Life Insurance surrender

POSTED BY Bharath Kumar ON February 21, 2012 12:34 pm COMMENTS (9)

Dear Sir,
I have purchased four LIC Jeevan anand(with profit)(with accident benefit) policies paying annually Rs 52000 towards premium. Till now I have paid for 2 years. Sum assured for three policies is Rs 250000 and Rs 265000 for one policy. Tenure of the policy is 20 yrs. I would like to discontinue the same and request you to let me know the surrender value for the same. Also, would it be wise to surrender at the value arrived by you or convert it into paid up as mentioned in other comments by you.
Thanking you

9 replies on this article “Life Insurance surrender”

  1. Shiwanand,

    If you paid 3 premiums and left it as is the accumulated corpus will grow at the long term of 4%-5% over the next 12 years.

    The rate of return pretty much does not change drastically for any duration. Accumulated corpus*4% compounded would be the return.

    In a majority of the cases it makes sense to surrender the policy. This is a one time pain really than looking at this policy for life!

    Take very conservative (low) values for the surrender value and still you will see you come out better.

    If you surrender the policy the life cover ceases as well. If you make the poliy a paid up one a thumb of the rule to find out the life coverage is as follows:

    Find the % of the total payments paid [Say 5 out of 15 = 33%]
    Multiply the Sum Assured by this %. SUm assured falls to 33% of 10 lacs = 333,333.
    Do a markdown of 12%-20%. Since your dad is close to 60 use a mark down of 20%. Life coverage = 2,66,666. This is a rough calculation told by a LIC agent.

    Elderly people will need life coverage ONLY if their family is dependent on them financially. So looking for a term coverage at 58 does not help.

    It makes perfect sense to get a pure health insurance policy sooner and definitely before he turns 60.

  2. shiwanand says:

    Hi Manish,

    LIC Jeevan Saral with profit policy.
    Sum Assured: 1000000. Accidental Benefit: 1000000. Yearly premium: 48040. Policy Tenure: 15 Years.

    Request to assist on the below mentioned queries:

    1) After paying 3 installments of yearly premium, policy is discontinued. What will the approximate amount I will receive at the end of 15 years (policy Tenure).

    2) After successful payment of five yearly premiums, what will be the expected return from LIC after 15 years of policy tenure. Once policy is stopped after fifth premium payment.

    3) How can I calculate the amount based on above two scenarios and could you provide me the complete formula of the calculation.

    4) What will be insurance cover in both above scenarios?

    Note: This policy is enforced to my father (current age 58) by one of our relatives. I came to know about it after 1 year when 2nd premium was paid. I always believe that insurance policy must be only for risk coverage and dead against for any such policy which offers investment with risk coverage. Now the problem is term plans offers very high premium at this age and few term plans are available for him. I have already consulted the LIC for above queries but they are not responding only suggesting to continue the policy. I don’t want to surrender the policy it is completely worthless. I have decided to discontinue the policy but not sure when (after paying how many premiums)? Because of I have no proper information regarding my queries. And one more thing he do not have adequate insurance coverage only 1.5 lacks money back policy. At this age I am insisting for health insurance policy or the policy which provides health insurance as well as life coverage.

    Could you please look into this and suggestions will be appreciated.

    Thanks & Regards
    Shiwanand.

    1. Dear Shiwanand, @ age 58, do your father still has some financial liabilities to fulfill? If the answer is yes, please purchase a term cover based upon the exact requirement of cover.

      Regarding this money drainer, please opt for surrender now. You ‘ll get only 30% of the 2nd & 3rd year prem. but receive that amount & invest the same in a simple product like bank FD & after 12Y you ‘ll get more than what the paid up value is offered to you by LIC.

      For exact paid up value, please contact, LIC office.

      Thanks

      Ashal

  3. Dear Bharath, As the minimum 3Y prem. has not been paid by you, the policy ‘ll not acquire any surrender value. Even if you opt to pay 3rd prem. Your surrender value ‘ll be 30% of the prem. till date excluding 1st year prem. So against the payment of 2nd & 3rd Y prem. you ‘ll still get only 30% of the paid amount.

    My take – contact LIC & make it paid up one if possible. If neither paid up nor surrender is possible, just forget this prem. as your mistake but learn a lesson that next time you ‘ll think & research before investing in an investment oriented life ins. policy.

    Thanks

    Ashal

    1. Bharath Kumar says:

      what we are required to get it converted into paid up

      1. Usually if you dont pay past the grace period the polciy is automatically made paid-up.

  4. BanyanFA says:

    Bharath,
    One quick way to know the surrender value of your policy is by contacting LIC directly. You can also check your policy status online as well.

    It is a good idea to clean up mistakes at the earliest possible. While it would result into some losses, but you have just entered into the policy for 2 years paying into it Rs. 1.04 lacs. Even if you get nothing, it is better to exit now. In my past I personally got my policy cancelled after paying Rs. 100,000 and getting just 25K as surrender value. But I think I did an excellent thing at that time. I invested 25 K and they are doing much better than what they would have done if I would have left it to the insurance company.

    Regards
    BFA

  5. Bharath – In a majority of the cases it makes sense to surrender the policy. This is a one time pain really than looking at this policy for life!

    Check out the calculator once again here “Endowment Plan – Should I Surrender or make it Paid up”

    http://justgrowmymoney.com/Downloads

    Take very conservative (low) values for the surrender value and still you will see you come out better.

  6. PRASANNA says:

    It is not advisable to surrender any traditional policy of LIC which will create more loss.
    the best way is to stop paying renewal premiums and collect the paid up premiums with
    some bonus they will give at the end of policy tenure. you can get your current surrender
    value easily if you register your lic policy with http://www.licindia.in

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