Surrending money back policy (LIC)?

Question

Hi,

I have 20-year money back policy and paid 4 year premium. If I surrender the policy what amount will I get. How to calculate the surrender value?

Answer 1

It is not a good idea to surrender any insurance policy. Any how you had taken money back policy and you will get the money in intervals as survival benefit. IF you wish to make more money then invest the survival benefit as you wish in mutual funds or shares to grow. you can even pay future premiums from your investment of your survival benefits itself. Hence please drop the idea of surrendering which will defeat the purpose of insurance.

good luck

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Answer 2

It should state it in your policy.  A lot of fine print to read, but different policies vary.

Answer 3

LIC money back policy and specially of 20 year duration are good and if you plan to invest in stocks or mutual funds instead of LIC, it does not makes sense.

Contact me if you want, I can guide you why not to cancel this apart from the article you read.

Certified Financial Planner

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Answer 4

Re: LIC Moneyback vs Mutual Fund Investments

Some others (incl. Certified Financial Planners) have raised a comment on the above. You can judge for yourself.

1.Compare a term plan insurance for the same amount as your Moneyback policy. It will be a fraction of the premium, perhaps as much as 1/8th to 1/10th of the regular. You can calculate the Term plan premium here at LIC Premium Calculator (Select Anmol Jeevan, or as suitable)

http://www.licindia.com/premium_calculat...

2. Read why the gurus advise Insurance & Investment should never be mixed. That is take a Term plan for the Insurance required. And invest the balance in 5Star-rated, safe, reputed MFs . you can read about Top MFs at http://www.valueresearchonline.com/topra...

Investments? Insurance? Or both?

http://www.personalfn.com/detail.asp?dat...

Insurance vs Mutual Funds

http://www.valueresearchonline.com/story...

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Congratulations! For making a tough but right long-term decision. It is evident that surrendering a LIC Policy after having paid the premiums for the first 4 years may be considered by many an unwise option, as you stand to lose some money. But then, continuing with high premiums only at the behest of your agent is even more unwise and over the long-term this could hurt your finances a lot more.

There is a surrender value applicable, if you have paid premiums regularly for atleast 3 years. So you will not lose all your money or premiums paid. There are interesting options offered by LIC too. Read on more...the following excerpt from an article at personalfn.com

The trouble begins when you decide to discontinue the policy like many ULIP & Insurance investors have done in the recent past, after realising that the policy doesn’t quite fit into their scheme of things.

In such a scenario, the policy is considered to have lapsed and all the premiums paid are forfeited. More importantly, the insurer doesn’t entertain any claims once the policy lapses. However, it should be understood that the policy is not necessarily forfeited i.e. the policy’s value doesn’t become nil. The Insurance Act does not allow for forfeiture as every policy acquires a reserve based on the premiums already paid.

The Insurance Act provides for a return to the policy holder of an amount that is representative of the reserve and this is referred to as the ‘Surrender Value’ or the ‘Cash Value’. The Insurance Act stipulates that every insurance policy shall have a guaranteed Surrender Value, if at least 3 years’ premiums have been paid. This reserve arises due to the following:

1. Premiums in the early years of the policy being more than what is justified.

2. Savings element in the premium.

Apart from the option of surrendering your policy, insurers like LIC also provide other options like making a policy ‘paid-up’, whereby the policy remains in force with a reduced sum assured, depending upon the number of premiums paid. Another option is to keep the policy in force by deducting future premiums, from the Surrender Value. A third option is to provide term insurance subject to the condition that the Surrender Value is more than the sum assured.

Surrender Value is usually calculated as a percentage of the portfolio returns. Portfolio returns are calculated assuming a nominal something like 15% annual growth of the invested amounts (Premiums minus expenses, which as you now know are quite high in the initial years)

Read the complete article at

http://www.personalfn.com/detail.asp?dat...