Shruti is 38 years old IT professional. She has been very systematic and disciplined in her savings and investments over the years. However, she feels that Insurance Portfolio needs attention. There Endowment Policies that he bought five years ago, primarily as a tax saving tool. Now she finds that they don’t give her the cover she deserves premium It is paying, nor gives very high returns. He is confident that his security needs can be met more efficiently and put to better use of his money but is not sure how to go about it. Shruti sees the premium paid as a drain on her investable surplus. What are the options available to him?


Shruti, like many others, sees endowment policies as an inefficient way of looking after security and Investment needed. His requirements are two-fold: one, that he gets adequate insurance cover at a competitive price and second, that he be able to make better use of his funds, which are currently being used to pay premiums on his policies.

With her existing policies, Shruti has options to either let the policies lapse, surrender the policies or pay them.

If she allows the policy to lapse by non-payment of further premiums, she suffers a loss of at least 50% of the premiums paid in the last five years. Paying-up the policy will mean that the cover will continue for the reduced Sum Assured during the remaining term. While Shruti will not be required to pay any further premiums, the proportionate Sum Assured will be received only on the maturity of the policy. This may indicate an opportunity cost as the fund will remain blocked and earn lower returns rather than being positioned in a better investment product.

Surrendering the policy will mean that a part of the premium already paid will be returned to Shruti. Since Shruti’s policies have been in place for some time, she will now have a good surrender value which she can immediately invest in the products of her choice, which have the potential of high returns. He should also start investment program from time to time with the money saved on premium, so that he cannot spend this amount. Taken together, the same outlay will now give Shruti a good insurance cover as well as investment.

(Content on this page is courtesy of Center for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Aarti Bhargava and Labh Mehta.)