I have two LIC policies - Jeevan Saral and Jeevan Anand. I will have to pay premiums for 35 years and 28 years respectively. Should I stop paying the premium? Is there a way in which I can get back the amount I have paid with interest?
- Ashish Tiwari
You have bought two endowment plans that have insurance and investment elements in them. These products are not ideal choice to buy insurance cover or getting great returns. You can consider getting out of them. However, there is no way you can get all the money paid back with interest. The process of getting out of an insurance policy is called surrendering the policy. When you surrender a policy, the insurance company will pay you a surrender value. The surrender value varies with each insurance plan. They also have different conditions to fulfill. In case of an early termination of the policy, the surrender value payable may be less than the total premium paid and the insurance company does not pay any interest on premiums paid. You must contact the insurance company and find out the details.
Jeevan Anand is an endowment policy (an insurance-cum-investment product). It offers very low returns that doesn't even beat inflation. On surrendering the policy after three years, the insurance company will pay you a guaranteed surrender value equal to 30% of all premiums paid after deducting the first year's premium.
Jeevan Saral is also an endowment policy. It is an expensive plan which again offers low returns. There are two surrender options available under the policy.
- Guaranteed Surrender value = 30% of all premiums paid after deducting the first year's premium.
- Special Surrender value = 80% of Maturity Sum Assured if you have paid premiums for 3 or more years but less than 4 years. 90% of the Maturity Sum Assured, if you have paid for 4 or more years but less than 5 years. And 100% of the Maturity Sum Assured, if 5 or more years' premiums have been paid. The Maturity Sum Assured here means the Maturity Sum Assured corresponding to the term for which premiums have been paid under the policy.
Special surrender value will depend on the duration for which premiums have been paid and the policy duration at the date of surrender.
Always remember that it is better to keep your investment and insurance needs separate. Insurance products with investment element in them are very expensive. They offer very little insurance cover and they also don't offer great returns. Always go for a pure term insurance product to buy an adequate life insurance cover and invest in equity mutual funds to achieve your long term financial goals.
This article was originally published on February 17, 2016.
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