Surrendering a Policy After 10 Years and Investing the Premium and Surrender Value Elsewhere ?

POSTED BY akgc2 ON January 30, 2014 3:53 pm ONE COMMENT

This is in continuation of my previous post. Reason to choose new thread I could not post a table in the comment part (Comments are just plain text).

Some Background

  “I had taken LIC Money Back policy (Plan Table 75) back in Dec-2003 for 20 Years term. I am paying Rs 31364/- as annual premium for Sum Assured of Rs. 5 Lakh.

Till Dec-2013 I have paid 10 premiums and 10 are still pending. In my online LIC account it shows the vested bonus as 1,81,500/- I have already received 2 cash back of Rs 1 Lakh each at the end of 5 (Dec-2008) and 10 (Dec-2013) years respectively. “

After calculation as mentioned in below table I have decided to surrender my policy even after 10 years (Half of the Policy term) looking for better returns of my investment.

The assumption here is that if I could generate annual returns of 9.5% or more with the Surrender Value and Pending Yearly Premiums (10) I will get more returns than the total returns including one more Cash Back after 5 years and Maturity Amount after 10 years.

Considering a long term of 10 years it should not be difficult to generate a annualized returns of 9.5% or more.

Policy Start Date 28-Dec-2003
Policy Maturity Date 28-Dec-2023
Total Payment Terms 20 Years
Pending Term (Years) 10 Years
Yearly Premium 31364.00
Current Surrender Value as on 30-Jan 2014 1,10,770
Expected Maturity Value After 10 Years 650000.00
One More Cash Back After 5 Years on 28-Dec-2018 100000.00
0.0 0.0 0.0 0.0 0.0 0.0 0.0
Interest Rate % In 10 Years Recurring
Premium will Grow To(A)
In 10 Years Single Deposit of Surrender Value Will Grow To
(B)
Total Returns  After 10 Years on Surrendering the Policy Now
( C ) = (A) + (B)
In 5 Years Cashback ( in Dec-2018 ) will Grow to
(D)
Total Return on Continuing the Policy = 6,50,000 + ( D )
( E )
Benefit in Returns on Surrendering the Policy Now
( F ) = ( C ) –  ( E )
8.5 504838.0 250449.1 755287.1 150365.7 800365.7 -45078.5
9.0 519397.0 262232.9 781629.9 153862.4 803862.4 -22232.5
9.5 534396.0 274513.3 808909.3 157423.9 807423.9 1485.4
10.0 549848.0 287308.9 837156.9 161051.0 811051.0 26105.9
10.5 565764.5 300638.7 866403.3 164744.7 814744.7 51658.6
11.0 582160.7 314522.7 896683.4 168505.8 818505.8 78177.5
11.5 599049.9 328981.0 928030.9 172335.3 822335.3 105695.5
12.0 616446.3 344034.8 960481.2 176234.2 826234.2 134247.0
0.0 0.0 0.0 0.0 0.0 0.0 0.0

Regards

Arun

One reply on this article “Surrendering a Policy After 10 Years and Investing the Premium and Surrender Value Elsewhere ?”

  1. ashalanshu says:

    Dear Arun, even here the the table is not visible in full. Can you discuss this issue with me over my personal e-mail ID?

    Thanks

    Ashal

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