I’m servicing an LIC Jeevan Saral Policy since Jan-2009. I pay a yearly premium of INR 60005 and have paid 7 premiums till date.
I now realise that this policy was mis-sold to me in the name of investment. I don’t mind booking some losses even, if you so advise, and put the proceeds in some good quality MFs through SIPs for long-term (10-15yrs or even more).
I went to check the surrender value of my policy recently to my (ill)-advisor and he suggested me to take a loan from LIC against this policy instead and that if I don’t wish to continue, I can simply default on the loan, thereby allowing the policy to lapse / cancel itself.
I request if you can advise me – If I should surrender my policy of 7 years now or keep servicing it till 10th year?
Secondly, if yes to surrender, then should I go with the Surrender Value or take Loan against it, as advised and default?
PS – I’m a firm believer in the India story and expect my MFs SIPs (if the proceeds are invested) to do much better than the returns offered by this policy over the long-term.
Shubhankar-First understand why your agent not advising surrendering rather than going for loan. Because in case of surrender his commission will stop immediately. However, in case of loan, he enjoys commission until the closure of policy. But going for loan is like double edged sword to you. One is, you are paying premium towards this policy which will give you around 5% return. Second is, you pay the interest on such bad investment as you took loan (which may be around 8%). Hence, my suggestion is to surrender the policy and come out of it.
Forget about equity and all, even if you invest in a simple product like PPF (which gives you same tax benefits like LIC policies), then you may compensate the loss of what you bear by surrendering this policy and also a decent return (decent in the sense, more than this LIC Policy).
Hence, go ahead and surrender. At the same time, buy online term plan immediately to cover your life risk.