Should I close my Jeevan Anand Policy

Firstly, you should remember that, if you have dependents it is absolutely critical that you have sufficient life insurance to provide financial security to your family in the event of an untimely death. All other considerations like investments and tax savings are secondary to this. Since from your query it seems that, LIC Jeevan Anand is your only life insurance policy, you should ask yourself is the cover or sum assured of your policy sufficient to meet the financial needs of your family in the event of an unfortunate death. LIC Jeevan Anand is a traditional endowment plan. Usually the sum assured of traditional endowment plans are not sufficient to meet the financial needs of the insured because the premiums are very high compared to the sum assured. Irrespective of whether you surrender or continue your Jeevan Anand policy, you should ensure that you have adequate life insurance by buying additional insurance if required. If you go through our article, Why are non term life insurance plans detrimental to your financial needs, hopefully you will realize that term plans are the best life insurance products to meet your financial needs.

Let us now come to the investment aspect. You are absolutely right in not seeing your life insurance endowment policy as the best investment or tax saving option. Over the term of your policy, you can expect an internal rate of return of around 6%, which is just barely above the normal inflation rate and probably below the inflation rate of your consumption basket in a city like Bangalore. For tax savings, For the purpose of tax savings, mutual fund Equity Linked Savings Schemes (ELSS) or National Pension Scheme (NPS) or Public Provident Fund (PPF) are better investment options, depending on your risk appetite. If you want to create long term wealth ELSS is the best tax saving investment option. In the last 2 years, top performing ELSS funds like Reliance Tax Saver, Axis Long Term Equity Fund and BirIa Sun Life Tax Relief 96, have given 30% or more compounded annual returns. If you are investing for retirement, then you can consider NPS. In fact, by investing in NPS, you can save an additional Rs 50,000 over and above the Section 80C limit of Rs 1.5 lacs.

If you want to surrender your Jeevan Anand policy you can calculate the surrender value based on LIC’s surrender value guidelines. LIC calculates 2 surrender values:-

• Guaranteed Surrender value: 30% of all premiums paid excluding first year premium. This is the minimum surrender value, provided your policy has been in force for three years.


• Special Surrender value: Paid up value discounted by surrender value factor. Special surrender value is calculated using the following formula:-


• Surrender Value = [{(Number of premiums paid / Number of premiums payable) X Sum Assured} + Accumulated Bonus] X Surrender Value Factor.

The surrender value of your policy will be the greater of the Guaranteed Surrender Value and the Special Surrender Value. You can find the Accumulated Bonus and Surrender Value Factor on the LIC website. We have discussed how to calculate surrender value in details, with particular reference to LIC Jeevan Anand in our article, Should you surrender your life insurance endowment policy.

Surrendering your policy is not the only option you have. You can also make your policy paid up. You also have the option of not paying premiums but not terminating the policy. In this option, after you have made a specified minimum number of premium payments (e.g. 3 full years of premium payments), you can continue the policy till maturity without making any further premium payment. You will continue to receive life cover through the maturity of the policy but the sum assured will be reduced to the paid up value. The formula for calculating paid up value of sum assured is as follows:-

Paid up Value of Sum Assured = (Number of premiums paid / Number of premiums payable) X Sum Assured

This paid up value will remain the same through the term of the policy. Once a policy is made paid up, it will not qualify for any further bonuses.

Maturity value of a paid up policy = Paid up value of sum assured + Accumulated bonuses (before the policy was made paid up)

We have discussed paid up value calculations in our article, Should you surrender your life insurance endowment policy.

You should make educated decision with respect to your life insurance policy. Whether you surrender your policy or make it paid up, you should buy adequate term life insurance. The premium of a term plan will be many times lower than the premium of the endowment plan. You can invest the savings in your premium amount in ELSS or other investment products that are suitable for you. You should consult with your financial advisor if you need help in making the right investment and insurance decision.