Should I surrender my LIC Jeevan Anand Policy after paying premiums for 11 years?

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I am 43. I have an LIC Je
evan Anand Policy for 25 years, the premium for which is Rs 61,559 per annum for a coverage of Rs 15 lakh. I have already paid premium for 11 years. The total paid up value is Rs 6,77,149. The bonus as on 31 March 2020 was Rs 8,02,500. Total value as on date is Rs 14,79,649. I wish to surrender my policy and take term insurance. Would that be wise? If yes, where I should invest my funds to get good returns?

Dev Ashish, Founder, StableInvestor and Sebi-registered investment advisor replies, “You should first purchase a term insurance plan. That too at the earliest. It provides a large cover in a cost-effective manner. Now comes the question of surrendering your LIC Jeevan Anand policy. One view is to cut your losses and surrender the policy. The future premiums saved can earn much better returns even if you invest in a combination of pure equity and debt funds. Also, the surrender amount you get can be invested properly to recover some of the losses. Another view is that your annual premium (Rs 61,559) is a lot less today than what it was 11 years ago when compared with your income. If you are already investing a large amount periodically in assets like equity (via MFs, ETFs, stocks) and debt (via EPF, VPF, PPF, NPS, etc.), then increasing it a bit more by using the money freed-up from surrendering the LIC policy and using the premium amount will not amount to much. I am all in favour of not mixing insurance and investment. But what is done is done. So since a large part of the tenure is over, you might think of this policy as part of your low-return debt portfolio and continue it till maturity. The final option is to stop paying further premium and make the policy paid up. You can use the (freed-up) future premiums to invest and get better returns. Assuming you surrender the policy (and you are willing to invest for at least 10+ years), you can start SIPs in large-cap index funds and flexi-cap funds for Rs 61,559, the premium amount. The surrender amount received can be parked in debt funds of the same AMC and then transferred through STP into equity funds over next 1-2 years.”

I am a 26-year-old woman. My take home salary is Rs 28,000 a month. I have an SIP of Rs 1,000 in SBI Bluechip MF, Rs 13,000 lumpsum investment in DSP Blackrock Equity and FD of Rs 65,000. I also pay an EMI of Rs 9,708 for my car which will end in 2025. I wish to buy my own house in 2025. How should I invest to accumulate a good amount for a down payment?

Prableen Bajpai, Founder FinFix® Research & Analytics replies, “Your goal of buying a house is just four years away. It can be assumed that a decent property will cost around Rs 40-50 lakh. Although 75 to 90% of the property cost can be availed as a home loan, to keep the EMI low, it is best to accumulate as much as possible for the down payment. You should consider pushing your goal of buying a house by 2-3 years. If you have no other big expense other than the car loan, then start a monthly investment to Rs 10,000 in equity mutual funds and Rs 5,000 in debt mutual funds. Within equity funds, choose an index fund tracking Nifty 50 Index and complement it with a flexi-cap fund (Rs 5,000 each). This investment will help you generate close to Rs 10 lakh in the next six years assuming a 10% CAGR. Do not stop your SIP during downturns or redeem this amount in between. Start moving into safer options closer to the goal. Simultaneously, invest `5,000 in a low duration debt fund to build a buffer. Increase monthly investment with any increment in salary.”

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