Should I continue with Jeevan Mitra Plan?

I have taken Jeevan mitra Triple cover Endowment plan of LIC in February 2013 for 30 years and paying ₹12,940 every year. The sum assured is ₹3 lakh. Please guide me whether I should continue the same or not, if not then in which mutual fund should be invested.
- Krishna Das

Jeevan Mitra (Triple Cover Endowment Plan) is an insurance cum investment product which offers inadequate life cover and generally gives lower returns compared to pure investment products. Since you have completed 3 years in this policy you can surrender the policy. Though you will make losses upon surrender, it is not wise to continue investing your hard earned money in a bad product. The surrender value will be 30% of the premiums paid after deducting first year's premium. On your policy, you will get ₹7,764 approximately as surrender value. Even with this loss you will be much better off investing else where. If you invest the annual premium of this policy in a fixed deposit for the next 27 years, you will accumulate ₹12.20 lakh (assuming an interest rate of 8 per cent) which is four times the sum assured of this policy. You should buy term plans for your insurance need. Term plans are typically low cost insurance plans that provide full protection and financial stability to your loved ones in case of any unforeseen events. And for investments you should choose diversified equity mutual funds for long-term goals of 5 years & above. . Equity has the potential to offer better returns than other assets over a long period.
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.

This article was originally published on May 06, 2016.