Should I discontinue Jeevan Saral?

We have brought two Jeevan Saral policies ten years ago with an annual premium of ₹24,000 each. Please tell me whether I should continue with this policy? Also, why do you say such policies are not good?
- Sanjay L

LIC Jeevan Saral is an endowment policy which is silent on its expenses. If you survive the policy term, it will pay a sum assured plus loyalty bonus. Loyalty additions may be paid from the 10th policy year onwards at the discretion of the insurer. As you have completed 10 years, you must have received loyalty bonus based on the maturity sum assured. However, a 10-year recurring deposit fetching 7.5% per annum would have doubled your money. LIC Jeevan Saral does not even beat inflation. It is also a complex product. Jeevan Saral insures for a sum equal to 250 times the monthly premium, which in your case comes to ₹5 lakh. It is not all adequate to take care of the needs of your financial dependents.

As you can see, this policy doesn't provide adequate life insurance cover and it is also a bad investment. This is the reason why ask readers to stay away from products that have insurance and investment element in them.

Always buy a pure term insurance plan to secure an adequate life insurance cover. Term insurance plans are cheap and they help you to buy a very large life insurance cover with a small premium. If you have long term financial goals, invest in diversified mutual funds via a monthly SIP.

Click here for list of well rated funds.

This article was originally published on November 26, 2015.