What will be the surrender value?

I have two LIC policies.
Policy 1: LIC New Money Back Policy - 25 years; premium - ₹10,140 per year since year 2006; policy term is 25; Sum Assured is ₹2 lakh.
Policy 2: Jeevan Anand - yearly premium of ₹49,522 since 2009; Policy term is 75 (Premium Payment term - 21); Sum Assured is 10 lakh.
I want to surrender them and continue investing the same amount to MF SIPs. Can you please tell me, what will be the surrender value and if its wise decision to surrender them or continuing them or make them paid-up?
- Prashant Yelsangi

Jeevan Anand is an endowment plan which has life insurance cover and investment built in it. The guaranteed surrender value is 30 per cent of the basic premiums paid excluding the first year's premium. The surrender value of Jeevan Anand policy will be approximately (₹1,04,000), assuming you have paid 8 years premium, including 2016. If you invest the money in a pure investment product along with the future premiums you will accumulate, ₹22.32 lakh, assuming you earn 12 per cent returns and ₹15.57 lakh, assuming you investment earns 8 per cent returns, in the next 14 years.

New Money Back Policy (T no 93) is also an endowment plan with the combination of life cover and investment in built in it. The guaranteed surrender value is 30% of the basic premiums paid excluding the first year's premium and all survival benefits paid earlier. If you have already received the 2nd payout then surrender value will be in negative. If you haven't then it will be wise to wait for the 2nd payout and close the policy.

Though you will make losses upon surrender, it is not wise to continue investing in a bad product. Such insurance-cum-investment plans typically offer a very small insurance cover and they also offer very modest returns. In future, do not mix your insurance and investment needs in future. Always buy a pure term life insurance 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 May 17, 2016.