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POSTED BY ON February 8, 2013 3:48 pm COMMENTS (17)
Dear All,
Based on the inputs I got from this wonderful forum for LIC Jeevan Anand policies, I have decided to surrender my all 9 policies.
However 2 of my Jeevan Anand policies (out of 9) are going to mature in next 6-8 years, so I am in a dilemma in surrendering these 2 policies. I have already paying it from 2006 (7 years).
Here are the detail of Jeevan Anand polices I have:
—————————————————————————————————————
Sr# SA Assured -> HLY Premium -> Policy term -> Left Term -> Paid Amount -> Vested Bonus -> Surrender Value
—————————————————————————————————————
1) 250000 -> 3952 -> 32 -> 25 -> 51376 -> 56750 -> 22410
2) 200000 -> 4511 -> 24 -> 17 -> 58643 -> 45400 -> 33111
3) 125000 -> 4879 -> 15 -> 8 -> 63427 -> 23375 -> 46208
4) 225000 -> 4017 -> 29 -> 22 -> 52221 -> 51075 -> 24916
5) 100000 -> 4504 -> 13 -> 6 -> 58552 -> 18700 -> 44557
6) 175000 -> 5210 -> 19 -> 12 -> 67730 -> 36225 -> 44460
7) 150000 -> 5079 -> 17 -> 10 -> 66027 -> 31050 -> 46885
—————————————————————————————————————
If you see Sr#3 and Sr#5, there polices are going to mature in 8 & 6 years respectively.
I understand that if I invest surrender amount of these 2 polices in PPF or any other debt fund (considering return of 8.5% on average),
Return will be more (even more if invest in MF), is my understanding is correct?
Question is should I surrender these 2 policies also (along with other 7 policies) or should I wait till maturity only for these 2 policies?
Is it wise decision to continue these 2 policies till maturity to enjoy full benefit??
Please share your thoughts on this.
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Thanks to all for your valuable suggestions. I will surrender all.
Dear Nitin, Please follow what dear Ramesh is telling as he has already explained it clearly, simply & effectively to you.
KISS – Keep it simple silly is my mantra & should be everybody.
Thanks
Ashal
Dear Ramesh & FFC,
Thanks again for your reply.
Some additional information:
I already have a term plan for 1 crore and recently started SIP & investing in PPF account.
So insurance reason for Jeevan Anand doesn’t make any sence. Also for investment reason I am sure SIP+PPF will give much more return as compaired to JA.
Based on above disclose, can you please suggest me again about surrendering of Sr#3 and Sr#5 JA policies?
@Dear Ashal,
Actually, I have following options for using surrender amount:
1. Pre-payment of Home loan
2. Investing this lumpsum amount in existing SIP via STP.
Please share your thoughts.
My suggestion:
1. Get rid of all policies ASAP.
2. Sit, think and execute a proper investment method.
3. Never invest in these type of policies ever. Do not get into any other complex plan. Just use simple instruments in which you know what you are doing, and not because someone else has told you about it.
“Don’t buy what someone wants to sell you. Buy what you have researched.”
Regarding investing the surrender amount, my take:
1. Get your asset allocation set in a proper way. In a way, which is suitable to your mind, your future expectations and your stomach.
2. Put the lumpsum into the required asset classes, in Lumpsum.
SIP/STP are important if you have money, which comes at regular interval. If it comes monthly, set up monthly SIP. If you have lumpsum, do lumpsums. Easy, clear and simple. (For me, at least).
Dear Nitin, please answer a simple question, what ‘ll you do from the money received after 6-8Y from these 2 policies?
Thanks
Ashal
@Ramesh: Thanks for your prompt answer.
@FFC: Yes, all these policies are 7 year old, I brought it together.
So as per your opinion its wiseable to surrender all, right? (Sorry I yet to go through the links which you sent me, I will check it)
Thanks.
Nitin,
Rameshs points are very valid. For someone holding just 1/2 policies they should just follow what Ramesh says. in your case I would not jump in and surrender all of them. The young ones definitely yes.I would let the older ones just play or at least get them paid up. You can use my calculator to decide.
Also the link from personalfn gives you a decent illustration although it its limitations.
Whatever you do, get yourself pure term life insurance first and then act on these
This is a link Bemoneyaware sent me:
http://www.personalfn.com/knowledge-center/insurance/case-studies/11-01-25/is_your_endowment_policy_a_waste_of_your_money.aspx
Could be relevant to Nitin
That is a good link, thanks.
My point is, since these policies provide a minimal amount of life cover (for which a term cover is the only good choice), that part canbe skipped and just a simple investment in a reasonable debt plan will also nearly beat the endowment (or money back) policy’s return. If one invests in equities, then over longer term, the returns and liquidity should prove to be even better.
Ramesh,
No arguing about this. Fully agree. Its just that he has one too many policies. So he needs to consider a moment or two before dumping all of them. The personalfn link illustrates the case for continuing or at leasing making older polices paid-up instead of surrendering (although the illustration has its own limitations)
It really boils down to what is the plan for the money which he will get Plus how is he going to go about investing in the future. Unless that plan is clear, in some cases even these policies are better than nothing, I would add.
Regarding 1/2 or 10, if the future plan is established, then the principle of all or none should be applied, in my view. Flexibility, consistency and liquidity are more important to me, YMMV.
Precisely. One has to list goals and see how each policy fares (how badly that is) and then make a call as you say.
If you surrender polices which are less than 5 years old all your 80C deductions will be reversed and you need pay tax on these.
It maybe wiser to let the polices close to completion run its life out instead of surrendering.
To understand the factors to be considered and calculate your options use this
http://freefincal.wordpress.com/2013/02/02/insurance-policy-surrender-value-paid-up-value-calculator/
Don’t rush into this. Do this one at a time. Before doing this list your financial goals and see where the policy returns stand wrt goals
All the policies are 7 years old, so, what does your first line mean in this case?
Nitin says “However 2 of my Jeevan Anand policies (out of 9) are going to mature in next 6-8 years, so I am in a dilemma in surrendering these 2 policies. I have already paying it from 2006 (7 years).”
So this makes it clear that the older polices are more than 7 years old. Not sure about the others. Only he can tell.
My bad. I didn’t read the table right. So the 80C rule is not relevant here.
Even for policies which are way over mid-way, if you will calculate in the form of:
1. Putting the surrender value in a good debt instrument @ 8% from now onwards.
2. Plus, all your future premium of the policies in the same debt instrument @ 8% from now onwards.
At the end of the proposed maturity time, the total of above 2 will be very close to the illustrations which you will be shown right now.
Point 2: If you will tweak the return of debt instruments to 9%, you will surely overcome the illustrations provided.
Point 3: Also remember, the illustrations also take the current bonus rates, etc. So even if you think that in future the long term debt rates will fall, they will do so for both LIC as well as others.
Point 4: You will have much better liquidity, and you will be spared the mortality charges.
Point 5: Because of the flexibility in putting money in different assets, you can rethink and re-strategise your asset allocation and invest accordingly.
In short, my opinion will be for Complete Surrender, and not even Paid up.