Answer Book question
Not yet, and not on anyone's say-so. including ours. First buy the term cover you actually need. Then look at each old policy on its own numbers: how much is paid, how much remains, what the surrender value is, and how close maturity is. Some are worth running out. Some are worth making "paid-up." A few are worth surrendering.
Not yet, and not on anyone's say-so. including ours. First buy the term cover you actually need. Then look at each old policy on its own numbers: how much is paid, how much remains, what the surrender value is, and how close maturity is. Some are worth running out. Some are worth making "paid-up." A few are worth surrendering.
Geetha in Adoor has a 25-year endowment bought in 2009, premium ₹24,000 a year, sum assured ₹5 lakh. She has paid 16 years. nearly ₹4 lakh. Maturity is in 2034. Her surrender value today is around ₹3.2 lakh. An advisor tells her to surrender and "invest properly." But with 9 years left and a likely maturity of ₹9–10 lakh including bonuses, surrendering now throws away most of the benefit of the years already paid.
An endowment policy front-loads its costs. The first few years' premiums mostly pay commission and expenses; the returns arrive in the later years through bonuses and maturity additions. Surrendering early crystallises the worst part of the deal. "Paid-up" is a third option: you stop paying premiums, the sum assured shrinks proportionally, and the reduced policy continues to maturity without further outlay.
Years paid versus total term. past the halfway mark the calculus usually favours continuing Current surrender value (ask the branch or check the portal) Projected maturity value including accrued bonuses What the freed-up premium would realistically earn elsewhere, and whether you would actually invest it Whether you already hold adequate term cover. if not, this decision is premature
The accrued bonuses already attached to an old LIC policy are yours; they are not lost by continuing. What you are deciding is only whether the remaining premiums are worth the remaining benefit. That is a much smaller and more honest question than "is this a bad policy."
Some old policies are pledged as collateral for loans, or have assignment to a bank from an old housing loan that was never released. Check the policy status before acting. Also, a surprising number of Kerala families do not know who the nominee is on policies bought twenty years ago by a parent.
Geetha's choices: (a) Surrender now: ₹3.2 lakh in hand. (b) Continue: pay ₹2.16 lakh more over 9 years, receive roughly ₹9.5 lakh in 2034. (c) Paid-up: pay nothing more, receive a reduced maturity of perhaps ₹5–6 lakh in 2034. Option (b) gives the best return on the remaining premiums; option (c) is sensible if cash is tight. Option (a) is the worst of the three for her.
A policy in its first three to five years with a small sum assured and a high premium is a different story; the sunk cost is smaller and the remaining commitment is long. There, surrender or paid-up after buying term cover can be right. Each policy needs its own arithmetic.
Get the surrender value and paid-up value in writing from the insurer Put the three options side by side with real numbers Make sure a term policy is in force before surrendering anything
Term insurance or savings insurance. which problem does each solve? I have four insurance policies. What exactly do I have?
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