindia.in/images/licact.pdf”

Any other Insurance company is offering this kind of guarantee ??????

Whenever a Financial analyst speaks in TV shows, he tells about only ULIP plans. It is because he is paid for that.

If you want to know more start investing from now, update me after 20 years.

take care…

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7 Ramesh June 9, 2011 at 11:34 am

@ Shivakumar

Please show me the “guaranteed return” in any of the current LIC policies. All bonuses are subject to LIC’s return on that investment.
Indicative returns are not guarantees.
Backing of GOI is not a guaranteed return.

LIC also provides Ulips in case you have forgotten that.
I am not a fan of mixing investment and insurance, be it by the way of Ulip or traditional policies. (please search elsewhere in the forum about my views).
Endowment products, whether by LIC or by others, are very inefficient products, in terms of inadequate insurance cover.

Back your claims with facts.
1. LIC policy holder is insured from day 1. Do you mean to say, non-LIC policy holders are not insured from day 1?
2. What are the various charges on an LIC policy? Like in this thread, about Jeevan Anand policy. “Unlike ULIP, charges are separate for insurance cover.” <– Do you mean to say that the charges for insurance are separate from the insurance premium that is being paid?
3. Regarding guarantee by GOI, even US-64 was backed by the govt. The result we know. Have you heard the term "sovereign debt default"? Just search it, if you dont know. Do you know the conditions of the Indian Treasury in 1991 before the govt. was "forced" to liberalise.
4. In TV shows, most analysts were busy ripping apart Ulips. From your analogy, i can then "claim" that they are being paid now again to do that. correct?
5. Sorry, i dont want to know about investing from you. thanks

Ramesh

Reply

8 Shivakumar A June 9, 2011 at 11:26 pm

_ramesh

There is no difference between LIC ULIP and other company ULIPs.

In LIC, there are no charges for surrendering ULIP after the completion of 3 years.

I agree Term insurance is the best, but you mean to say risk is upto 65 yrs only?

You agree that if particular fund performs, then returns will be given from that particular policy.

ULIP’s funds are being invested in the market after taking all charges.

Example :-

Supporse Mr X puts 20,000/- in ULIP, approx. upto 15 to 40% is taken as charges in1st year.

Now Mr X investment is approx. Rs. 16,000/-. (-4000/-)

Mr X had already lost 4000 and got units for Rs. 16,000/- only.

Pls tell me how much time a fund will take to recover this first year 4000+any other charges(if any)

suppose Mr X invests for say 5 year. On an average he will be losing one year premium in charges only.

If a government company like US-64 (UTI Mutual Funds) can suffer, what is the guarantee of other company ULIPs?????

Do you know the profit and loss of other ULIP issuing companies?????

Do you know what is the claim ratio of other ULIP issuing companies?????

You will be shocked to know….

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9 Ramesh June 10, 2011 at 12:18 pm

@ Shivakumar
You have very conveniently bypassed all the previous questions.

This is not a debate of LIC ulip over non-LIC ulips.
Term insurance is the best way for life insurance, and any other way is overall more expensive. Life insurance is a protection for financial dependents, till one himself is working. Most of the people will either stop working after 65 years or they would have sufficient corpus so that there are no financial dependents. In these cases, a life insurance is “idiotic” financial decision.

Update yourself about the newer Ulips norms (even the LIC policies are modified).

A person taking a Jeevan Anand policy with the same premium of 20k as in your eg. After 5 years, he will get 27k {(20×5-20)/3]. So dont mis-inform.

You want to give examples, give facts and compare apples to apples, similar situations.

yes, i have an idea about P&L of lic as well as non-lic. But do you have that?

Check this one out. http://articles.economictimes.indiatimes.com/2010-11-22/news/27585310_1_notional-lic-schemes
Also check this out.
http://sudeeshbubby.blogspot.com/2010/11/lic-with-rs14000-crore-notional-loss.html (the exact print of the LiveMint article).

I also know about the FUD (fear, uncertainity and doubt) created by the LIC (and its agents) about the claim ratio? Can you detail the claim ratios of pure life insurance and endowment policies of LIC separately? Only the overall/total claim ratio is published.
Also, within the first 2 years, every pure life insurance policy will undergo severe scrutiny. So comparing results of newer companies will tend to distort the claim ratios.
eg. Aegon which is new entrant, has about 50% claim ratio. so 50% of pure term insurance claims in first 2 years (<– Is that a bad thing? We dont know). It will be nice to have the same data (pure term insurance policies of LIC which have come under claim within 2 years of issuance). But we dont have that data, and this type of opaqueness causes confusion.

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10 Shivakumar A June 23, 2011 at 7:45 pm

Market has gone down by several hundred points.

Suppose Mr X has taken a ULIP Policy for his daughter’s marriage and the maturity date is 23 June 2011.

What would be the status??….
He cannot ask the company to hold his ULIP till the market touches 21000 points.

Mr X might have lost returns as well as some portion of principal also.

THIS IS THE POWER OF ULIP AND MUTUAL FUNDS…..

Reply

11 Ramesh June 24, 2011 at 11:21 am

@ Shivakumar
LOL.
I wonder why LIC agents consider themselves to be knowledgeable about capital markets.

When you get near your goals (in MF or Ulips), you shift to debt options. You obviously do not know this. So spare yourself the effort to make us laugh.

Ramesh

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12 Shivakumar A June 24, 2011 at 6:45 pm

Some people invest few thousands and consider as if they know everything about capital market.

On an average 10% only make money from market driven investments.

In Share market – One’s loss is other’s profit.

So once you make money don’t consider everyone is making profit.

I don’t know Capital markets as you know but at the same time You don’t know LIC as much as i know.

LIC’s market share has increase this year because people invested in Private companies have started coming out after 4 to 5 years.

Share market may give more returns but not every year (YOY).

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13 Ramesh June 24, 2011 at 7:03 pm

@ Shivakumar

So why dont you enlighten us about LIC with some Facts about it. As asked by Ashal and me above.

Capital Markets dont equal to trading/futures/options etc.
It also includes buying shares of companies / MFs for long duration in which case, your profits are linked to the performance of the underlying companies/MF. Which is not at the expense of others.
so, in that way, share markets will give you far greater returns. over the last 10 years, the worst MF has given a return of 8%. which actually is better than PPF.

Investing in LIC (or non-LIC) traditional plans means loss of purchasing power over any period of time, surely.

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