My father had bought a Child Money Back Policy (Plan 113) which has some survival benefits partly on my reaching 18 in this November and partly later. The premiums are fully paid-up. Should I surrender the policy to invest in mutual funds or should I wait for the survival benefits.
- Sachin Santuka
Child Money Back Policy (Plan 113) is an old LIC plan that was discontinued in 2002. You have two consider both continuing with the plan as well as the guaranteed surrender value on surrendering the plan before taking a final call. It is not possible to give you a specific ideas because you have not mentioned details about the plan.
If you continue with the plan, the payout would be:
When the child is 18 years, 20% of Sum Assured is paid
When the child is 20 years, 20% of Sum Assured is paid
When the child is 22 years, 30% of Sum Assured is paid
When the child is 24 years, 30% of Sum Assured is paid
When the child is 26 years, the policy matures and the guaranteed addition plus loyalty addition is paid as maturity benefit and the policy terminates. The guaranteed addition of this plan is ₹80 per 1000 Sum Assured every year. This means if your sum assured is ₹1 lakh, you will get a guaranteed addition of ₹8,000 every year. Apart from the guaranteed addition, the policy will also qualify for loyalty additions on maturity.
If you surrender the policy after paying three annual premiums, you will get a guaranteed surrender value of 90 per cent of the premiums paid minus the first year's premium and additional premiums paid for the premium waiver benefit (PWB). If you paid a single premium to buy the policy, you will get a guaranteed surrender value of 90 per cent of the single premium minus all extra premiums (if any).
If premiums have been paid fully, guaranteed surrender value is calculated on or after the risk commencement date. In that case the guaranteed surrender vlaue would be 90% of the premiums paid before risk commencement minus the first year and any other premium plus 30% of the premiums paid after the risk commencement date plus all extra premium plus additional premium paid for accident benefit.
Since you are beginning your financial life, always keep in mind that you should never mix insurance and investment. For securing a life insurance cover, always buy a pure term policy. And invest in equity mutual funds to achieve long-term financial goals of five years and above. If you are a new comer to the stock market, choose a top-rated balanced scheme and start investing every month via a Systematic Investment Plan (SIP). If you are familiar with the stock market, you can invest in a diversified equity scheme. You must continue with your SIP investments irrespective of the market conditions. This will help you to average your purchase cost and enhance your returns.