I am have been paying ₹36030 annually since 2012 on an insurance policy- 4 installments (total ₹1,44,120). My agent says that if I surrender the policy now, I will lose approximately 50,000 and will only get back 95,000 approximately. He is suggesting to either surrender in 6th year or wait for 10 years, because I will get loyalty additions. Then if I surrender the amount I will get will be more than the actual premium paid for 10 years. Please advice.
- Gourab Roy
Since you haven't mentioned the policy details, we are not sure which plan you are referring to. However from your query we understand that it is an insurance plan which has inbuilt investment element in it. Only insurance plans which has investment element will have maturity value and bonuses.
Insurance-cum-investment plans typically offer a very small insurance cover and they also offer very modest returns. Do not completely go by the recommendations of an insurance agent, unless you see get these values from the insurer in writing. The policy document will have such details mentioned. The loyalty additions are not guaranteed. Loyalty additions may be added from the 10th policy year on wards at the discretion of the insurer and are paid at the time of a claim or at maturity. On surrender you will not get any loyalty additions.
Though you will make loss on surrender, it is not wise to continue investing in a sub-par product. If you surrender the policy now and invest the same and future premiums in a bank fixed deposit, it will fetch you better returns.
Buying an insurance plan for investment is not a great idea. It compromises your life insurance cover and returns too. 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.
This article was originally published on June 16, 2016.
Ask Value Research 
New episodes every Friday 
New Process Alert 
Seems like you've uploaded a wrong QR code. Please upload the QR code downloaded from MF Central platform.
