Paid Up Value for LIC – dilemma

POSTED BY Ramz ON May 14, 2012 1:31 pm COMMENTS (3)

Hi Sir,
I am currently having jeevan Anand LIC policy. I want your suggestion regarding paid-up and surrender. The following are the details of the amounts

Total tenure – 20 years
Coverage – 500000
I am paying the premiums from Apr 2007

Total Amount paid under premiums : Rs.122075
BOnus accrued under the policy : Rs.113500
Surrender value : 76018
Paid up value : 119048

I cam to know that I will be receiving total amount of Rs.232548(Paid up plus Bonus) on maturity date(2028) if I dis-continue paying the premiums.

But with surrender value I receive Rs 76018.

I want to personally discontinue paying the premiums and take term insurance. However with the above numbers, cant choos which option to finally take – paid up or surrender. Your help will be appreciated. Thanks in advance

Regards,
Ram Prasad

3 replies on this article “Paid Up Value for LIC – dilemma”

  1. If your numbers are correct the answer should be very straight forward.

    If you have 76k in hand today and invest it at 7.24% (post tax return) then the corpus will turn into 232548 after 16 years. So you need to invest somewhere where the post tax return is > 7.24%. Thats all the math you need.

    Choice A: If you invest this in PPF it is very likely you get atleast 8% average return over 15 years. You come out ahead with almost minimal risk.

    Choice B: As Ashal said pump this money into Mutual Funds and assuming 12% return the corpus will be 4.16 lacs.

  2. Dear Ram, answer is very simple – If you opt to surrender now, you ‘ll get 76000 Rs. which you can invest for next 15Y to match with the 20Y term of policy as 5Y already gone past.

    Within these 15Y, even for a conservative estimate of 8% return from debt products, the maturity value ‘ll be 241000. If you op to invest the surrender amount in to Eq. to cover the losses due to early surrender, the maturity value @ 12% growth rate ‘ll be 416000 Rs.

    Thanks

    Ashal

    1. Ramz says:

      Thanks for the quick reply.

      May be more than the numbers, its the thought of losing some 50k right now is worrisome. But seems like there is no point hanging in there.

      Will sort out the options provided by you.

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