Hello Sir. Could you please help me to evaluate on to Surrender LIC policy is a wise decision now. Plan details below. Plan - Lic Jeevan Anand 815 Sum insured - 8lakhs Premium - 36 Annualy Policy in force from - 2015 Maturity year - 2040 Premium paid - 10 years Premium remaining - 15 years Please help me to understand if I surrender this policy will be beneficial to reduce by debts or to invest in MF via SIP. Also please advise how much I get if I surrender the policy now. Thank you Thank you.

Ans: Hello;

First you must ensure that you both have adequate term life insurance cover.

Taking loan for investment is not recommended under any circumstances.

Better option is to surrender these extremely low return endowment policies, after ensuring adequate term life cover, and invest the proceeds in mutual funds.

Returns from mutual funds cannot be assured however based on past record it is observed that generally equity mutual funds provide good inflation adjusted returns over long term.

Happy Investing;

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

Ans: Thank you for sharing the updated surrender value and maturity amount details.

You will get Rs. 2 to 2.25 lakhs if you surrender now.

On maturity, you may get Rs. 21 lakhs after 15 more years.

Now, let’s assess both options from practical, financial, and emotional angle.

Comparing Current Value vs Future Value

If you hold, you will pay Rs. 5.4 lakhs more over 15 years.

The return will be Rs. 21 lakhs. That includes your Rs. 3.6 lakhs already paid and Rs. 5.4 lakhs more.

Net gain is around Rs. 12 lakhs over 15 years.

This gives you less than 5% annual return.

Also, this money is locked for 15 years. No liquidity.

If You Surrender Today

You get Rs. 2 to 2.25 lakhs in hand now.

No more premium to be paid. Rs. 36,000 saved annually.

That frees up cash every month. Rs. 3,000 monthly is useful for other priorities.

If you invest through SIP in mutual funds, you get better returns.

Debt pressure also reduces faster with this Rs. 2 lakh.

Emotion vs Logic

Rs. 21 lakhs after 15 years may sound attractive.

But this is slow growth. And not flexible.

You must not make decisions from emotional attachment.

LIC policies sound secure, but are poor wealth creators.

You can get better cover with term plan and better returns with mutual funds.

Decision Summary

Surrender now gives flexibility, cash flow, and debt support.

Continuing gives low return, poor liquidity, and future burden.

From Certified Financial Planner’s view, surrendering is the right choice now.

Once your debt is under control, start SIPs in regular mutual funds through MFD with CFP support.

You will grow faster and stay more financially stable.

You have taken right steps by evaluating surrender now.

Make the change and move to better financial future.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

Ans: You have made a proactive step by reviewing your existing insurance-cum-investment plan. That reflects responsibility and financial awareness at an early stage of your life. Many investors delay such evaluations. But you’ve started early, and that is always rewarding in the long term.

Now, let us analyse your LIC Jeevan Umang (Plan 945) from a 360-degree lens.

» Understanding Your LIC Policy’s Nature

– This is a non-linked, with-profits, whole-life insurance plan.
– It offers life cover for the entire life and survival benefits after the premium-paying term.
– After 20 years of paying premiums, you will start getting yearly income for life.
– Also, on death or maturity (after age 100), your nominee or you will get lump sum money.

» What You’ve Paid So Far

– Commencement was on 28/07/2022.
– You have likely paid 2 full premiums of Rs 66,386 each.
– You may have paid the third instalment recently or it is due soon.
– Total payment so far is roughly Rs 1.32 lakh to Rs 2 lakh, depending on instalments completed.

» Surrender Value at This Stage

– LIC policies like Jeevan Umang build surrender value slowly in the initial years.
– No surrender value is available in the first 2 policy years.
– After 2 years, Guaranteed Surrender Value (GSV) is offered.
– In your case, since the policy just completed 2 years, GSV would be applicable.

– The surrender value is typically around 30% of total premiums paid (excluding GST, rider premium).
– In your case, expected surrender value can be Rs 35,000 to Rs 45,000.
– The amount is low because of LIC’s long-term structure and heavy allocation to initial charges.

» Should You Surrender the Policy Now?

– Surrendering early gives very low value.
– But continuing may lock your money in a sub-optimal product for 20 years.
– Let us explore this from multiple angles before deciding.

» Returns Expectation from LIC Jeevan Umang

– Internal Rate of Return (IRR) in Jeevan Umang is usually between 4% and 5%.
– This return is over the long term (20+ years) and includes bonuses.
– Bonuses are not guaranteed. They depend on LIC's future profits.
– Even in best-case scenarios, returns don’t beat inflation.

– For a young person like you, a 4% return does not create wealth.
– Mutual funds or other investment-focused tools offer better compounding potential.

» Drawbacks of Continuing Jeevan Umang

– Low liquidity: You cannot access your money for 20 years.
– Low returns: Earnings won’t outpace inflation or meet future goals.
– Opportunity cost: Better growth assets are available, especially at your age.
– Locked-in commitment: You must pay Rs 66,386 yearly for 20 years. That’s Rs 13+ lakh over time.

– If you miss premiums in between, policy may lapse or benefits reduce.
– Risk cover is also modest, compared to standalone term plans.

» Do You Need Life Insurance Right Now?

– At 27, you may or may not have major dependents.
– If unmarried and no major financial liabilities, insurance may not be urgent.
– When needed, pure term insurance gives high cover at low cost.
– For example, Rs 1 crore term cover may cost Rs 8,000–10,000 yearly.
– Compare that to Rs 66,386 for limited life cover in Jeevan Umang.

» What If You Invest the Same Amount Elsewhere?

– If you invest Rs 66,386 every year in a diversified mutual fund, returns can be far superior.
– Over 20 years, assuming conservative 10% return, the corpus may reach Rs 38–40 lakh.
– That’s significantly more than what Jeevan Umang can deliver.
– Mutual funds are flexible and liquid. You can pause, increase or redeem as needed.
– You stay in control of your money.

» Actively Managed Mutual Funds vs LIC

– Mutual funds are meant purely for wealth creation.
– LIC plans mix investment and insurance, which dilutes both.
– You get transparency, flexibility, and higher return expectation in mutual funds.
– Active fund managers dynamically rebalance based on market conditions.
– This agility is absent in traditional insurance plans.

» Why You Should Avoid Direct Mutual Funds

– Direct plans may seem cheaper due to lower expense ratio.
– But without expert guidance, wrong choices can ruin returns.
– Lack of goal alignment, poor rebalancing, or overexposure are common risks.
– A Certified Financial Planner (CFP) partnered MFD can help guide your journey.
– Regular plan investors get personal advisory support at no extra effort.
– This ensures correct fund choice, periodic reviews, and disciplined investing.

» What To Do After Surrendering Jeevan Umang

– Surrender the policy to avoid locking funds in a low-yield plan.
– The surrender amount may be small, but the future savings can be large.
– Use future Rs 66,386 annual amount in a diversified mutual fund SIP.
– Create a target-based portfolio based on your long-term goals.
– Get a pure term plan if insurance is needed. Keep it separate from investments.

– Build emergency fund for liquidity.
– Keep health insurance in place for protection.
– Align all financial moves to future goals, not just product features.

» Handling Emotional Attachment with LIC

– Many investors hesitate to exit LIC due to legacy, family belief, or peer advice.
– But financial decisions must serve your goals, not legacy systems.
– Being loyal to LIC doesn’t mean staying in unsuitable products.
– A professional and independent outlook is better than emotional dependency.

» Final Insights

– You’ve started financial introspection early, and that’s commendable.
– Your LIC Jeevan Umang is better suited for those needing low-risk, long-term assurance.
– It does not match the return expectations or flexibility needs of a young earner.
– Surrendering now, though slightly loss-making, frees you for better options.
– That gives you long-term control, agility, and compounding advantage.

– You can rebuild faster with the right mutual fund SIP strategy.
– Keep protection and investment separate always.
– Choose regular plans and consult a qualified CFP for best results.
– Focus on goal-based investments, not product-oriented approaches.
– This step today will make a huge difference to your financial future.

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

Ans: Your self-driven approach and minimalistic lifestyle are truly inspiring. Stopping traditional plan premiums and choosing to invest in mutual funds is a strong, thoughtful move.

» Understanding the Paid-Up Policy Option
– Converting to paid-up means you keep the policy with reduced benefits.
– No more premiums need to be paid once made paid-up.
– Insurance coverage continues but is much lower than the original cover.
– Paid-up value pays after maturity or on death, along with bonus added till last active premium.
– No fresh bonuses will accrue after paid-up status.
– This choice gives some life cover and future payout without more payments.

» Surrendering the Policy: What to Expect
– Surrender gives you some money now, but it is less than premiums paid.
– Surrender value often is just 30-60% of total premiums paid, sometimes even less.
– All policy benefits, bonuses, and protection stop after surrender.
– Once surrendered, you get no death cover or maturity benefit at all.
– Money you get on surrender can be invested right away for growth.
– If surrender value is extremely low, loss can feel unfair and disappointing.

» Key Differences: Paid-Up vs Surrender
– Paid-up means waiting till maturity or death for payout, but coverage remains.
– Surrender means immediate cash, but you lose all policy benefits.
– Reduced paid-up is less payout but at least you do not exit with huge loss.
– Some policies let you wait for higher value at maturity than what you’d get from surrender.
– No more bonuses after going paid-up, but you retain whatever bonus is already attached.

» Evaluating Your Personal Situation
– At 61, term plan and health insurance are already in place, which protects dependents.
– You are self-sufficient and do not depend on the old plan benefits.
– If no urgent financial emergency, immediate cash from surrender may not be vital.
– If you can invest on your own, mutual fund SIPs offer better growth than leaving money in many LIC traditional plans.

» Why Not Surrender in Your Case
– Paid-up is a practical choice if surrender value is too low.
– You avoid booking a big loss by keeping it paid-up.
– For many policies, paid-up value at maturity is greater than what immediate surrender gives.
– Your decision to stop premiums and keep as paid-up is usually the most loss-minimising route.

» When Surrender Might Be Better
– If surrender value is close or equal to current paid-up value.
– If you urgently need liquidity now for a better investment or emergency.
– If growth from mutual funds would strongly outpace what a tiny maturity benefit would deliver years later.
– If policy is many years from maturity and the death cover is not required, sometimes surrender makes sense.

» Insights from Similar Cases
– Most traditional LIC plans penalise early exits, giving poor value if surrendered soon.
– Many people keep paid-up to avoid emotional loss and keep at least some benefit alive.
– Those who can utilise surrender amount for very high return growth might opt to surrender, but that is rare at your stage.

» Emotional Impact and Practical Factors
– Keeping the paid-up relieves premium payment stress.
– Seeing the policy remain may reduce emotional loss from ending it completely.
– Emotionally, keeping some link gives peace till maturity, especially for long-held policies.

» Combining with Mutual Fund Strategy
– Continue investing premiums previously paid to LIC in mutual funds.
– For next 5 to 8 years, mutual funds can help grow wealth much faster.
– Paid-up policy remains as a backup and bonus for the end of tenure.

» Tax Considerations and Timing
– Surrender may trigger a tax liability on profits if surrender value is more than premiums paid.
– Paid-up policy is usually tax-neutral till maturity, and benefits paid on maturity are often tax-free, based on Section 10(10D) rules (check your document or with a tax expert).

» Final Insights
– Your move to keep policy as paid-up and start investing in mutual funds is smart.
– Unless you must access money quickly, do not surrender at deep loss.
– If you do not need death cover, surrender can be checked only if value matches or has minimal gap with paid-up.
– Otherwise, let the policy quietly run its course.
– Use mutual funds to fill up any insurance or growth gap from now onward.
– Maintain your disciplined investment with hope and patience.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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