I Stopped Paying Premium for My ICICI Pru Savings Suraksha Plan. Should I Continue?

Ans: Yes, you can continue the policy and during the company will issue a cheque and deliver it to your registered address. The payment will be made only in Indian Rupees.

Ans: You've completed the premium payment for your ICICI PruLife Wealth Stage II policy. Paying Rs. 10 lakhs over 10 years and seeing it grow to Rs. 18 lakhs is a good achievement. Now, deciding whether to hold on until 2027 or withdraw and reinvest elsewhere is crucial.

Disadvantages of Insurance-Cum-Investment Policies
Insurance-cum-investment policies, like ULIPs, often come with several disadvantages:

High Charges: These policies have high fees, including mortality charges, fund management fees, and policy administration charges. These eat into your returns, reducing overall gains.

Complex Structure: The structure of these policies can be complicated. Understanding all terms and conditions is challenging for many policyholders.

Lock-In Period: Such policies usually have a long lock-in period. This restricts liquidity, making it hard to access your funds when needed.

Lower Returns: Insurance-cum-investment policies often provide lower returns compared to pure investment products like mutual funds. The primary purpose of insurance should be protection, not investment.

Benefits of Mutual Funds
Switching to mutual funds can offer better returns and more flexibility:

Higher Returns: Mutual funds, especially equity funds, have the potential to deliver higher returns over the long term compared to insurance-cum-investment policies.

Transparency: Mutual funds are more transparent with clear information on charges and fund performance.

Flexibility: Mutual funds offer liquidity, allowing you to redeem your investments anytime without significant penalties.

Diverse Options: You can choose from various mutual funds based on your risk appetite and investment goals. Equity, debt, hybrid, and sector-specific funds offer a wide range of options.

Professional Management: Mutual funds are managed by professional fund managers who actively monitor and adjust the fund's portfolio to maximize returns.

Reinvesting in Mutual Funds
Here's a step-by-step approach to reinvesting your policy proceeds in mutual funds:

Withdraw the Policy: Since your policy’s current value is Rs. 18 lakhs, consider withdrawing it. Check any surrender charges or exit loads before proceeding.

Assess Your Risk Appetite: Determine your risk tolerance. If you're comfortable with higher risk for potentially higher returns, equity mutual funds are a good choice. For moderate risk, consider hybrid funds. For lower risk, opt for debt funds.

Diversify Your Investments: Diversify your Rs. 18 lakhs across different mutual fund categories. This reduces risk and increases the potential for higher returns.

Start Systematic Investment Plans (SIPs): SIPs help in rupee cost averaging and compounding. You can start SIPs with a portion of the lump sum and invest regularly.

Suggested Mutual Fund Categories
Equity Funds: Suitable for long-term growth. Large-cap funds offer stability, while mid-cap and small-cap funds provide higher growth potential with higher risk.

Debt Funds: Ideal for stable returns with lower risk. They invest in fixed-income securities like bonds and treasury bills.

Hybrid Funds: Offer a balanced approach by investing in both equity and debt. Suitable for moderate risk appetite.

Example Portfolio Allocation
40% in Equity Funds: Split among large-cap, mid-cap, and small-cap funds for diversification.

30% in Debt Funds: Ensure stable and less volatile returns.

20% in Hybrid Funds: Balanced growth with moderate risk.

10% in Liquid Funds: For emergency needs and short-term goals.

Regular Monitoring and Review
Regularly monitor your mutual fund investments. Review performance at least annually and make adjustments as needed. Staying updated with market trends and your financial goals will help you stay on track.

Power of Compounding
Mutual funds benefit greatly from the power of compounding. The earlier you invest and the longer you stay invested, the more your money grows. For example, investing Rs. 18 lakhs today and letting it grow at an average annual return of 12% for 10 years can significantly increase your corpus.

Final Insights
Given the high charges, complexity, and lower returns associated with insurance-cum-investment policies, it's advisable to withdraw your ICICI PruLife Wealth Stage II policy and reinvest in mutual funds. This move will likely offer higher returns and more flexibility. Diversify your investments across equity, debt, and hybrid funds based on your risk tolerance. Regularly monitor and review your portfolio to ensure it aligns with your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in

Ans: Your decision to purchase the ICICI Pru Guaranteed Income For Tomorrow (GIFT) Plan reflects a prudent approach to creating a future income stream. The policy offers guaranteed returns and aligns well with long-term financial security. However, it’s essential to carefully assess whether continuing with the premium payments will help you meet your financial goals efficiently.

Let’s evaluate the key elements of this plan, the expected returns, and alternative options to help you make an informed choice.

Key Highlights of Your Current Insurance Plan
Here’s a quick summary of your ICICI Pru Guaranteed Income For Tomorrow Plan:

Premium Payment Term (PPT): 12 years
Annual Premium: Rs 5 lakh + GST (Rs 5,22,500 in the first year, Rs 5,11,250 for the next 11 years)
Annual Payout Start: September 2038
Annual Payout Amount: Rs 7,90,926 (tax-free) for 25 years
Return of Premium with Bonus: Rs 66 lakhs at the end of the payout term in 2062
Evaluation of Returns: Rate of Return and XIRR
Rate of Return: This insurance-cum-guaranteed income plan typically offers returns in the range of 5-6%, which is relatively modest compared to other investment vehicles.

Expected XIRR: Calculating the exact XIRR is complex as it considers both premium payments and the eventual payouts. Given the guaranteed amount, the XIRR is expected to be in the range of 5.5-6.5%.

Opportunity Cost: This return may appear low compared to the potential returns from other investment options like mutual funds, especially when compounded over 12 years. High inflation rates may further erode the purchasing power of the fixed payouts, potentially affecting your financial freedom in the future.

Benefits of Continuing with the Plan
If your primary goal is guaranteed income and stability, here’s why you might consider continuing:

Assured Income: This plan provides a predictable, tax-free income stream for 25 years, helping you maintain cash flow without market risk.

Capital Preservation: With the return of premium and bonus at the end, the plan ensures capital preservation, which may suit a conservative investment outlook.

Tax-Free Income: The payouts are tax-free, which can be beneficial, particularly if you anticipate a high tax bracket in the future.

Considerations for Discontinuing the Plan
Although this plan provides guaranteed income, certain factors may urge you to consider discontinuing:

Lower Rate of Return: Traditional insurance-cum-investment plans generally offer lower returns. These returns may not match the long-term growth rates required for wealth accumulation.

Liquidity Constraints: The plan restricts liquidity since you must commit for 12 years, with no flexible withdrawal options. This can be a drawback if you anticipate needing funds for other investments or emergencies.

Inflation Impact: While the payouts are fixed, the real value of the income will diminish over time due to inflation. Alternative investments can offer growth that more effectively counters inflation.

Alternate Investment Options
If you decide to discontinue premium payments, here are some diversified options to consider for potentially higher returns with a balanced risk:

Actively Managed Mutual Funds: Investing in actively managed funds can offer a blend of equity and debt exposure. Experienced fund managers adjust portfolios to capture market gains while managing risk. Unlike index funds, actively managed funds may outperform due to professional insights. Explore equity mutual funds with a long-term focus for higher returns.

Balanced or Hybrid Funds: These funds offer a combination of equity and debt, reducing volatility while aiming for reasonable growth. Balanced funds are suitable for generating wealth over time, with moderate risk.

Debt Mutual Funds: For conservative growth, debt funds provide stable returns with relatively low risk. Note that debt fund returns are now taxed at your income slab rate, which may affect post-tax returns. Consider debt funds if you prefer a safer, predictable growth without long lock-ins.

Public Provident Fund (PPF): If you haven’t maximized your PPF contributions, this instrument offers tax-free interest and principal, with long-term compounding benefits. PPF is risk-free and provides stable, inflation-protected growth over time.

Sovereign Gold Bonds (SGB): For those interested in gold investments, SGBs offer regular interest income and long-term price appreciation potential. SGBs come with tax-free redemption if held to maturity, providing a hedge against inflation.

Systematic Withdrawal Plan (SWP) in Mutual Funds: An SWP offers regular payouts by systematically redeeming mutual fund units. Unlike insurance payouts, SWPs give you flexibility, and the invested corpus has growth potential, enhancing overall wealth.

Recommendation for Next Steps
To determine whether to continue with the premiums, consider the following steps:

Re-evaluate Your Financial Goals: Consider your long-term objectives and whether guaranteed, fixed returns align with them.

Assess Liquidity Needs: If liquidity is crucial, continuing this plan may limit your ability to allocate funds to better-suited investments.

Discuss with a Certified Financial Planner (CFP): Consulting a CFP can provide tailored insights and assist in calculating the precise XIRR and assessing the tax impact on your returns.

Final Insights
Your current insurance plan provides stability and guaranteed returns, which is suitable if you prioritize capital preservation. However, if wealth accumulation and inflation protection are key, consider exploring other options that offer higher growth potential with some market exposure.

Choosing the right path ultimately depends on balancing security with growth, ensuring that your investments remain aligned with your future financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,

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

Ans: You are 29 and paying Rs?5,000 monthly for a life cover of Rs?10?lakh under a LIC Jeevan Anand endowment plan. Let us evaluate this from all angles, and see how it fits into your larger financial picture.

1. What an Endowment Policy Means for You
It combines insurance and investment in a single package.

Premium allocation is split: part for life cover, part for savings.

Returns are modest compared to pure investments.

Charges and commission reduce your effective yield.

Insight: You are paying Rs?5,000 a month purely to get Rs?10?lakh cover and a small maturity benefit after long years.

2. Ideal Use of Life Insurance
Life cover should ideally be pure term insurance.

Term plans offer high cover at low premium.

Investment benefits should come from mutual funds or other high-return assets.

Insight: Pure insurance is better handled separately from wealth creation.

3. What Jeevan?Anand Offers vs Alternatives
Jeevan?Anand Features

Provides life cover + maturity benefit

Lock-in creates discipline

Bonus may add some value at maturity

Drawbacks Compared to Alternatives

Low returns – typically 4–5% net over term

High charges reduce benefits

Poor liquidity – difficult to exit early

Better options: equity mutual funds, PPF, or hybrid funds

4. Comparing Returns and Cost
A Rs?5,000 premium for 15–20 years may give modest benefit

In contrast:

Actively managed equity or hybrid mutual funds often yield 10–12% average returns

PPF offers ~7–8% with compounding and better tax efficiency

Insight: You may be leaving higher wealth gains on the table by staying in endowment plan.

5. Liquidity and Flexibility Considerations
Insurance savings plans are illiquid, with surrender losses early.

Pure investments like mutual funds offer easy access.

If goal ingredients or needs change, mutual funds allow freedom.

Insight: Flexibility matters over your investment horizon.

6. Should You Continue or Surrender?
Evaluating Continuation

If you are okay with low returns and long-term lock-in, you may continue.

But these funds could perform poorly compared to other vehicles.

Evaluating Surrender

Early surrender may involve penalties and partial loss.

However, future premiums can shift to better investments.

You must compare surrender value vs future expected returns elsewhere.

Do this comparison with your CFP for clarity. You need to ask:

What is current surrender value?

What rate of return can the premium earn elsewhere?

Based on honest growth estimates, do you gain more by staying or surrendering?

7. Transitioning to Better Alternatives
If you choose to redirect your premiums, here’s an approach:

Use a term insurance plan for Rs?50–100?lakh cover.

Invest the difference (approx Rs?5,000) into:

Actively managed equity mutual funds – growth over 10+ years

Or PPF if risk is unwanted and you want compounding benefit

Use regular plan (not direct) via an MFD with CFP credential
– Ensures fund review, rebalancing, and guidance
– Avoids trial-and-error and emotional investing

8. Integrating into Your Overall Plan
Here is how your new financial setup could look:

Component Allocation Rationale
Term Insurance Cover Replace LIC’s cover High coverage, low premium
Equity Mutual Fund SIP Rs?5,000 monthly To replace endowment returns
PPF / Debt Funds (optional) Additional safety For tax-friendly stability

If you also have other investment goals, consider allocating more to broader SIPs actively managed.

9. Why Actively Managed Funds Over Index or Direct
Index funds passively follow markets, including weak stocks

Direct (no-advice) plans feel cheaper but lack guidance

Actively managed regular plans include:

Expert-led security selection

Ability to move in/out of sectors based on conditions

Periodic performance review

Support through life changes or investment rebalancing

You benefit from fund handling and review support, especially as goals and market cycles shift.

10. Tax Efficiency and Withdrawal
Equity funds taxed: LTCG above Rs?1.25 lakhs at 12.5%; STCG at 20%.

PPF is tax-free on maturity.

Use appropriate funds for horizons and tax plans.

CFP guidance helps with tax-efficient switching and withdrawals.

11. How This Helps Your Long-Term Goals
Shifting to pure investments can boost corpus over time

Increased returns compound powerfully over 10–15 years

Term insurance ensures your family is protected

You get flexibility without locking up funds

The overall plan fits into a future where savings and protection are clearly separated

12. Next Practical Steps
Check surrender value of existing LIC plan

Compare with projected returns from MF or PPF

If it's better to exit, get help from CFP to reinvest intelligently

Adjust your SIP portfolio over time for goal alignment

Keep reviewing every year with CFP support to stay on track

Final Insights
The LIC endowment policy provides low growth with high lock-in.

A better structure separates risk cover from wealth creation.

Aim for strong returns via actively managed investments with regular reviews.

Term insurance + SIPs in equity/PFFP offers stronger, flexible financial build-up.

Make decisions based on returns, liquidity needs, and future goals.

Your premium can be put to much better use through strategic investments.
Consult your CFP for surrender analysis and structured redirection.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment