3. Continue our LIC policies?

Ans: You're welcome! If you have any more questions or need further assistance, feel free to ask. Best wishes on your financial journey!

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: considering citizenship changes and the associated tax implications on LIC policies is wise for your son. Surrendering these policies could indeed reduce his future tax burden as a resident of another country. Let’s go over some key points regarding this decision.

Dual Taxation Risks on Policy Maturity
Potential Double Taxation: If your son becomes a tax resident of another country, his worldwide income may be taxable there. This includes any proceeds from Indian LIC policies, which could lead to double taxation.

Taxable in India on Maturity: Certain LIC policy proceeds are taxable in India upon maturity, particularly if the sum assured is below a specific premium-to-sum-assured ratio.

Complex Tax Reporting: He may have to report these policy earnings in both India and his new country of citizenship, leading to more complex tax filings.

Evaluating Surrendering LIC Policies
Immediate Surrender Value: If the LIC policy is surrendered before maturity, he would receive the surrender value, which might be lower than the maturity amount but could save him from future taxation abroad.

Avoid Future Taxable Events: By surrendering the policy, your son can avoid potential tax issues on future policy payouts, including long-term foreign tax on maturity proceeds or accrued income.

Penalty-Free Options: In some cases, LIC policies allow for partial or full surrender without significant penalties after a certain policy tenure. It’s worth reviewing his specific policy terms.

Potential Alternative Investment Options
Mutual Funds and NPS: If he has an investment horizon and can manage moderate risk, he could reinvest the surrender value in mutual funds. Actively managed funds in India can offer tax-efficient returns for long-term goals compared to LIC policies, especially if his tax residency shifts.

Top Tax-Efficient Options: Tax-free bonds, hybrid mutual funds, or other options that align with his risk profile can offer more flexible and efficient returns. Investing through a Certified Financial Planner can ensure a suitable asset mix.

Insurance Coverage Alternatives: If LIC policies also provide insurance, he may want to consider term insurance in the new country for essential risk cover without tax complexities.

Important Steps Before Surrendering Policies
Calculate Surrender Value: He should review the surrender value and compare it with the remaining tenure and expected benefits of the LIC policies to make an informed decision.

Consult a Tax Expert: Dual taxation implications can be complex, especially with international treaties and tax laws. Consulting a tax expert in both India and the new country is advisable.

Consider Exchange Rate Impact: The value of the maturity proceeds might fluctuate with exchange rates. Surrendering the policy can give him more control over the funds in his currency of choice.

Final Insights
Your son’s decision to surrender LIC policies before changing citizenship can offer relief from dual tax obligations, simplify his tax filing process, and provide him with a more flexible and tax-efficient investment portfolio. Examining his goals, needs, and future tax considerations will allow him to make the most effective decision.

Best Regards,
K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

Ans: You have held these LIC policies for a long time.

You have been disciplined in paying premiums.

That shows commitment and patience.

But it is also important to assess if they are helping you build wealth.

Let us do a complete 360-degree assessment from a Certified Financial Planner’s view.

This will help you take a confident and informed decision.

Your Existing LIC Policies – A Summary Review

Policy 1: Jeevan Saral (started Dec 2008)

Monthly premium: Rs.1,021

Sum Assured: Rs.2.5 lakhs

Maturity: Dec 2043 (35 years term)

Policy 2: Jeevan Saral (started July 2007)

Half-yearly premium: Rs.15,162

Sum Assured: Rs.6.25 lakhs

Maturity: Dec 2043 (36.5 years term)

Policy 3: Jeevan Mitra – Triple Cover (started April 2003)

Annual premium: Rs.3,731

Sum Assured: Rs.1 lakh

Maturity: April 2033 (30 years term)

Policy 4: Jeevan Anand (started Nov 2003)

Annual premium: Rs.4,176

Sum Assured: Rs.1 lakh

Maturity: Nov 2027 (24 years term)

What Needs to Be Evaluated in Your Policies

Total premium paid so far.

Number of years left for maturity.

Guaranteed maturity benefit.

Bonus declared each year by LIC.

Internal Rate of Return (IRR).

How Jeevan Saral and Other LIC Plans Really Perform

LIC policies are mostly traditional endowment-type products.

They promise guaranteed returns and bonuses.

But the real returns are usually very low.

In most Jeevan Saral cases, final returns are between 4% to 5% per year.

Some even get less than 4% IRR.

That is much below inflation.

Why Jeevan Saral Needs Serious Review

LIC stopped selling Jeevan Saral.

There were many complaints about maturity mismatch.

Projections made by agents were often too optimistic.

Agents showed high maturity values which were not guaranteed.

In reality, maturity depends on age at entry and term.

Older policyholders often got very low maturity values.

Your Jeevan Saral Policies – Key Concerns

One policy has Rs.1,021 monthly premium for 35 years.

The total premium paid will be nearly Rs.4.3 lakhs.

Sum assured is only Rs.2.5 lakhs.

Expected maturity can be Rs.5 to 6 lakhs depending on bonus.

But that means less than 5% return for 35 years.

Second Jeevan Saral policy has higher premium of Rs.15,162 half-yearly.

Total paid will cross Rs.21 lakhs by 2043.

Sum assured is Rs.6.25 lakhs only.

Even with loyalty additions, returns may remain under 5.5%.

What About Jeevan Mitra and Jeevan Anand?

These are older plans with low sum assured.

Jeevan Mitra offers triple cover but investment value is low.

Jeevan Anand continues coverage even after maturity.

But it is of no real benefit unless it is for life insurance need.

Premiums are small, but the returns are not attractive.

Total investment is locked in for long term.

Big Issue – Mixing Insurance with Investment

LIC policies combine insurance and investment.

This is not ideal.

Insurance should give protection only.

Investment should create wealth.

Mixing both gives neither good coverage nor good returns.

Why You Should Surrender – Analytical Assessment

Your goal should be wealth creation and financial protection.

These LIC policies give low returns.

Real return after inflation may be zero or negative.

Even if held till maturity, returns remain weak.

These funds are better used in mutual funds with CFP guidance.

What Happens If You Surrender Now?

All your policies have completed more than 20 years or close to it.

That means surrender value will be higher than early years.

LIC will give you guaranteed surrender value plus bonuses.

In most cases, surrender gives 30% to 50% of total premiums paid.

But if you reinvest wisely, you can recover this gap.

The earlier you surrender, the faster your wealth creation begins.

Reinvestment Strategy – 360-Degree View

Surrender values can be reinvested into mutual funds.

Use actively managed equity funds with long term view.

Always invest through a CFP and MFD, not in direct plans.

Direct funds do not offer help or regular review.

Regular funds via CFP give guidance, rebalancing and emotional support.

Why Not Direct Funds? Key Disadvantages

No one to support during market fall.

No plan to shift asset when goals change.

No help in tax planning.

No family guidance in your absence.

Most people stop SIPs or withdraw in panic without advisor help.

Returns in direct funds may look high, but are rarely achieved.

Why Not Index Funds Also

Index funds copy market blindly.

They can’t protect from downside.

They don’t shift allocation during market bubble.

You get average market returns only.

No active fund manager to add value.

Good active funds have beaten index consistently in India.

India is not yet a mature market for passive investing.

What You Must Do Now – Action Steps

Take surrender quotes for all four LIC policies.

Check exact surrender value and accumulated bonuses.

Do not delay. Every month wasted is loss of growth.

Consult a Certified Financial Planner and execute surrender with confidence.

Shift the proceeds to mutual funds under long-term plan.

Allocate funds based on your risk level and goals.

Use SIPs and STP for reinvestment if large corpus.

Do You Need Insurance Now Separately?

Buy a term insurance plan for full protection.

Term plan is pure cover, no savings.

Premium is very low for large cover.

It is best way to protect your family.

Final Insights

You have kept the policies for long. That discipline is rare.

But continuing them will not create meaningful wealth.

LIC policies serve purpose only for guaranteed returns and simple safety.

But they don’t grow your money fast.

You should not mix insurance and investment.

Surrendering is not a loss. It is a correction.

Mutual funds offer better returns, more flexibility and full transparency.

You will also get better control of your money.

Your money must work for you. LIC policies are not doing that.

With right CFP guidance, you can recover and grow faster.

Start now. Every month delayed is growth lost.

Take smart decisions. Not emotional ones.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment