Do not choose complicated insurance plans that hide costs and lack transparency...
15-May-2013 •Research Desk
I am 24-years old and live with dependent parents. My monthly income is Rs 25,000. I have LIC’s Jeevan Anand policy for 20-year policy term and Rs 15 lakh sum assured. I have paid one year’s premium of around Rs 50,000 against it. I think it’s too costly and I would like to change to LIC’s Amulya Jeevan term insurance policy. Is it possible to convert my existing policy? Or do I need to surrender the policy and forfeit the premium paid? What options do I have?
LIC Jeevan Anand is a combination of Endowment Assurance and Whole Life plan which cover you against death throughout lifetime with a provision of paying a lump sum amount on survival, at the end of chosen term. This means either your nominee will receive death benefit in the event of death during policy term or you will receive maturity benefit on survival. If the policyholder dies after the term, nominees will still get death benefit.
Looking at your case, you are paying nearly Rs 50,000 annually for a Sum Assured of Rs 15 lakh and an annual bonus. This bonus has ranged between 4 and 4.3 for a period from 2004-05 to 2010-11. On an average LIC Jeevan Anand has declared an annual bonus of 4.1 per cent per annum. LIC may also add a Final (Additional) bonus if you hold your policy for a certain period.
This policy is costly and lacks transparency as well. Looking at the annual bonus rates, even a bank fixed deposit will give you better guaranteed returns. If you buy the Amulya Jeevan term plan, it will cost you one-third of what you pay for your current policy. In Rs 15,000 per annum you can nearly triple your Sum Assured to Rs 50 lakhs with a policy term of 35 years.
Buy term insurance plan without any delay to protect your family against financial distress in case of any mishap. As far as switching from this policy to LIC Amulya Jeevan Plan is concerned, it is not possible. You cannot even surrender your policy before completion of three policy years. However we recommend you to stop paying premiums from now. Though it will put you into immediate losses but will simultaneously save your losses to grow further. Make sure you buy a Sum Assured sufficient enough to take care of your dependents at least till their lifetime or till someone else in the family can replace you as bread earner.