Is continuing with my policy till maturity wise?

Ans: Assessing Your Jeevan Saral Policy
It's commendable that you’re evaluating your investments. With only 5 years left on your Jeevan Saral policy, you should consider your options carefully.

Consider Surrendering Your Policy
Surrendering your Jeevan Saral policy now might be beneficial. You mentioned a surrender value of Rs. 6 lakhs, which could be reinvested for potentially higher returns.

Investing in Mutual Funds
Starting a SIP in mutual funds can be a wise choice, even if the market is high. Over the long term, mutual funds generally provide better returns than traditional savings options like FDs and RDs.

Increasing NPS Contribution
Increasing your NPS contribution from Rs. 50,000 to Rs. 1.5 lakhs annually is a good move. It provides tax benefits and helps in building a substantial retirement corpus.

Investing in PPF
Investing Rs. 1.5 lakhs annually in a PPF account is a safe and tax-efficient option. Opening a PPF account for your daughter will also help in securing her future.

Balancing Your Portfolio
Diversify your investments between mutual funds, NPS, and PPF. This balance offers growth potential with safety, meeting both short-term and long-term financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: You have a well-structured insurance portfolio with Rs. 1 crore coverage. This includes term and traditional plans. The plan you mentioned provides a 5.5% annual survival benefit, life cover until age 100, and a maturity benefit. The idea of using these policies as a form of pension by receiving 5.5% of the sum assured monthly is thoughtful.

Given your current situation—no dependents and no need to create a legacy—your focus shifts from protection to optimizing returns. With the premium payment term over, you face no further financial commitments. Your plan is now a source of regular income, and at the end of the term, you will receive a bonus amounting to 80% of the premiums paid.

Evaluating the Need to Continue or Surrender the Policies
Benefits of Continuing with the Policy
Regular Income: The 5.5% survival benefit provides a steady income stream. This is particularly useful if you require a predictable cash flow.

Life Cover Until Age 100: While you may not need life cover, this ensures a safety net is in place. Should anything happen, your nominee receives a substantial amount.

Maturity Benefit: The policy promises the sum assured plus accumulated bonuses at age 100. This is a significant amount that adds to your financial security in your later years.

No Further Commitments: With the premium payment term over, you don’t need to invest any more money into this policy. You are just reaping the benefits now.

Drawbacks of Continuing with the Policy
Low Returns: The 5.5% return is modest, akin to the returns from fixed deposits or debt funds. Over time, inflation might erode the purchasing power of this income.

Opportunity Cost: If you surrender the policy, you could potentially invest the surrender value in higher-yielding investments. This could provide better returns over time.

Limited Flexibility: Insurance policies like this one are rigid. You can't easily adjust your investment based on changing market conditions.

Should You Surrender the Policy?
Factors Favoring Surrender
Unlocking Higher Returns: By surrendering the policy, you can reinvest the surrender value in more lucrative options. Actively managed mutual funds, for instance, offer potential for higher returns.

No Need for Life Cover: With no dependents, the life cover aspect may not be essential. The focus should be on maximizing your financial returns rather than providing a death benefit.

Maximizing Financial Freedom: Reinvesting the surrender value gives you more control over your finances. You can tailor your investments to suit your risk tolerance and financial goals.

Factors Against Surrender
Guaranteed Income: If you value the certainty of the 5.5% survival benefit, continuing the policy is advantageous. This is especially true if you prefer a low-risk, predictable income stream.

Bonus Payout: At the end of the term, you receive a bonus equivalent to 80% of the premiums paid. Surrendering the policy means forfeiting this benefit.

Emotional Comfort: Sometimes, the comfort of having a guaranteed income, regardless of the returns, can outweigh the potential for higher returns elsewhere.

Exploring Alternative Investment Options
Actively Managed Mutual Funds
Higher Returns Potential: Actively managed funds often outperform passive options like index funds. Experienced fund managers can navigate market fluctuations to maximize returns.

Professional Guidance: Investing through a Certified Financial Planner ensures that your investments are aligned with your goals. This helps in optimizing returns while managing risk.

Reinvestment Flexibility: You have the flexibility to reinvest dividends or capital gains, allowing for compounding growth.

Avoiding Direct Funds
Lack of Professional Management: Direct funds require a hands-on approach. Without professional guidance, you might miss out on potential gains or take on unnecessary risks.

Complexity: Direct funds demand more time and knowledge. Unless you’re an expert, this can lead to suboptimal decisions.

Benefits of Regular Funds: By investing through a Certified Financial Planner, you gain access to regular funds. These offer the expertise of a fund manager who can help you navigate market conditions and maximize returns.

Insurance Strategy: Term Plan vs. Traditional Plans
Advantages of Term Plans
Cost-Effective: Term plans provide high coverage at a low cost. This frees up more funds for other investments.

Focus on Wealth Building: With no dependents, you can focus on wealth accumulation rather than protection. The money saved from term insurance premiums can be invested in high-return avenues.

Disadvantages of Traditional Plans
Low Returns: Traditional plans often provide lower returns compared to other investment options. They are primarily designed for protection, not wealth creation.

Lack of Flexibility: Traditional plans are rigid. Once you’re locked in, it’s difficult to adapt to changing financial needs or market conditions.

Should You Retain Your Term Plan?
Minimal Cost: If your term plan premium is low, retaining it might be a good idea. It provides peace of mind at a negligible cost.

Focus on Other Investments: With your primary protection in place, you can focus on building your wealth through other investment options.

Final Insights
In your situation, maximizing your financial returns is key. The traditional policy provides a steady income but may not offer the best returns long-term. Surrendering the policy and reinvesting in actively managed mutual funds could yield better results. This strategy allows you to tailor your investments to your financial goals and risk tolerance.

With no dependents, your primary focus should be on wealth accumulation and enjoying your financial independence. A Certified Financial Planner can guide you through this process, ensuring that your investments are optimized for growth while managing risk.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in

Ans: LIC Policies:
LIC plans typically offer lower returns compared to mutual funds. You may consider redirecting future premiums toward mutual funds or term plans for better returns.

Term Plan & Health Insurance:
Your term plan and health coverage are strong. Given your daughter’s situation, continuing with Star Health is wise, as the government scheme may have limitations.

Mutual Fund Portfolio:
Your current investments are well-diversified. You could add a mid-cap fund for balanced growth. Consult a Certified Financial Planner (CFP) for personalized advice.

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

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