I have taken a Life Insurance Corporation Endowment Assurance Policy for a yearly premium of ₹14,890. The policy has a premium payment term of 20 years. I have paid for 4 years and premium is due next month. The sum assured against this is ₹6 lakh.
Is it wise to continue this policy for another 15 years? If I want to surrender this policy after 5 years of premium payment, what will be the surrender value?
- Padhiary Jitendra
It is advisable to surrender the policy after completing 5 year term because endowment policies generally fail to give inflation-beating returns. You also don't know the cost structure of these plans which can be very high. If you discontinue your policy, you will get a guaranteed sum equal to thirty percent of the premiums paid (after excluding first year's premium). You may even get a higher amount depending on the annual bonus declared by the insurer.
Though the surrender will come at a loss, it is wise to stop investing in this low return earning plan. If fixed income is your need, invest in debt mutual funds. If you have a long term goal and can take some risks, invest in diversified equity mutual funds by way of SIPs.
This article was originally published on April 28, 2015.
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