Surrender or Continue the LIC Policy (PLan Table 75)

POSTED BY akgc2 ON January 29, 2014 4:49 pm COMMENTS (9)

Hi

I has taken LIC money back traditional policy  (Plan Table 75) in Dec-2003. Below table has all the details about the policy.

Its a money back policy with 20% cash back every 5 years and 40% + Bonus plus Loyalty benefit at maturity.

Surrender value of Rs 1,81,500 mentioned below is the current vested bonus visible in my LIC online account.

Maturity Value is the Value which I had come across using some calculator on one website few months ago.

(However would like to get the exact value  from any LIC adviser on the Forum).

Now my calculations below shows that I will get better returns if I surrender the policy and put the Yearly Premium and Surrender Value in a Recurring deposit account like PPF etc.  I am not worry about 80C tax rebate as that limit is already exhausted by various investment means like  Employee PF, Child Education, Other Term Policies, and Principal of Home Loan.

Could you please guide me and let me know whether I am right or not in my calculations? 

(Only thing I need to confirm from LIC Adviser is the Maturity Value and the Surrender Value based on Current Vested Bonus to make sure that my calculations are correct)

Pending Start Date 28-Dec-2003
Pending Maturity Date 28-Dec-2023
Total Payment Terms 20 Years
Pending Term (Years) 10 Years
Yearly Premium 31364
Current Surrender Value as on 30-Jan 2014 181500
Expected Maturity Value After 10 Years 650000
One More Cash Back After 5 Years on 28-Dec-2018 100000
Interest Rate % In 10 Years Recurring
Premium will Grow To
In 10 Years Single Deposit of Surrender Value Will Grow To Total Returns  After 10 Years on Surrendering the Policy Now In 5 Years Cashback in Dec-2018 (After 5 Years) will Grow to Total Return on Continuing the Policy Benefit in Returns on Surrendering the Policy Now
8.5 504838 410368 915206 150366 800366 114841
9 519397 429677 949074 153862 803862 145211
9.5 534396 449798 984194 157424 807424 176770
10 549848 470764 1020612 161051 811051 209561

9 replies on this article “Surrender or Continue the LIC Policy (PLan Table 75)”

  1. Vikram says:

    Dear Sir/Madam,
    I have a LIC money-back (75-20) policy (Table 20 – Term 20) with sum assured of 4 Lakhs.
    1st premium paid on Dec 2001 of Rs.25,092/- (annually). Last premium of Rs.25,092/- paid on Dec 2015.
    Till date 15 premiums paid for 15 yrs and 2 money-back of Rs.80,000/- each (20% of sum assured) received on Dec 2006 (5th yr) & Dec 2011 (10th yr). 3rd money-back (15th yr) of Rs.80,000/- is due this Dec 2016.
    If I surrender the policy on Jan 2017 after receiving the 3rd money-back (on Dec 2016) and year-end accumulated bonus (on Dec 2016) without paying the 16th premium (due on Dec 2016), how much will I loose ?
    Total Investment = Rs.25,092 x 15 = Rs.3,76,380/-
    Total Money-back = Rs.80,000 x 3 = Rs.2,40,000/-
    Vested Bonus accumulated till 2016 = Rs.2,60,000/- (approx)
    Please provide your suggestion if I surrender the policy on Jan 2017, how much will I loose (in figures) from maturity amount and bonus. Also can I stop paying premiums from 16th year till maturity on 21st year ?

    Thanks & Regards
    Vikram

    1. Hi Vikram

      The best answer you can get only from the agent you invested through or just contact the company. The thing is your case is a bit personalised and other than company, no one can give accurate information

      Manish

      1. Vikram says:

        Thanks Manish for your feedback !!

  2. akgc2 says:

    Dear Divya
    As per article below my Manish there are some changes in the LIC policy from Jan-2014.
    Article also talks about the changes in Surrender value and for 4-7 Yrs premium paid policies it says the surrender value will be 50% of premium paid.

    In my case I have paid 10 premiums. May I know how much surrender value I will get ?

    https://www.jagoinvestor.com/2013/09/5-major-changes-in-life-insurance-policies-from-oct-1-2013.html#comment-132349

  3. ashalanshu says:

    Dear Arun, surrender value and paid up value can be availed from LIC itself. Maturity value you can calculate on the basis of bonus declared in past.

    Thanks

    Ashal

  4. akgc2 says:

    I have paid 10 installments of Premium till Dec-2013 and 10 are pending. I do have enough life cover with Term Insurance Policies (1.5 Cr Plus).

    What I need is approx figures of the amount I will get

    1. At maturity on continuation of the policy
    2. At maturity if I stop premium payment making it paid up policy.
    3. Now itself if I surrender the policy.

    If I get these figures I can calculate which option be better in term of better returns among these three.

    Can any financial expert or LIC adviser in this forum help me to know these figures?

    Few unknown areas here are

    1. Amount of Loyalty Bonus at maturity

    2. Surrender Value after 10 premium are paid and teh current vested bonus reflected in policy is 1,81,500/-

    3. Maturity value of Policy if it is converted into Paid Up policy now (Where 10 premiums are paid and 10 are pending.)

    Policy is LIC Money Back Policy (20 years) with Plan Table as 75.

  5. ashalanshu says:

    Dear Arun, the current vested bonus ‘ll be reduced if you opt to paid up as your sum assured ‘ll be reduced from current one to the calculated one as per your paid 11 prem.

    In my personal opinion, as you have just received your 2nd money back in 2013, it’s advisable to get surrender value and invest elsewhere. here I assume you have adequate life insurance cover from Term covers.

    thanks

    Ashal

  6. akgc2 says:

    Hi Divya
    Does this Surrender Value formula apply to all the premium paid terms or its valid for 3 years paid premium. As per your formula I would receive only Rs. 62728/-

    From your experience could you please tell me what would be the maturity value for this policy.

    As per my calculation 40% of SA + 20 years Bonus @40 Rs per 1000 of SA + LA
    it comes 40%*5,00,000 + 20*40*(5,00,000/1000) + 10% of 5,00,000(Assuming LA as 10% of SA)
    = 2,00,000 + 4,00,000 + 50,000 = 6,50,000/-

    However if you have different numbers please let me know.

    Also could you please let me know what would be the Maturity value for Paid Up policy considering 10 annual pending premiums of Rs. 31364/-, Current Vested Bonus of Rs 1,81,500/- after 10 years.

    Regards
    Arun

  7. divya.advisor says:

    You are loosing lot of money on surrender.
    Rules for surrender value for policies before 1-JAN-2014:
    Guaranteed Surrender Value = 30% of all premiums paid – 1st year’s premium

    You can take the paid up option i.e stop payment and take all the money at end of term. You can contact the branch to view the accumulated bonus and conversion to paid up.
    Always remember PPF has a annual limit of 1 Lakh and returns from regular RDs are taxed.
    You can invest in a mutual fund SIP if you want after you stop payment. You should pick the right fund for a conservative investor a bluechip/indexed fund should be a good option

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