fate of endowment plans after taking TERM PLAN

POSTED BY ddshah ON January 10, 2011 11:51 am COMMENTS (18)

Sir, I am reading this blog for last one year….it inspired me to take term insurance of 60,00,000 from lic… I have LIC plan worth 7,00,000 with yearly premium of 71,000..

Plan                           Sum assu    DO comm.   Last prem   maturity  paid up value   bonus       surren value 

Jivan shree                 5,00,000     28.3.03       28.12.12     28.3.23        3,87,500        2,71.000     2,66,400

(7.5 assu) premium 12,800 Qly

Jivan samrudhdhi      1,00,000     28.2.05       28.2.18       28.2.19         8500             39000            23,500 

(25,000 got in 2010) ) premium 10600 Yly

Komal jivan                1,00,000       28.8.04      28.2.18       28.2.19         43,000         48,750          45,300                                              

  premium 9000 Yly

My  wife’s plans are for 4,22,000 with yearly premium of20,000..

Jivan samrudhdhi      1,00,000     28.2.05       28.2.18       28.2.19         8500             39000            23,500 

(25,000 got in 2010) ) premium 10600 Yly

Jivan surksha            3,22,000      28.3.03       28.3.26       28.3.27       1,03,000        82,000            90,000


My  view on investment is FOR  >10 yrs…What shoud be the solution??

18 replies on this article “fate of endowment plans after taking TERM PLAN”

  1. ddshah says:

    @ sashank,
    term plan (amulya jivan-1):prem..17,100, maturity..5.4.34,, health insurance:10,860 national assurance co…., car insurance: 6,086…, home insurance is not taken (planning to take in march with health insurance premium date)…LIC PREMIUMS are as mentioned in 1st post….(Jivan shree.. Last prem in 28.12.2012)…. THANKS, Sir….

    1. ddshah says:

      @ sashank,Sir…are you there ??…i think i have submitted required information…thanks in anticipation….

  2. shashank kashettiwar says:


    What is the premium and tenure of the term plan, the premium on the health insurance, premium on other insurances like car, house etc. I want to know the total outlay at present for the insurances of all type you are having.


  3. ddshah says:

    @randomguy, Thanks…sir,i m not able to understand ‘To me investing is about cash flow and cash flow is the king!! Always in my book. I will invest for cash flow. Capital gains are just a bonus and icing on the cake!!’ can you pl elaborate..?

    @ sashank,
    Sir,i am starting to understand your comment “These kind of plans are sucking out blood of LIC but making the buyer happy”…regarding my wife’s policy:Jivan samrudhdhi…so far i paid 64,200…got 25,000back in 2010…sur. val. is now 39,000…i can surrendr it….Even Jivan surksha (pension)..as i went through policy there is no guaranted return (bought in 2003) i can surrender it also…one more strange thing has happened with me that..MY TERM PLAN IS OF ONLY 30L..Story:i had only 30L term plan since2009…one month back i applied for 30 more..MY LIC AGENT HAS FORGOTTEN TO REGISTER MY PoLICY & CHEQue was also not deposited…I ALSO FORGOT TO COUNTERCHECK in bank passbook…When i came to know this I immediately asked him to STOP THE PROCEDURE…MY health insurance is from NATIONAL…4L for me 4L for wife…1.5Lfor each daughter…(since 8 yrs..) Sir, any other detail do you want…pl let me know…THANKS…

  4. ddshah says:

    @shashank, Sir, i m waiting for your reply…pl guide me…

    1. shashank kashettiwar says:

      sorry, i could not post my reply earlier.

      First let me explain a bit what I mean by that point2….as it is not clear to you.

      As I mentioned , I’m keeping the context of you having LIC’s term plans. Now these term plans are much expensive compared to other reasonably priced term plans. So if one is having these term premiums, which are pulling us down, then even high returns of equity also will not improve the situation substantially if the discontinued premium amount is parked somewhere else for rest of the tenures of the policies. And you are having high returns, guaranteed plans. Discontinuing such plans and replacing the covers with term+investment is not worth at this stage. So better continue with them. The covers are also rising at a fair rate because of high guaranteed additions/bonuses.

      The one very different solution which I would like to suggest to you is, if one trusts LIC only, then it is more sensible to go with their ULIP than with their term + some other mutual fund combination.

      Out of your savings of 9 L you are putting 1.4L in PPF, @ 70 K in LIC savings plans. How much is the premium for the 60L term plan and the health insurances?. (Discontinue with wife’s insurance and pension policies. Covers are small and we better use that money for covering the breadwinner than the housewife. Her real protection lies in having a high cover of husband.)

      will write the complete solution when you tell me these small details.


  5. ddshah says:

    @randomguy, Thanks…sir,i m not able to understand ‘To me investing is about cash flow and cash flow is the king!! Always in my book. I will invest for cash flow. Capital gains are just a bonus and icing on the cake!!’ can you pl elaborate..?

  6. randomguy says:

    Shah – Sorry, cant answer your question. There is lot of calculations involved and multiple products!! Investing has to be simple in my book, otherwise I will look away. Surrender value, paid up value, sum assured – what does it mean and I dont want to know!! – lots of jargon and very confusing. Please note that I am not arithmetically challenged though. Whatever advice you get from anyone, do your own calculations!! So nothing to add from my end-wont make a difference any way and that should be the case ideally.

    Interesting that you mentioned that you are not smart enough to be dealing with rental (investment) properties. Why did you invest in land then? I am sure you have your own reasons but to me investing in land(no income and no gain until sold) is much more risky(speculation) than investing in a rental property(regular rental return). Rents are only going higher every year!! My rental yields are double it was 3 years ago(goes to my mom) and capital gains are 100% from 6 years ago-miniscule compared to gains in big cities! You can easily get rental properties which will give you gross 5% yield – just look for it long enough and swallow your pride when it comes to investing in properties.

    To me investing is about cash flow and cash flow is the king!! Always in my book. I will invest for cash flow. Capital gains are just a bonus and icing on the cake!!

    I am not a property investor really, I am more a share/stock investor. But my share investing performance is mediocre to put it mildly!! I continue to pour money on a regular basis into shares.


  7. ddshah says:

    @shashank & randomboy, thank YOU very much for such good analysis and advice…

    @shashank, (1)i m not having EPF.. i m free lancing consultant…(2) sir, i didn’t got your “2) If you are thinking of putting this money into equities then again”….even if my horizon is for >10 yrs…(3) i m planning to go for 1 cr term plan fromprvate co ..may be KOTAK…not decided..you can help me..i fully agree with u about disability/accident aspect also…’ Disability is even more fearsome than the death scenario.’ YOU r right ,Sir…(4)i see my income and career progressing in almost same limit as present one..may be +/- 10–15%…(i m free lancing consultant)..legcy wise: may be 4-5 L FD …i don’t count those…may be given to charity…(5)75K…in MF…70% largecap..,,20%mid,small cap…,10% flexicapREF EQ….,requred gold has been taken for both daughters marraige also…THANKS.

    @randomboy,i will surely go for 1 cr term plan..i have good health cover for all 0f us…investing in rental property :i m not smart in those dealing…difficult for me to gain out of it..so investment has been done in only land 11L…

    SIR,should i go for’ if my view is long term than, should i surrender MY PLAN also & invest in any large cap fund for REST of YEARS….?’ someone has suggested me that i can continue with plns& at the sme time i can morgage them in bank for overdraft facility…i can make sip from that account..& pay interest..well i m hesitant for this.. is it wise approach?..HOW in case of YES/NO…

  8. randomguy says:

    Shah- well done, your financial position is much better than I thought!

    Your strong points are very high savings % as Shashank pointed out, reasonably good equity exposure (your initial disclosure didn’t have these details) and you have real estate exposure. But you are overweight in cash still but not a big negative as cash can be put to work at any time(sooner the better-beware inflation/purchasing power). Your circumstances and the risk/reward appetite is the key from here I think.

    The policies you have – it is up to you to do the sums and make a decision and I am sure you are capable of doing that. But do consider the inflation which will erode the value of cash in the future. Inflation is your number one enemy!!

    You need at least 1crore term insurance and medical insurance(medical bills are going to go much higher and will be more than the general inflation).

    No leverage/liability (loan) is not necessarily a good thing!! If I were you I would still consider investing in rental property and you have enough earning to finance that. Property (bought at a reasonable price) is a very good hedge against inflation and you know it. Of course, here you use Other Peoples Money(OPM). The western world became rich through the same route until the year 2000, after 2000 it went berserk and the basic rules when borrowing money were not followed(excessive greed).

    Of course, there are many roads to Ayodhya(instead of Jerusalem)!! I am ruining the language here.. Either you get there eventually or not!! How fast do you want to go?


  9. shashank kashettiwar says:


    Seems 11L is your post tax income( if 9L is your yearly savings). So I would put your CTC to be @ 15-16L, is this correct? Is there any EPF balance apart from PPF balance you have mentioned and how much is EPF contribution?

    Your saving % is pretty good when we look at your CTC, which I’m assuming to be @15-16L. Almost 55-60% of your gross income. With such strong saving habits and fair amount of equity in the portfolio, I don’t think you have to even worry about the usual financial goals of life like child education, marriages and own retirement. They can be fulfilled very comfortably even with present asset allocation strategies. You can ‘afford’ to be risk averse if so wished. Which again you are not as you do hold substantial equity assets.

    One more observation is that you have chosen LIC to buy your term plan. If you are regular reader of this blog then yu are aware that there are cheaper, much cheaper term plans in the market. Still choosing LIC means you would stick to the ‘comfort’ of trust which the name LIC carries. I won’t go against this decision or even try to give arguments against such decision just because you can afford this luxury of higher premiums, so no harm in this.
    But this decision has a major impact on the whole perspective of looking at your decision about the usage of money incase you discontinue(making paid up) or surrender the LIC plans.
    1)If you put this amount of @70,000 in some other debt investments while holding LIC’s term plans, then it is not going to create more value than continuing with the existing savings plans. And anyway you are already fully invested in PPF so no chance on this front.
    2) If you are thinking of putting this money into equities then again you won’t find any substantial benefits whether you surrender the plans or make them paid up.

    3) You have two guaranteed addition products like Jeevan Shree and Komal Jeevan , totalling @ 60 K premium. Don’t even think of surrendering or making them even paid up. (These kind of plans are sucking out blood of LIC but making the buyer happy) . Overall these plans together would end up giving you almost 8% maturity returns with all those loyalty additions in the end apart from bonuses- a PPF and insurance rolled into one, just imagine!!!
    4) Moneyback plans don’t give much cover as they have more of saving element than security element. But the premiums are low compared to your total annual savings. So continue , no harm again in having @ 6.5-7% post tax returns in a debt class insurance product (in your case)
    5) Can rethink about the pension plan though. Is this plan also with some assured returns and discontinued now by LIC? Do provide some more info if you can.

    6) I think you are hugely underinsured for your income level and age . You should have a cover of 10-12 times atleast to cover your future wealth creation. I would recommend you should buy 1 crore of more cover in life insurance and should create @ 1.5 crore cover on disability/accident side also. Disability is even more fearsome than the death scenario. Buy this cover from general insurance companies. How are your health covers?

    7) (Few more info if you can provide) What has been CAGR of your income from the age you started working till today? How do you see your income and career progressing in near future and where you think you will reach at your retirement- income and designation wise. What kind of legacy you think will be left behind for you by your parents? If you can provide these details then I can suggest what kind of plans should you buy to create that 1 cr cover in life , I told you above. Also what is the % of debt and equity in the 75000 savings you invest monthly or 9L yearly


  10. ASHAL JAUHARI says:

    Dear DDShah as the Jeevan Shree is going to complete in next i.e. 2012, it’s advisable to pay remaining prem. for it which ‘ll be total of 5 prem.

    Surrender your Jeevan Smruddhi & Konal Jivan.

    Regarding your wife, it’s not clear that she is working or not. Even if she is working, it’s advisable to take adequate term cover for her also. In case she is not at all working & a full time home lady, in that case, instead of investing in these 2 plans, open a PPF account for her & invest the full prem. amount to her PPF acct. every year between 1st to 5th april.



    1. ddshah says:

      @ASHAL,she is full time home lady…thanks…

  11. SANJAY GOSWAMI says:

    You should invest in p.p.f rather than endowment plans.These plans will give u 5 to 6% return.Even postal life insurance give u 7%yrly.Better take a term plan and invest in ELSS.

    1. ddshah says:

      @SANJAY,i m investing 70,000 between 1st to 5th april in my & wife’ s PPF …

  12. shashank kashettiwar says:

    can you provide following info, will allow me to advise correctly.

    your age
    your annual income
    how much you save i.e. the saving%
    how is your investment portfolio i.e. % of equity and debt investments
    what is the break up debt portfolio i.e. FDs,NSCs,PPF/EPF,Bonds, Debt MFs
    you are salaried or in business

    What is to be done with your existing insurance portfolio has to be decided with a proper context to above mentioned factors (and some more but lets restrict it to above list at the moment)

    Whether these plans are good,bad or ugly for you or anyone can be decided only in a proper context. There is nothing absolutely good or bad about any product, it’s relative. So same solution/portfolio could be sensible for someone whereas horribly wrong for some other person.

    A judgement cannot be passed without context. So do provide it.


    1. ddshah says:

      @Shashank & Randomguy,
      Sir,my details as follows…42yrs….11,00,000p a….savings 75,000 mthly… 15L PPF..5L FD..11L real estate..12L eq MF.. 8L MIP MF….No loan liability…professional…2 daughters…14 yrs & 10 yrs… my questions are…1)i m thinking to surrender my wife’ plan..is it fine? 2) if my view is long term than, should i surrender MY PLAN also & invest in any large cap fund for REST of YEARS….? 3) out of ‘PAID UP’ & ‘SURRENDER’ which is better for me…thanks…

  13. randomguy says:

    Shah-please simplify it for us to help you. What is your question-not clear from your illustration of numbers/policies. Just scanning through your numbers/policies, you are paying 5-10% yearly as premium to sum assured-is that correct??

    Rule of thumb for insurance product is that you shouldn’t be paying more than 1% of sum insured annually for insurance products-whatever they call it-ULIPs, endowment, money back etc. If they charge more, that is day light robbery. The inflation is anywhere between 5-20% in India since last many years. Have you considered that?

    You are a conservative investor and there is nothing wrong with that. You have lots of products which will suit you and seek for investments away from LIC from now on for gods sake. LIC is not be all and end all-they are very inefficient just like government depts in India.

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