I had taken a PM Vaya Bandana LIC scheme at 6 Lacs in the year 2020 . Now the LIC has informed me that I had exceeded Rs 15 lacs cap on this scheme. Neither me nor my Agent or LIC noticed that at the time of investment. Now LIC wants me to return the Certificate and return my money after deducting the premium paid. This means I shall loose : 1. Any return on my investment for last 3 years. 2. LIC had taken Rs 52000.00 as GST. What is the remedy and why I shall be penalized for the fault which all had committed.

Ans: Hi Sharad, unfortunately when you stop paying your premiums, the policy lapses. If your policy has lapsed owing to non-payment of premiums on time, the terms and conditions of the policy contract are null and void until you reinstate it. A lapsed coverage must be reinstated by paying the accumulated premiums with interest and providing the necessary health information.You will have to pay the premiums of the years missed and then the policy will get revived.

Ans: Firstly, I commend your proactive approach in evaluating your financial decisions, especially regarding insurance policies like LIC Jeevan Arogya. It's essential to understand the implications of surrendering such policies.

Understanding LIC Jeevan Arogya
LIC Jeevan Arogya is a health insurance policy that provides coverage against hospitalization expenses. It offers benefits such as hospital cash benefits and surgical benefits, aiming to support your healthcare costs.

Considering Surrendering Your Policy
Surrender Value
Before surrendering your LIC Jeevan Arogya policy, it's crucial to check its surrender value. The surrender value is the amount you will receive if you decide to terminate the policy before its maturity.

Calculation Factors
The surrender value depends on various factors, including the premium paid, the policy's tenure, and any bonuses accrued. Typically, health insurance policies like LIC Jeevan Arogya do not accumulate cash value like traditional life insurance policies.

Potential Outcomes
Partial Surrender
Some insurance policies allow for partial surrender, where you can withdraw a portion of the accumulated value while keeping the policy active.

Policy Lapse
If you stop paying premiums without surrendering, the policy may lapse, and you may lose all benefits and the premiums paid.

Considerations Before Surrendering
Alternative Options
Before surrendering, consider if there are alternative options such as reducing coverage or modifying the policy to better suit your needs.

Financial Impact
Evaluate the financial impact of surrendering. Calculate the surrender value and compare it with the benefits received and future premium payments.

Health Coverage
Ensure you have adequate health coverage in place before surrendering. Health insurance is crucial for unexpected medical expenses.

Consulting a Certified Financial Planner
Expert Advice
A Certified Financial Planner (CFP) can provide personalized advice based on your specific situation. They can help you understand the surrender value and explore alternatives.

Long-Term Financial Goals
Consider how surrendering the policy aligns with your long-term financial goals. Redirecting funds to investments that offer better growth potential might be beneficial.

Final Insights
Surrendering an insurance policy like LIC Jeevan Arogya should be a well-thought-out decision. Assess the surrender value, understand the financial implications, and consider consulting a Certified Financial Planner to guide you through the process.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: First, I want to acknowledge your situation and empathize with the financial stress you're experiencing. Losing a job and dealing with an unexpected financial burden is challenging. However, there are steps you can take to manage your current predicament and make informed decisions moving forward.

Evaluating Your Policy
You mentioned that you purchased an Edelweiss LIC policy with an annual premium of Rs 5,25,000. Unfortunately, you have lost your job and cannot pay the second premium. You've also requested a refund, but the company has refused.

In India, insurance policies, including LIC, typically have strict terms regarding premium payments and refunds. Generally, if the policy lapses due to non-payment of premiums, the insurer may not refund the premium paid.

Surrendering the Policy
If you cannot continue with the policy, surrendering it might be an option. Surrendering a policy before the stipulated period usually results in a significant loss, as the surrender value is often much lower than the total premiums paid. However, it might be better than letting the policy lapse without any value.

Check with your insurer about the surrender value and the exact procedure for surrendering the policy. Ensure you understand the financial implications, including any penalties or fees.

Exploring Policy Loan Options
Some insurance policies offer the option to take a loan against the policy's surrender value. This might be a viable short-term solution to meet your financial needs without completely losing the benefits of the policy.

Enquire with Edelweiss LIC if a policy loan is available and assess the terms, including interest rates and repayment conditions. This can provide immediate financial relief while keeping the policy in force.

Considering the Free Look Period
When you buy an insurance policy, there is a "free look period," usually 15 days from the date of receipt of the policy During this period, you can review the policy terms and conditions. If you find them unsatisfactory, you can return the policy and get a refund of the premium paid, minus some nominal charges.

If you are still within this period, you can leverage this option. However, it seems you might have already passed this window. For future reference, always utilise this period to ensure the policy suits your needs.

Budgeting and Financial Planning
To navigate through your current financial crunch, creating a detailed budget is crucial. List all your income sources, savings, and expenses. Identify areas where you can cut costs or defer payments.

This budget will give you a clear picture of your financial status and help you prioritize your expenses. Focus on essential needs and avoid any unnecessary expenditures.

Seeking Alternative Income Sources
Since you've lost your job, exploring alternative income sources is essential. Consider part-time or freelance work, which can provide interim financial support. Online platforms and local opportunities might offer suitable options based on your skills and experience.

Networking with former colleagues, friends, and industry contacts can also open up new job opportunities. Inform them about your current situation and actively seek their assistance in finding suitable job openings.

Debt Management
If you have existing debts, managing them efficiently is vital. Contact your lenders and explain your situation. Some lenders might offer deferment or restructuring options for your loans.

Prioritize high-interest debts and aim to pay them off first. Consider consolidating your debts if it reduces your overall interest burden and simplifies repayments.

Emergency Fund
If you have an emergency fund, this is the time to utilize it. An emergency fund is designed for unforeseen circumstances like job loss. Ideally, it should cover 3 to 6 months of living expenses.

If you don’t have one, consider starting to build one as soon as you stabilize your finances. Having an emergency fund provides a financial cushion for future unexpected situations.

Financial Assistance and Support
Explore government schemes and financial assistance programs that might be available for unemployed individuals. Some organizations and non-profits offer financial aid or support for those in need.

Seek advice from a certified financial planner who can provide tailored guidance based on your specific situation. They can help you create a recovery plan and suggest investment strategies for future stability.

Exploring Other Investment Options
While dealing with your current policy and financial issues, it's also a good time to evaluate other investment options. Investing in mutual funds through SIPs (Systematic Investment Plans) can provide better returns and flexibility compared to traditional insurance policies.

SIPs allow you to invest a fixed amount regularly, even with a limited budget. They offer the benefit of rupee cost averaging and potential for higher returns over the long term.

Benefits of Actively Managed Funds
Instead of investing in index funds, consider actively managed funds. These funds are managed by professional fund managers who aim to outperform the market.

Actively managed funds can adapt to changing market conditions and potentially offer better returns. The expertise of fund managers and their ability to select high-performing stocks can provide a competitive edge.

Advantages of Regular Funds
While direct funds have lower expense ratios, regular funds offer the benefit of professional guidance from certified financial planners. Investing through a planner ensures you receive personalized advice and continuous portfolio monitoring.

Regular funds also provide access to additional services and support, helping you make informed investment decisions. This professional guidance can be invaluable, especially in complex financial situations.

Final Insights
Your current financial challenges require careful planning and informed decisions. By evaluating your insurance policy options, budgeting effectively, exploring alternative income sources, and seeking professional guidance, you can navigate this difficult period.

Investing in mutual funds through SIPs and opting for actively managed funds can provide better financial growth. Remember, seeking advice from a certified financial planner ensures you receive tailored and professional support.

Take proactive steps to manage your finances, and with time, you can overcome these challenges and achieve financial stability.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in