Exit Strategies for mis-sold insurance policies

By
Hemant Beniwal
96

Exit Strategies for mis-sold insurance policies
We at TFL, are working constantly on Investor Education and following different ways and means through which our message could be reached to as many people as possible.

Blog, Seminars are few of the ways through which we started Financial Literacy. From January 2010, we have come up with a JOURNAL which will be a quarterly edition wherein we have used print media to endorse Financial Literacy.

The First news letter was based on Insurance as we found that Indian Investor makes his Maximum mistakes while taking Life Insurance. Topics covered were:
• बीमा एक खर्चा है न कि निवेश
• टर्म प्लान
• Your Insurance agent is mis-selling if…
• Do’s & Don’ts in Personal Finance

Exit Strategies for mis-sold insurance policies Click to Tweet

The News letter was appreciated by all who read it and there came questions that WHAT SHOULD WE DO WITH OUR EXISTING INVESTMENT BASED INSURANCE POLICIES.

Due to mis-selling of Insurance; more than 91 Lakh policies worth Rs 1000 Crore lapsed in 2009. A policy is considered lapsed when the premium is not paid within 60 days of the due date.
If possible we should try for exit policy rather than getting it lapsed. Let’s check out some of the exit strategies.

Before checking strategies lets understand two terms PAID UP and SURRENDER VALUE.

What is meant by PAID UP?

When you stop paying premium but do not withdraw the money from the Insurance company, the company reduces all your benefits proportionality. The benefits like SUM ASSURED, MATURITY VALUE etc. But in case of Endowment & Money Back Plans Insurance Amount ceases to exist.  You do not lose anything by this approach. For example, if your policy is for 10 years with SUM ASSURED of Rs. 2 lacs and you have paid premium for 5 years, your SUM ASSURED will now be 1 lac only and other benefits will also reduce by 50% as you have paid 50% of the overall amount that your were supposed to pay.

After making the policy PAID UP, you may choose to redeem the amount or continue with the insurance without further paying of Premium.

In case you were to redeem the policy, you get the amount as per SURRENDER VALUE.

Now what is meant by Surrender Value?

Surrender value is the amount that Insurance company will give you in case you were to withdraw policy before its maturity date based on their pre-decided calculation. For the first 3 years, the Surrender Value is NIL or very low. As the time increases, this amount keeps going up.

Typically, Insurance Policy people have either ENDOWMENT, MONEY BACK, ULIPs or Pension Plans.

If you have taken ENDOWMENT OR MONEY BACK POLICY(Traditional Policies)

  • After First Year premium, we suggest that you should stop paying further premium. You would lose all you have paid, but it is better to stop travelling on wrong road once you know it.
  • If you have paid 2 years premium, we suggest that you should pay one more installment and the stop paying premium. By doing that, you will actually make this policy PAID UP.
  • If you have paid the premium for more than 3 years, we suggest that you should stop paying further premium and get this policy into PAID UP ZONE until you get reasonable value.

Tax treatment: The entire surrender value added to your income in the year of receipt.

If you have taken ULIPs.

One of the most mis-sold policy is ULIPs. It is a combination of MUTUAL FUND and TERM INSURANCE prefixed by HUGE CHARGES.

  • After First Year premium: ULIPs are very expensive product and bit tricky in its calculation. The expense varies anywhere from 20% to 70% of first years premium. Do check the same and if you find those heavy expenses, say thanks to your Agent & get your insurance bond laminated so that not only you but others also don’t make such financial blunders in life.
  • If you have paid 2 years premium, do pay 3rd year premium as well – NO CHOICE
  • If you have paid the premium for more than 3 years: Whether you should withdraw or hold that investment is based on Alternative Opportunity you have at that point in time. If you find that you will be better off investing in Mutual Fund directly instead of remaining Invested in ULIP, then its better to withdraw the same and make Mutual fund investment. Now this statement applies to all your investment.

Tax treatment: Nil tax liability if withdrawn after 5 years but between 3-5 years if you surrender it then entire surrender value gets added to his income in the year of receipt (in this case, you can withdraw 99% of the fund value). Also check surrender charges before you make such decision.

How to exit from tension policy, by the way people still call it pension policy: The decision to hold or redeem is based on similar lines as Traditional Policy and ULIPS.

Tax treatment: The withdrawal from Pension Policy is always added to your income whether you do it before the maturity or when you get annuities.

The illiterates of the 21st century will not be those who cannot read and write but those who cannot LEARN, UNLEARN and RELEARN – Alvin Toffler

If you have made mistakes by taking BAD policies, we would say that learn from past experience and get rid of your Insurance Agents who pretends to be your friend. Always remember that Insurance and Investment are best bet only if they are not served as Cocktail.

Disclaimer:

Our recommendations are applicable to most of the investment linked insurance sold in India but before you take decision, we would advise that you should either read the fine prints of the policy document, or contact the insurance company. You may also mail us in case you look forward for our advise. You can mail us at [email protected]

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96 COMMENTS

  1. Very glad to read that "more than 91 Lakh policies worth Rs 1000 Crore lapsed in 2009" which means people are getting financialy educated.

  2. Hello Sir,

    this question is related to a policy I took up in Oct 2002 from LIC. The policy is called New Jeevan Shree. I am no longer interested in this policy since the life cover is too small compared to the premium paid. I want a term cover instead. I will invest the premium difference in mutual funds and ETF. The LIC policy has no transparency. I don’t have a pressing need for money. So i am not looking at the surrender option. Is converting it to a paid up policy a good option? How much can I expect at the end of term if I let it convert to a paid up policy? What happens if I die before the maturity? Is there any life cover? The annual premium is 31976/- and the basic sum assured is 5 lakhs (with 70 per thousand annual addition).

    regards,
    Sumant

    • Hi Manish

      I think here you are talking about surrendering your policy – you will get surrender value here which in traditional plans is approximately 1/3 of premium paid & in ULIPs it is amount after surrender charges(After 3rd year 0 – 10% depending on the plan)

    • Hi Manish

      In paid up you will not be giving any further premium – you will get the amount on maturity.

      Read in artilce
      What is meant by PAID UP?

    • Hi Vipin

      Term insurance is a pure insurance policy which covers you for a good sum assured for a price which is dirt cheap. This policy is only about MORTALITY CHARGES and there is no element of investment in this policy. Hence this policy is not only cheap but also helps you to buy large insurance coverage for a small amount. For example, a 30 year old male can get a life cover worth Rs. 50 lakh for next 30 years on a yearly premium of Rs.10000/- or even less which accounts for less than Rs.200 per lakh.

    • Hi Amit

      As still you would not have received first installment of money back this policy will be treated as endowment – your paid up value should be close to 1/3 of the premium paid.

      Easiest way to know surrender value or paid up of any insurance policy is call on there toll free no.

  7. Hi Hemant,
    I am quite disappointed with your remarks that ULIP’s are very expensive. It suggest you are doing proper research and your opinions are not nutral.
    Post Sep’2010, ULIP’s are available with as low as only 2% allocation charge. Request you to kindly educat customer’s with nutral outlook towards any segment of products.

    • Hi Soumen,

      Thanks for your critical remarks.

      This article was written in Feb 2010 but I think still it holds true. Don’t you think so?

  8. Hi Hemant,
    Do you believe that all endowment /money back policies are not useful?

    and if we make a policy paid up ie having paid up for three years… so do we have to notify the insurer that we are not going to continue premium and will get the sum assured at the end of the period.?

    I have one money plus from LIC with 5k AP and have already paid for three yrs..So shall I continue?or withdraw?

    Also I have one Money back endowment policy with 45kAP and already paid for three yrs…so again the same question whether to continue or not.

    • Hi Kapil,

      You have asked something like all are politicians bad – now should I say no or yes. There may be few good politicians but as a class they are not – similarly my answer is endowment/money back policies are not useful. Few of them can be good – few polices that were launched by LIC in 2003-4 or before that period have some good features & higher guaranteed bonuses. But even in those policies return will not be higher than 6.5% or 7% taxfree – so if people feel that it’s sufficient for them they can continue otherwise they should plan to withdraw. My preima facia suggestion for you is discontinuing both policies.

      For paid up as such you don’t need to inform insurance companies but still you can write a simple application to them & take a receiving to avoid any confusion in future.

      • Hi Hemant,
        If I discontinue both the policies then the surrender value will be fully taxable,so what can I do to reduce the tax liability on the same
        And second where do I invest if not in these policies.
        Regards,
        Kapil

  9. Dear Hemant ,
    Its great to read your articles .but i have few doubts
    1 doubt: Taking todays scenerio when FMC of all ULIP plans have been reduced
    (And defintly less than the FMC of Mutual Finds which are not disclosed and not discussed too) , with capping of charges in ULIP,has the ULIP now got lucrative vis a vis mutual fund and term plan combo
    2 doubt : Through comparisons it is always said that in long run( More than 20 Years) ULIP performs better than Mutual Fund taking todays charges scenerio:TRUE or False? ( Please explain with some data too on this)
    3 doubt:Online Term Plans are defintly cheaper to any other term plans but is there any clause for claims compared to normal term plans claims.
    Regards
    Chinmay Jhaveri

  10. Hi Hemant,

    I have gone throguh your articles and find them useful. I work in a Pvt Company and my current take home is Rs. 53000 but i have not invested much in savings due to other expenses till date. I am looking to invest systematically now onwards, I have highlighted below some insurance + ULIP plan which i have taken in past. Please go through them once and Kindly advise, do i need to revise them, close them and look for another investment and better insurance plan.

    LIC: BIMA GOLD

    Date of Commencement: 05/09/2005

    Yearly Premium: Rs. 6569

    Sum Assured : Rs. 200000

    Date of Maturity: 05/09/2025

    **********************************************************************************

    Bajaj Allianz: Capital Unit Gain Size One

    Date of Commencement: 15-Feb-2007

    Yearly Premium: Rs. 15000

    Sum Assured : Rs. 150000

    Date of Maturity: 15-Feb-2027

    Note: 3 year locking period over

    **********************************************************************************

    Max New York Life: Smart Invest Pension – Risk Coverage (Unit Linked Individual Pension Plan)

    Date of Commencement: 23-Nov-2007

    Yearly Premium: Rs. 10000

    Date of Maturity: 23-Nov-2031

    Note: 3 year locking period over but policy is currently not active because 4th year premium not paid.

  11. hi Hemant…thanks for your valuable review on various insurance products. great work…i have taken kotak preferred term plan of 30 lac sum assured. but i did a mistake by buing LIC samridhi plus of rs.20000/= on march 2011. now after going through your eye opener review on this policy, i want to discontinue it. can you through some light how much amount i will get if I discontinue this policy within 1 year.
    regards
    kousik

    • Dear Dr. Kaushik,

      First year premium is always discarded in traditional plans for expenses.Hence, you may have to bear this loss if discontinued.

  12. Hi Hemant,

    I have taken HDFC unit linked endowment policy in September 2009 with 3k per month. I paid nearly 2 years premium and now i want to stop paying further premium. After i looking into this website, i thought i can continue paying premium for 12 more months and stop paying from 3rd year onwards and make it as paid up policy.

    Now i have a question can it be possible to pay the remaining 1 year premium as one premium(12*3000 = 36000) and made the policy paid up now itself instead of waiting for 1 more year?

    • Hi Durga,

      Changing a premium mode majorly happens on the renewal date. You can check with the company for accepting advance premiums.

  13. Dear sir,
    i bought (mis-informed)max smart assure policy in 2009 and after 2 years paying 40000 thousands..my policy was surrendered without intimating me and without my permission. can u please tell me how much value i will get and what are the legal options in consumer court or in irda.

    • Hi Sanjay,

      Check your policy document.There is a process of filing your complaint within the company and then to Ombudsman.
      You can ask for details on submission of the surrender proceeds from the company which will tell you when and where was your application processed.Then file a complaint if you haven’t submitted it.

  15. I have invested in HDFC SL crest with premium of Rs 50,000/- & have paid one premium. Should i continue with this policy or should i drop it now?
    Another is Kotak Mahindra Super Advantage with premium of Rs 30000/- & have already paid 2 premiums.

    Please advice me on these policies whether to continue or not. It will help me a great deal.

    • Hi Yashuhanda,
      Both of these policies are investment relates & are really expensive. HDFC SL Crest is Highest NAV guaranteed fund – which was understood by investors as Highest Return guaranteed fund. Once the earlier products expired, IRDA did not approve any new product based on the highest NAV. The insurance regulator is not comfortable with the way these products are being pitched to customers. Problem is – these products are not expected to do as well as simple equity oriented schemes, since insurers tend to invest substantial amounts in debt. My suggestion is go & sit with your agent and discuss this.

  16. Hi Hemant,

    I am having Max New York Life policy named “Life Maker Premium unit linked investment plan”. I have paid Rs 80,000 for 4 years (20,000 per yr starting from yr 2008) but still its having value of around 60,000 Rs in 4 yrs.

    Please tell me what should I do. Should i Continue or withdraw

    • Hi Dheeraj,
      You have option to surrender this policy but you should surrender it or not depends on what you want to do with this money. Once again read this article – you will get your answer.

  17. Hi Hemant,

    My age is 29. I have take two Life insurance as given below. Kindly suggest What should I do with them?

    ****Birla Sun Life Insurance policy as on 9-Jan-2012***

    Commentcement date 10-Feb-2009
    Sum Assured 2,00,000
    Plan Dream Plan-Life Cvg-Opt 100% -Term 20
    Policy Term 74 (Premium paying term: 25)
    Premium 20,023.02
    Fund Type (SFIN) Individual Life – Enhancer (ULIF00213/03/01BSLENHANCE109)
    MoneyBack Date 10-Feb-2029
    MoneyBack Amount 3,87,000.00

    Portfolio Details as on 9-Jan-2012

    NAV as on last date 33.3580
    No. of Units 1,280.124
    Unit Fund Value 42702.38

    Coverage Information

    Plan-1 Dream Plan-Life Cvg-Opt 100% -Term 20
    Coverage Status Active
    Modal Premium 16,137.90
    Face Amount 2,28,330.00
    Issue Date 10-Feb-2009

    Plan-2 Dream Plan-Enhanced Sum Assured Term 20
    Coverage Status Active
    Modal Premium 3,885.12
    Face Amount 2,272,000.00
    Issue Date 10-Feb-2009

    ****LIC policy as on 9-Jan-2012***

    Commentcement date 28-Dec-2008
    Sum Assured 2,00,000.00
    Plan Jeevan Anand (T.No. 149)
    Policy Term 74 (Premium paying term: 25)
    Premium 8,449.00
    Accrued Bonus 27400.00
    Loan Eligibility Amt 12000.0

    Actually in Birla Sun Life Insurance policy I can enable a partial withdrawal facility and this will keep my policy active and i’ll not have to pay premium. Does this sound good? I am thinking to enable this partial withdrawal facility as I have paid 3 premiums and can enable it now.

    In LIC Jeevan Anand, What will I get if I make it Paid Up/Surrender?

    Thanks,
    Jigs

    • Hi Jig,

      You can make Jeevan anand paid up if you wish to discontinue it. Although teh amount will be received on maturity, it will be a better option then surrender.
      With ULIP, clear about the annual charges.Even if you stop paying premium they get deducted from your fund value.

  18. Dear Sir,
    I have bought 2 policies under influence of agent/friend in march 2011.
    1.) for myself JEEVAN ANAND, SI 1000000. Term 30 years, Annual Premium 31000.
    2.) for my wife: LIC JEEVAN BHARATI, SI 500000, Term 15 Years, Annual premium 35000.
    Now the second premiums are due in march,2012. What should I do now? I feel suffocated on continuing these miss-selled products. Kindly guide.

    3)Also, I had bought one MONEY BACK PLUS plan(ULIP)in 2009 and paid 3 premiums till now, and 4th one is due on 31st JAN,2012.
    SI 1,00,000; term-10 years, Annual premium: 10,000.
    should i exit this policy also?

    Kindly guide and help me with your valuable remarks.
    Many Thanks.

    • Hi Inder,

      In any traditional plan the first year premium is discarded by the company for agents commissions etc. Hence if you discontinue now, you will have to take it as a loss. However, policy where you have paid three year premiums there is an option of a paidup where the SA is reduced according to the premium paid but amount you receive on maturity only.

  19. Dear Hemant,

    Can you please clarify what is the excat diffrence between the second and third points ? It seems both are same. Particularly what does the statement ‘get this policy into PAID UP ZONE until you get reasonable value’ refers ? Do you mean to continue to pay premiums for more than three yeras ? How can we identify whether we reached a reasonable value ? Kindly explain in detail. Thanks.

    ■If you have paid the premium for more than 3 years, we suggest that you should stop paying further premium and get this policy into PAID UP ZONE until you get reasonable value

    • H Sowmi,

      In a traditional life insurance policy there are surrender charges applicable for Exiting before term. These are as high as 70% of the premium paid.However, if you have paid 3 years premium then the policy can be made paid up i.e. you do not exit but stop paying premium in which the company reduces the SA to the amount of premium paid. the policy participates in the profit and the amount is paid at the maturity.

      I Hope this clears your doubt.

  20. blinded by LIGHT….better than blinded by DARKNESS..
    Can u please tell the returns on these plans, surrender value or paid up value, and also alternative suggestion( term plan -SBI/LIC/HDFC )

    ICICI Prudential Moneyback (2004) 13514 PA 200000
    Jeevan Anand (2009) 29800 PA 500000
    HDFC Children double benefit plan (2011) 38000 PA 600000

    • Hi Seenu,

      You will get all these details from the respective companies.As far as return is concerned, traditional plans do not fetch you higher returns. Money back from these give you lowest.Do remember that plan with any guarantee or any option of intermediate money-back will be costly.

  21. Hello Hemant Ji,
    I purchased Jeevan Anand 6 years back for 16 years policy term. I have already paid 6 year premiums @ 25,655/- per year. SI is only 3,60,000/-. I do not want to continue this policy. How much can I expect at maturity if I stop paying premium and let it convert to a PAID UP policy? What happens if I die before the maturity? Will I lose my life cover or it will be reduced to a proportionate amount before maturity? Will i get life cover even after the policy is matured and upto what extent?
    Thanks,
    Atul

  22. hi hemant
    very useful article,one more thing i want mention,policy can be returned to insurence company within 15 days from the day bond paper is received.kindly advice at what grounds it can be returned!

  23. Hi,

    I had taken this ULIP from ICICI bank where I have my savings account in Dec. 2011. One bank agent fooled me by showing only the benefits, hyped in his own words but not telling me properly about the charges involved. I was busy and could not discontinue within 15 days of freelook period. Now that it is March – April already, I have decided not to approach the bank regarding my decision of discontinuing since I have shown this as an investment for tax saving. But I don’t want to pay any more premiums since it is a heavy amount of Rs. 80,000 and I am a young professional. It is a 5 yr. payment plan with maturity period of 10 yrs. How much can I expect to get back after discontinuing? The policy brochure only mentioned about discontinuance charges from 2nd yr. onwards. Nothing is mentioned about not paying any more premiums soon after the first premium payment. When I called the customer service, they said that the bank will keep the amount for 2 yrs. more, but will deduct the applicable charges which the bank will decide. I feel deceived. Please help.

    • Hi Yachana,

      If you have paid only one year premium then you might not get anything back as in life insurance first year premium is utilized by company for paying insurance commissions and other charges and so are discarded completely. That’s why the policy document would have mentioned no surrender value for first year premium.
      You should speak to the insurance company call centre and not the bank as they are only distributors and not custodian of your insurance fund.

  24. kindly give idea about jeevan saral plans,i have several lic jeevan saral policies, trem 15/20/25 years, paid premium for 3/4 years,what avg return will i get?
    please guide.

    • Hi Manish,

      Traditional insurance plans do not fetch you return more than 5-6% on higher side. Jeevan Saral is also a traditional plan from LIC and so you shouldn’t expect higher returns.

  25. Hi ,
    Hemanth

    I want to know more about ELSS ( Equity linked saving scheme) where to investment to avoid tax , please guide about area of investments.

    Regards,
    Manjunath

  26. Dear Hemant,
    I have gone throguh your articles and find them very useful. My age is 50, a person very close to me is forcing to buy Reliance Cash Flow for Rs.30,000 premium annual through Vcare a corporate agent of Reliance. Kindly suggest What should I do ?, Kindly give an idea about Vcare

  27. Hi,

    I had take Jeevan Saral policy for 21 yrs with premium 12250 quarterly.
    I had paid 2 premium , I think i had make mistake and want to stop this policy as returns are seems to less.
    If i stop this now i will lose 24500 which is huge amount.

    I want to invest in MF with SIP… and a term plan for insurance.
    Should i continue with the existing policy or not…
    PLZ help

    Regards,
    Laxmikant

    • Hi laxmikant,

      Here is the answer whether you should continue or not?
      If you have taken ENDOWMENT OR MONEY BACK POLICY(Traditional Policies)

      After First Year premium, we suggest that you should stop paying further premium. You would lose all you have paid, but it is better to stop travelling on wrong road once you know it.
      If you have paid 2 years premium, we suggest that you should pay one more installment and the stop paying premium. By doing that, you will actually make this policy PAID UP.
      If you have paid the premium for more than 3 years, we suggest that you should stop paying further premium and get this policy into PAID UP ZONE until you get reasonable value.

  28. Hi Laxmikant,

    Based on your better understanding now, you want to invest in MF and Term Plan. You can do a simple cost benefit analysis.
    How much Insurance cover you have from this policy? If you were to buy Term Plan what will be the cost? Subtract your term plan premium from your current
    annual premium of Rs. 49000.
    You may be aware that Jeevan Saral is unlikely to give you more than 6 to 7%
    CAGR. Your good selection of Mutual Fund may give you 10 to 12% CAGR.
    Over 21 years it will make a huge difference.
    It is best to bite the bullet now.

    Regards,
    Sudhir Goyal

  29. Hi Hemant,
    I am a married man with a 2 year old son. I don’t have any insurance policy or MF. I want to invest around Rs 10,000 per month so that it covers my familys need like insurance for my son, mediclaim for the family and some savings maybe in MF. Kindly suggest what are the best options available that I can make use of . that would really help me do something for my family.
    This is a little urgent request so kindly assist me.

    Thanks & Regards,
    Lawrence

  30. Hi Hemant,
    Thank you for your response. I don’t have much knowledge about MF or share market and that is why I asked you if you could suggest any insurance policy or MF that I could invest in (with names) also a good children policy for my son who is 2 years old and one mediclaim policy for my family and some savings maybe in MF as retirement plan . Kindly mention the name of the company you want me to invest in.

    Thanks & Regards,
    Lawrence

  31. Hi Hemant,

    I have a HDFC Youngstar Plan (Children Plan), the annual premium of the same was 25000 and SA is 5 Lacs. I had started this plan somewhere in 2005. The policy is currently in Paid up status. I recently got a call from an RM stating that with the New ULIP rules (on charges which has been reduced), it makes more sense to surrender the earlier policy and take new policy.

    I am not sure what were the charges on my existing policy…but surely it would be more than the current plans. Do you think it is a wise decision to close the existing policy? Also if I have to discontinue the existing policy, wouldn’t investing in Term Plan + Diversified Equity MF would be a better decision than another Child Plan, B’coz the overall SA that I would be getting in the Child Plan would again be very low compared to the Term Plan (More specifically the I-term plans). Is continuing the policy in Paid-up state a correct decision? Some monthly charges for administration, mortality etc are being debited from the fund value of the ULIP.

    Please guide…

    Regards
    Sheela

    • Hi Sheela,

      In paid up you will get the maturity according to the premiums you have paid.You do not loose unlike in surrendering where you have to pay surrender charges .Hence its a wiser decision.
      A term+MF is an ideal combination as you have understood.

  32. Hi Hemant,
    I have the following insurances and policies
    My age is 28. I have take two Life insurances and one retirement plan as given below. Kindly suggest What should I do with them? Kindly guide me for better prospectus.

    1)Birla Sun Life Insurance “FREEDOM 58”
    Commentcement date -Dec 2008
    Type- retirement and pension policy
    Insurance coverage- Nil
    Total Annual premium- 18000 Rs
    Mode of premium- monthly

    2)Birla Sun Life “Platinum Advantage”
    Commentcement date -Sep 2010
    Type- Insurance with 7 yrs highest NAV after 10yrs
    Insurance coverage- 360000
    Total Annual premium- 36000 Rs
    Mode of premium- monthly

    3)LIC Jeevan Anand
    Commentcement date -June 2008
    Type- Insurance
    Insurance coverage- 100000
    Mode of premium- monthly 470Rs

    4)Birla Sunlife frontline Equity fund
    Commentcement date -Nov 2010
    Type-SIP mutual fund (growth)
    Mode of premium- monthly 1000Rs

    5)HDFC Equity fund
    Commentcement date -Nov 2010
    Type-SIP mutual fund (growth)
    Mode of premium- monthly 1000Rs

  33. Dear Hemant Ji,
    It is very nice to note your constant help to mislead middle class salaried professionals. You have truly demonstrated that candle does not lose anything when it light another candle. Kindly help me to take a correct decision on following:
    I have two Endowment plans from Max Newyork life. Purchased in Year 2003 and after reading your article (How to Exit Mis-sold Insurance policies)
    I wish to surrender these plans, kindly advice whether my understanding is correct and in line with your guidance.
    1. Myself (44 years) – Max New York Life – Whole Life till 100 years – Purchased in May 2003 – Premium paid 9 years – Rs 31500×9 + 20000×7 (OPPB) –Total Paid Rs 423500, Life Cover 10 Lacs – Increasing every year and now approx. 15 Lacs + (PA-5 Lacs, Critical Illness- 5 Lacs)- Surrender Value today – Rs 258976, premium to be paid next 50 years. Next due date is May 30th .
    2. My Son (17 Years) – Max New York Life – Endowment till age 60 years – Purchased in May 2003 – Premium paid 9 years – 15000×9 – Total Paid Rs 135000 – Life Cover 7.5 Lacs – Increasing and now approx. 8.75 Lacs – Surrender Value today – Rs 73500, premium to be paid next 50 years. Next due date is May 30th
    Kindly give your valuable inputs & please advice what to do? Can I surrender these policies..
    Best Regards,
    Rahul Pareek

    • Hi Rahul,

      Yes you can exit from these policies. But you should check from your policy document how much surrender charges will apply.
      Although whole life policies are good for creating wealth for your loved ones, But being a traditional plan you cannot expect higher returns from these products.

  34. Quite Useful Information ! Although I haven’t bought such insurance policies but this might help a few friends.
    Will share it for sure. 🙂

  35. Sir
    I have taken money back plan of max new york life insurance. my premium amount is of 12000 for year. After 3 year i will get 12000. I just have paid my first premium. So i want to surrender from these policy. Please help me.

  36. I Have Dream Plan-Life Cvg-Opt 100% -Term 20 of birla sun life . I wanna know that what is locking period for this policy , and also wanna know that can i surrender this policy if yes how much deduction will be … pls suggest.

    Br//
    Javed

    • Hi Javed,

      If you have purchased this policy after IRDA changed the norms in ULIP then there will be a lock in of five years for availing tax benefit.

      For surrender charges you should look at your policy document where it will be mentioned explicitly.

  37. Dear Hemant ,
    First of all thank you for such a nice and enlightening article. After going through this I realized that I have made a bad investment in one ULIP. I started investing in 2008, so already paid 4 premiums i.e 20000/year. Now, I want to get rid of this as soon as possible after taking into consideration the below points. Please have a look at those points I have thought of and share your views and advice on them
    1. The policy has a surrender charge of 60% of the annual premium now and this charge gets reduced by 10% every year. So its Nil only after 10th year.
    2. Unlike most of the ULIPs the initial charges are evenly distributed over 10 years instead of heavy charge on the first year
    3. The surrender value will be taxable now as the policy has not yet completed 5 years.
    4. I intend to invest the entire corpus in equity mutual funds

    Now, I guess I have just 2 options (as I can think of):
    1. Surrender the policy after paying one more premium and get the tax benefit. Surrender charges would be 50% of the annual premium however.
    2. Surrender the policy after 10th anniversary

    Can there be any other better options like making the policy paid up (I don’t care about the insurance as I have already taken a term insurance) or continuing with policy for long term (20-25 years is fine with me)

    Thanks in advance for your precious time.
    Best Regards,
    Bibhu

    • Hi Bibhu,

      Its a situation where most of the investors are stuck with. Foregoing tax benefit you a have availed in last 4 years may not be available option.And considering high surrender charges now you can look at continuing the policy for the term if you keep contributing the premium.But you will have to watch for fund performance and will have to manage it efficiently to get the best result.

  38. I think here you are talking about surrendering your policy – you will get surrender value here which in Unit link Plan (Siksha Plus II)is approximately 2 Yers premium paid & in ULIPs it is amount after surrender charges(After 2nd year 0 – 10% depending on the plan)

    My policy convert ulip to tradintional plan please advice and what a process. earliest. Becouse understanging in I and Agent.

    • Hi Pankaj,

      Traditional plans generate much lower returns then other instruments and so may not meet your requirement.Also you need to differentiate between insurance and investment to avail the best option.

      Identify your requirement first and then evaluate the other alternatives. This will help you in making the decision.

  39. Hi Hemanth,
    Nice article.
    The illiterates of the 21st century will not be those who cannot read and write but those who cannot LEARN, UNLEARN and RELEARN – Alvin Toffler
    Nice statement.

  41. Hi Hemat,
    I have read your article and its really very helpful. After reading your article i have finally decided to surrender my policy of Birla Sunlife named “Dream Plan-Life Cvg-Opt 100% -Term 20” with the annual premium of Rs. 12,000.57. I have already paid the premium of 3 yrs, even 4th year is about to complete. Now i have decided to surrender it after 4 yrs. and want to invest them in mutual funds. Please suggest me to choose the best mutual funds to invest in after 2 months. Waiting for your suggestions and have a wonderful new year.

  42. Nice article on how to exit from bad insurance policies. Tnx for making us financially aware. Long live tflguide !!

  43. Dear hemantji ,

    I have Rs. 1 Crore term plan with critical illness rider( WORTH 10 LACS) taken in Dec.2013.
    I have also JEEVAN ANKUR POLICY for my 3 and half year old son.
    The SA is 3 Lac with Critical illness and Accident Benefit.
    The policy I have taken in March -2012 . I pays Rs. 1096 Monthly.
    If the same amount I invest in PPF I can get more than that in less period.
    As I am having term Plan I want quit out from JEEVAN ANKUR.
    But I am in Dilemma whether to quit or not .
    Kindly Guide me properly. Should I quit right now or make it in PAID UP ZONE as you have suggested in your article.

    Regards,
    Santosh Patange
    09860500000

  44. Dear sir,

    I have taken a LIC market plus -1 ( Table 191 ) policy opting for growth fund, in Dec 2009, i pay an annual premium of Rs 60,000. the policy term is for 14 years
    The agent told me, after 14 years that is at age 48 i will start getting Rs 20,000 as monthly pension, or else will get a lump sum of Rs 25,00,000, but, now i am skeptical about this pension plan, please, let me know whether to continue this plan or not, thanking you.

    • Murlidharan,

      Market Plus is a market linked pension plan wherein you earn returns based on the return delivered by markets you are invested in. Any figure quoted to you is an assumption. You need to check what assumptions your agent has taken and then see whether they are reasonable enough. But exiting a pension plan before the vesting date makes your withdrawal taxable. So analyze and then decide what action you should take.

  45. i hav jeevan anand rnfoenent policy for 1

    0 year plan now i had paid 3 year and 6 months now iam going to surrrender my plicy how many rupees i can get back?

    • Rupasen,

      Jeevan Anand is a traditional plan. If you have paid three years premium then the standard surrender value is 30% of all premiums paid excluding first year premium.

  46. Dear sir, i have lic health plus policy for 12 years. Its 4 installment(rs-1515 each) per year and i complete 3 years. I want to withdrawl my policy. What i get total money back ?

    • Anup,

      Since part of your LIC health Plus premium goes towards investments -ULIP, you will be paid the fund value as on date of withdrawal. Check with the company value of your investments.

  48. Hi Hemant,

    Really its a very good article but reading after making myself bakra :). My problem is also same. I have taken a LIC’s endowment plan(814) with SA – 500000 and AP – 24000 for term 20 yrs. I had just paid 1st year premium. Now my question is suppose
    1. if I paid premiums upto 3 yrs to take this policy into PAID-UP ZONE then how much return shall I get at maturity ?

    2. Do we need to know the insurance company about that we will not pay any premium
    further and please take this policy to PAID-UP ZONE. I mean what is the process of taking a policy into PAID-UP ZONE ?

    Thanks in advance.
    Vishal Kumar

  49. Dear Friends

    I was mistakely sold Max whole life policies for quite a huge amount and now planning to take a legal route against Max. If any of you is NOT satisfied with Max Whole life policies. Please do contact me on 9899300238 so that collective effort can be taken against MAX.

  50. Sir, I paid three annual premia of HDFC Standard life ULIP. My policy was kept in paid up status. I wish to continue my insurance coverage under the policy. I am 63 now and the policy maturity is in Dec 2023. Now can I draw some amounts from the fund keeping sufficient funds to take care of monthly insurance premia charged by the company to the debit of my fund account.

  51. dear sir,

    i have taken two policies of hdfc life childrens plan double benefit plan since 2013, and am paying a heavy premium of Rs 50,000 on each annualy for a paltry sum assured of 5 lacs per policy. please suggest should i continue or stop making payment from 2016 onwards. thank u

  52. Sir,
    I have bought HDFC LIFE SL crest – ULIP & paid only one premium of 60000/-. After buying policy with 6-8 months i have seen different charges getting deducted on monthly basis by reducing no.of units. Now i have decided not to pay further premiums. Pls suggest how to take money out of this policy.

  53. Sir,

    I am new in banking.. my age is 22 and I started a business.

    I am from poor family background… And I become murga of yes Bank executive in may 2016….

    I purchase max life gain policy 8 year / 15 year maturity. So I finally decide to exit.. I only paid 1st premium of 40000 rs.

    But please provide me best way to exit .. that I can minimize loss ….

    Thank you

  54. sir, many thanks for your article. i made a ULIP POLICY IN LIC WEALTH PLUS in feb. 2010. now should i surrender it at present NAV? or hold it because i got a news from website that LIC may go for a IPO and if it happens then certainly the sky is the limit.

  55. Hi ,I opened a bharti axa Child advantage plan of rs 5192 monthly.And given 2 instalments.Now I not able to pay for last 2 months.and the policy gets lapsed.Should I continue with this plan?Please suggest.

  56. I have taken ICICI PRU LIFE INSURANCE which is also a mix of ulip and INSURANCE

    Paid for 4 years.
    Shall I quit.

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