Cancelling Jeevan Anand Policy dillema

[fonzie]

Hi

I am a 26 yr old Software professional. I am not well versed with the investment and policy fundas (I am working on it!) so if I say something incorrect, go easy on me! :)

I currently have a Jeevan Anand LIC Policy with Sum Assured of 500,000. The annual permium is ~25k. It started in Nov 2007 and by Nov 2010 I had already paid 4 premiums. Last year, I was researching on new investment opportunities and came across articles on 'Why NOT to buy Jeevan Anand and similar Insurance policies'. After doing some more research, I became convinced that I would be better off with a Term plan rather than Jeevan Anand. So I did not pay the premium last year with a view of either surrendering the policy or converting it to its'paid up ' value.

But a few days back I came to know that one can get cheaper (and easier) loans against the Jeevan Anand Policy which according to my father is a big advantage. You know the 'kab time kharab ho aur zaroorat pad jaye' wala funda!

So now I am two minds and I hope the folks here can guide me to the right decision.

My questions:

1. How much difference is there in the interest rate for say a personal loan and a loan against the policy? Is is significant enough to keep this policy active?

2. Are there any alternative assets that I can invest in which would yield better results than JA and can be used as a security for loans?


Thanks in advance!

[VarunD]

Hi

I am a 26 yr old Software professional. I am not well versed with the investment and policy fundas (I am working on it!) so if I say something incorrect, go easy on me! :)

I currently have a Jeevan Anand LIC Policy with Sum Assured of 500,000. The annual permium is ~25k. It started in Nov 2007 and by Nov 2010 I had already paid 4 premiums. Last year, I was researching on new investment opportunities and came across articles on 'Why NOT to buy Jeevan Anand and similar Insurance policies'. After doing some more research, I became convinced that I would be better off with a Term plan rather than Jeevan Anand. So I did not pay the premium last year with a view of either surrendering the policy or converting it to its'paid up ' value.

But a few days back I came to know that one can get cheaper (and easier) loans against the Jeevan Anand Policy which according to my father is a big advantage. You know the 'kab time kharab ho aur zaroorat pad jaye' wala funda!

So now I am two minds and I hope the folks here can guide me to the right decision.

My questions:

1. How much difference is there in the interest rate for say a personal loan and a loan against the policy? Is is significant enough to keep this policy active?
1- Loan Value = 90% of surrender Value (approx.)
2- How to calculate surrender value? (http://www.policywala.com/forum/showthread.php/1086-How-to-calculate-the-Paid-Up-Value-Surrender-Value-and-Loan-Value)
3- A loan is only sanctioned after payment of 3 years of premiums.
4- The rate of interest charged on loans is at 9% to be paid half-yearly.



2. Are there any alternative assets that I can invest in which would yield better results than JA and can be used as a security for loans?


Thanks in advance!
You can take loan on PPF. The rate of interest on the loan taken will be around 2% above the rate of interest earned on the deposits in PPF. Current PPF Interest Rate 8.8% so the rate on loan is 10.8%.

[VarunD]

Please also read this article - 'Term Insurance + PF' is better than LIC's Jeevan Anand (http://www.policywala.com/content.php/369-Term-Insurance-PF-is-better-than-LIC-s-Jeevan-Anand)

[fonzie]

Thanks for the info Varun!