Paid one year of LIC 852 Siip plan, can I get any return on surrender?

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: Surrendering an LIC policy like the LIC 852 plan (also known as the New Endowment Plan) within a year of paying premiums generally results in a financial loss. Insurance plans like this have specific surrender values which depend on the number of years the policy has been in force and the premiums paid.

Here are a few key points about surrendering an LIC policy:

Surrender Value Eligibility: Typically, you can only get a surrender value after paying premiums for at least three years. Surrendering within the first three years usually means you won't get any money back.

Guaranteed Surrender Value: If you surrender after three years, the guaranteed surrender value is generally a percentage of the total premiums paid minus the first-year premium and any bonuses.

Special Surrender Value: This may be higher than the guaranteed surrender value and depends on the policy's term and the number of premiums paid.

Given that you've only paid for one year, it's very likely that you won't receive any surrender value.

At the same time, continuing this policy is also not a good choice due to very poor returns.

Please consult a CFP

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

Ans: Policy Overview

Your LIC policy matured in 2023.
You received a maturity amount of around Rs. 12 lakhs.
LIC deducted a TDS of Rs. 45,000.
Interest Income and Tax Implications
TDS indicates interest income is added to your income.
In this case, the interest income appears to be Rs. 4.5 lakhs.
Interest income from such policies is taxable.
Tax Rebates for Old LIC Policies
Policies started before 2012 might have different tax rules.
Check if your policy qualifies for any old tax exemptions.

Assessing the Financial Outcome
Your premiums were about Rs. 30,000 yearly.
You paid premiums for 20 years.
Evaluate if the maturity amount meets your financial goals.

Evaluating Investment Options
Consider reinvesting the maturity amount.
Actively managed funds can offer better returns.
Engage a Certified Financial Planner for personalized advice.
Avoiding Index Funds and Direct Funds
Index funds have limited potential in volatile markets.
Actively managed funds provide better risk management.
Regular funds through an MFD with CFP offer professional guidance.

Final Insights
Analyze your overall investment strategy.
Ensure your investments align with your financial goals.
Regularly review and adjust your portfolio for optimal performance.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: LIC Jeevan Saral is an endowment policy that, like other similar plans, does not disclose its expenses transparently. These insurance-cum-investment products usually provide minimal insurance coverage along with modest returns. Unfortunately, if you choose to surrender the policy, you won’t recover the full amount of premiums paid.

The policy stipulates that the surrender value will be the higher of the guaranteed surrender value or the special surrender value:

Guaranteed Surrender Value: This equals 30% of the total premiums paid, excluding the first year’s premium and any premiums for accident or term riders.

Special Surrender Value: This is 100% of the Maturity Sum Assured, provided that at least five years' premiums have been paid. The Maturity Sum Assured used will correspond to the term for which premiums have been paid.

Although surrendering the policy might lead to some losses, continuing with a suboptimal product is not advisable. Purchasing an endowment plan as an investment is generally not recommended because it limits both your life insurance coverage and your potential returns.

For future reference, it's better to opt for a pure term life insurance plan, which offers more substantial coverage at a much lower premium. To meet your long-term financial goals of five years or more, investing in equity mutual funds would be a more suitable approach.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in