Help me Optimize my Life Insurance Policies – I read Book – “How to be your own financial planner in 10 steps”

POSTED BY Endee777 ON May 4, 2014 4:23 pm ONE COMMENT

I am currently reading the book “How to be your own financial planner in 10 steps” by Nandish Desai. I am at first chapter. I don’t want to move to the next chapter unless I ACTION on the topic of first chapter – “Optimize life insurance policies”

My age is 30. I have the following three LIC policies

1. Jeevan Bima Kiran from LIC (with accident benefit) – On my name

Circumstances of Purchase: Purchased when a LIC agent who has been in contact with dad came over to our house. Way back then I was still waiting to join the MNC job that i had secured in my college campus. So may be the decision didn’t matter that time as my financial existence was nil.

Policy Details:

Date of Purchase: October 2005, Policy Tenure: 30 years (last payment August 2034)

Survival Benefit/Sum Assured on death before maturity: 5lac + loyalty addition

Extended term cover after (without accident benefit) date of maturity: 3 lac

Annual premium: 4262 /-

Bonus: None

2. LIC Jeevan Anand – on my wife’s name

Circumstances of Purchase: Sister’s friend is an LIC agent. I got repeated calls from her. Wife had to do something for tax planning. And we purchased this policy. Now I feel the premium is too high, after being enlightened by Jago Investor’s articles. Wife’s income is decent.

Policy Details:

Date of Purchase: January 2012, Policy Tenure: 20 years (last payment August 2031)

Survival Benefit/Sum Assured on death before maturity: 5lac + accrued bonus

Extended term cover after (without accident benefit) date of maturity: 5lac

Annual premium: 21,586 /-

Bonus: 43 (recent figures). Checked by logging in to LIC account – bonus so far is 43,000

3. HDFC Term Insurance

Circumstances of Purchase: Informed decision. It’s an outcome of Jago Investor articles/blogs/boot camp. Given my current income levels and plans around buying a bigger home, 1crore term insurance is a must have. In fact I feel I will have to top it up after the arrival of a third member in the family (in the next one year or so)

Policy Details: Coverage: 1crore, Annual Premium: 11,862 /-

I am thinking how should I optimize my insurance policies? It’s a no brainer that I must continue with HDFC term insurance. Given my current income levels and plans around buying a bigger home, 1crore term insurance is a must have. In fact I feel I will have to top it up after the arrival of a third member in the family (in the next one year or so).

LIC Bima Kiran’s premium is too insignificant to be thought upon for optimization so I don’t know what I should do with it.

LIC Jeevan Anand’s premium is definitely high and I was thinking whether to surrender it or make it paid up. If I surrender it I will get around 12,000 rupees (30% of the total premiums paid, excluding the first premium). Amount of premiums paid so far is around 81,000. So surrendering doesn’t make sense, and making it a paid up might be a better option. But I don’t what would that mean, if I decide to make it paid up – stop paying premiums? The 27,000 rupees that my wife is paying per year can be diverted like this:

1. Buy a term insurance of 50lac (was thinking to go for Kotak’s plans this time), premium for 30 year old female should be around 6-7k

2. Start an SIP of 1k per month in equity mutual funds – with 3-5 years of horizon or even 10 years. This SIP can be increased with income in same or different products

3. Put the balance (roughly 10k) in PPF as wife already has an RD of 10k per month

When I purchased this policy I was told that Anand, my wife will get around 12-13lac at the end of 20years which she can choose to withdraw, or stay covered without any premium payments

I would be happy if someone guides me on what to with Bima Kiran, and Jevan Anand.

Although I have the right thoughts in mind, I am still finding it difficult to take a bold decision. I am yet to foray into equity mutual funds. So need to be careful on what I do if I decide to use wife’s 27k as said above. =)

One reply on this article “Help me Optimize my Life Insurance Policies – I read Book – “How to be your own financial planner in 10 steps””

  1. ashalanshu says:

    Dear Endee, Stop Bima Kiran and use the saved prem. to top up your own term cover. Stop Jeevan Anand and purchase adequate term cover for your wife and after that start investing the saved prem. and surrender amount from both these policies for retirement goal.

    Thanks

    Ashal

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