I was financially naive that I thought endowment policies were wealth creators, but I realized my mistake.
Several years ago, my aunt asked me to buy an endowment policy from LIC (Life Insurance Corporation of India) through her. I politely declined her offer with a conscious effort not to strain our relationships. I respected her a lot for what she was, except that I could not tolerate the forceful selling of LIC endowment policies. At some point, to sustain and respect the relationship, I succumbed and bought a couple of endowment policies (Jeevan Anand & Jeevan Saral). Keep paying premiums for several years for a very meager life cover and a payback of corpus that does not even beat inflation. When I realized that I was spending a hefty premium for an insignificant life cover, I immediately surrendered both the policies; luckily, they had some surrender value. There were so many questions from various LIC agents asking to re-invest in another endowment policy. Somehow, I escaped all these gimmicks and got the surrender value of the policies.
Policy commencement: Sep-2011
Life Cover: 5 Lacs
Premium Paid: INR 30,000 per year
Policy surrendered: 2019
Surrender Value: 1 Lac
Eye Opener: A Simple term insurance with a life cover of 1 crore demands a premium of INR 20,000 a year, whereas I was paying INR 30,000 for a life cover of 5 Lacs!
Is my life worth just 5 Lacs?
Why am I paying more for a significantly lower life cover?
Whose pockets are my money filling in?
Though the total premium paid was much higher than the surrender value, the opportunity cost looked much higher, and thus, I re-invested in a few stocks.
I met my aunt over a zoom call, and after a couple of minutes of general conversation, she started selling LIC policies again. She boasts of her selling several crores of policies to many individuals. Her dedication and determination were so high that whom so ever she met, she eventually ended up in merciless selling of LIC policies.
Three Important Things that I observed:
- She was more focused on her commissions…