Hi,
My doubt is regarding surrender vs paid up for my 2 LIC policies which I want to discontinue. I want to move to term insurance. My insurance coverage currently is not enough.
I see in many blogs and investment websites that people recommend surrendering the policy rather than making it paid up. I have made some calculations (see below) regarding surrendering vs making paid up of my 2 LIC policies. But my calculations show its better to make it paid up. I am not sure if I am missing something here.
It would be helpful if you can verify and confirm my calculations below. Your help is much appreciated.
Regards,
Shankar
1. Jeevan Rekha – 20 yrs
I took a 20 yr Jeevan Rekha policy with sum assured 5 lacs in Sep 2003. I have paid half yearly premium of Rs.10,822 till Mar 2012. Hence total premiums paid till date is Rs.1,94,796/-. Bonus accrued till date is Rs. 1,54,500/-.
My surrender value as on date is Rs. 98,500/-.
If I take the surrender value of Rs.98,500/- today and invest somewhere with 10% compound interest p.a., I will get Rs.2,81,032/- in 2023.
If I make the policy paid up now, in 2023 I expect to get prorated sum assured + bonus accrued till now = (9/20) * 500000 + 154500 = Rs.3,79,500/-
Hence, I think making the policy paid up is better. Can you confirm if I am correct?
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2. Jeevan Anand – 25 yrs
Similarly I took a 25 yr Jeevan Anand policy with sum assured 9 lacs in Sep 2003. I have paid half yearly premium of Rs.18,772 till Mar 2012. Hence total premiums paid till date is Rs.3,37,896/-. Bonus accrued till date is Rs. 3,38,400/-.
My surrender value as on date is Rs. 2,34,700/-.
If I take the surrender value of Rs.2,34,700/- today and invest somewhere with 10% compound interest p.a., I will get Rs.6,69,626/- in 2023.
If I make the policy paid up, in 2023 I expect to get prorated sum assured + bonus accrued till now = (9/25) * 900000 + 338400 = Rs.6,62,400/-
Again, I think making the policy paid up is better. Can you confirm if I am correct?