A Doubt

POSTED BY Alok Sapru ON March 17, 2013 12:16 pm COMMENTS (4)

I have a Jeevan Anand policy from LIC for five years. It will mature after 20 years. The premium is 59,730 and sum assured is 15 lacs. I also have a home loan with SBI having outstanding amount 19,60,000 which is for 25 more years. EMI is 18,195 and interest rate is 10.2%. I can save around 5000-7000 every month. I have one SIP (HDFC top 200 growth) and three year old PPF A/c. I want to settle my home loan as soon as possible.

My question is Should I quit Jeevan Anand and prepay 5000 each month to my loan account or continue with Jeevan Anand and pay 5000 every month there ? Which is better ?

4 replies on this article “A Doubt”

  1. Dear Alok, 5.16L Rs. Yly income translates into a minimum term cover requirement of around 80L Rs. @ 15 times multiple. Add your home loan into it & roughly the figure reaches to a Crore. Now do tell me, if you die today, how your family ‘ll survive in your absence with those 17L Rs. only.

    Please close Jeevan anand now. Rest regarding the investment & loan payment, please follow what dear Pattu (FFC) has stated above. Running a lown is a good idea when your effective ROI is not more than 2-2.5%. How? Simple, your ROI is around 10.5% & running Inflation as on date is around 8% (I’m counting here the wholesale inflation not the retail one which is around 11%), you are paying only 2.5% interest in real value. With each passing day, the purchase value of your money ‘ll decrease & yet your EMI ‘ll remain same, so effectively you ‘ll pay less than what you are thinking.



  2. Closing the Jeevan Anand and using it for home loan prepayment are two different actions.

    Yes you should close the Jeevan Anand.

    Should you use it toward home loan?

    Do you have enough insurance? Have you planned for your goals? Do you have enough emergency fund and health insurance. Do you save for all your goals? If the answer to any of these is no then work on all of these. If you need to save more for your goals then use the
    Jeevan Anand money towards this. If your retirement is 25 or more years away continue your home loan and focus on your other goals. You can always prepay later.

    Use this for your goals

    I have a “comprehensive child planner” which you can use to find your insurance amt.

  3. Dear Alok, what’s your yly income? Family size? No. of dependents? Other loan liabilities? Total sum assured from all life insurance policies?



    1. Alok Sapru says:

      My yearly income is 5.16 lacs. I have a family of 5 members in which my wife and child depend on me. No other loan liabilities. Total sum assured is 17 lacs (two LIC policies, no premium pay for one policy and maturing in 2016).

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