Should I exit Jeevan Saral policy?

I have bought a LIC Jeevan Saral policy in 2011 and paid about six annual premiums of ₹48,000. Is it advisable to exit from the policy now?
- Harshil Shah

LIC Jeevan Saral is an endowment policy which is silent on its expenses just like other plans in this category. Though you will make losses on surrender, it may not be wise to continue investing in a bad product. Such insurance-cum-investment plans typically offer a very small insurance cover and they also offer modest returns.

The surrender value will be the greater of the guaranteed surrender value and special surrender value.

Guaranteed surrender value will be equal to 30% of the total amount of premiums paid excluding the premiums for the first year and all the extra premiums and premiums for accident benefit / term rider.

Special Surrender Value will be 80% of the Maturity Sum Assured, if 3 years' but less than 4 years premiums have been paid. The Maturity Sum Assured for this will be the Maturity Sum Assured corresponding to the term for which premiums have been paid under the policy.

In future, always buy a pure term life insurance plan to buy an adequate life insurance cover. Term insurance products are ideal for insurance cover because they have very low premiums.

This article was originally published on March 31, 2016.