Many times i come across with my young clients , who says that i am stuck with a long term insurance policy and it is not meeting my goal requirements. so i just ask simple question to them , why you have taken this long term commitment and less return policy ? and i get below responses.
- Some says i need to save tax at last moment and didn’t thought about return and long term.
- Many of them says my father’s friend who is an Insurance agent has influenced me to take the plan.
- Few says i am not aware about the features and returns , some one approached me and i took it.
All the above replies forced me think about my young friends , how much financial awareness is needed among them?
well friends , do not get hardhearted , i have an strategy to come out from this problem, which occurred due to wrong financial planning.
if you have completed 2-3 years of premium payment , you have two options as mentioned.
- Paidup policy
Lets us understand this with example, where Mr. Chintamani explains his problem :-
1. Jeevan Rekha – 20 yrs
I took a 20 yr Jeevan Rekha policy with sum assured 5 lacs in Sep 2003. I have paid half yearly premium of Rs.10,822 till Mar 2012. Hence total premiums paid till date is Rs.1,94,796/-. Bonus accrued till date is Rs. 1,54,500/-.
My surrender value as on date is Rs. 98,500/-.
If I take the surrender value of Rs.98,500/- today and invest somewhere with 10% compound interest p.a., I will get Rs.2,81,032/- in 2023.
If I make the policy paid up now, in 2023 I expect to get prorated sum assured + bonus accrued till now = (9/20) * 500000 + 154500 = Rs.3,79,500/-
Hence, I think making the policy paid up is better.
2. Jeevan Anand – 25 yrs
Similarly I took a 25 yr Jeevan Anand policy with sum assured 9 lacs in Sep 2003. I have paid half yearly premium of Rs.18,772 till Mar 2012. Hence total premiums paid till date is Rs.3,37,896/-. Bonus accrued till date is Rs. 3,38,400/-.
My surrender value as on date is Rs. 2,34,700/-.
If I take the surrender value of Rs.2,34,700/- today and invest somewhere with 10% compound interest p.a., I will get Rs.6,69,626/- in 2023.
If I make the policy paid up, in 2023 I expect to get prorated sum assured + bonus accrued till now = (9/25) * 900000 + 338400 = Rs.6,62,400/-
From the above two examples it is pretty clear that , it is good to make a policy as paidup one. which has below advantages.
- Life Insurance cover till the maturity age.
- Rest of the premiums can be invested for better returns.
- Free from the long term commitment to pay premiums.
I hope this would be beneficial for you in some way. if you like please acknowledge us and share this as much as possible.