I have got two LIC policies - one for myself (LIC's new endowment plan for a sum assured of ₹5 lakh) and a Jeevan Ankur for my 4-year-old daughter for a sum assured of ₹8.5 lakh, both with 20 years maturity. I am 34 years old and I pay my premium on an yearly basis and I have paid three premiums for both plans and I pay ₹59,000 yearly. Please advise how can I get out of these policies as I want to start investments via SIP and buy a term insurance plan?
- Mamta Chaudhary
The Guaranteed Surrender value of LIC's new endowment plan will be a particular percentage of total premiums paid (net of service tax), excluding extra premiums and premiums for riders, if opted for. The percentage will depend on the policy term and policy year in which the policy is surrendered.
LIC's Jeevan Ankur is a conventional with profits plan. The risk cover under this plan will be on the life of a parent and daughter is the nominee under the plan.. The guaranteed surrender value will be available after completion of three policy years and at least three full years' premiums have been paid and is equal to 30% of the premiums paid excluding the premium paid for the first year and all premiums in respect of optional rider and extras, if any.
Though you will make losses on 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.
Buying an insurance plan for investment is not a great idea. It compromises your life insurance cover and returns. 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. You should invest in equity mutual funds to achieve your long-term 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.