Should I Continue My LIC Policy with a 15-Year Maturity and 5 Lakh Payout for a Monthly Premium of 2220?

Ans: The returns from traditional endowment life insurance policies are poised to drop further from already pathetic return that they use to provide due to guaranteed surrender value rules which have kicked in since 01/10/2024.

I am hoping that you have adequate term insurance cover for yourself and your spouse. If the answer is Yes then you may surrender it and invest in NPS, mutual funds.

Happy Investing!!

*Investments in mutual funds are subject to market risks. Read all scheme related documents carefully before investing.

Ans: Hello;

My suggestion to you would be to surrender it as early as possible.

Even if you get your premiums back with some or nil return, it is okay.

Agent will tell you about loss because he will get impacted if you surrender the policy.

Recently IRDAI(Oct-2024)passed a diktat whereby the losses to investors surrendering their policy prematurely will be much lower then before.

Best wishes;
X: @mars_invest

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: 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