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D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

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Beware of LIC agents pitch

Posted by Muthu on December 2, 2013

I hear that some LIC agents are asking to take policies before 31’st December 2013 as the current ones would no longer be available from 1’st January 2014. 

Probably brisk sales may be going on for LIC policies during the last few months and it may reach feverish pitch this month. 

Please understand that this is a ploy by agents to maximize their revenue in a shorter span for time. 

It is true that existing policies would no longer be available after the end of this month. What is unsaid is that, new policies with better features for customers are being introduced from next month.

 From January 1’st;

 1)     Surrender value would be higher

 2)     Minimum holding period to be eligible for surrender is being decreased

 3)     The insurance cover would be more for the premium paid (sum assured as number of times of premium)

 4)     The commission for agents are being brought down

 5)     LIC would be opting for a new mortality table. As life expectancy has increased in the last decade, the mortality charges would come down. This would result in decrease of term insurance premium and also mortality charges for other policies

 6)     Service tax is levied only by private insurers so far. LIC has been absorbing the same into their pockets. Like private insurers, LIC also would start passing on the service tax to its customers

As we repeatedly mention, all one need is a reliable term cover from a good life insurance company at a competitive cost. Rest is all noise. So I’m confident that you would not be falling for these sales pitches. Still just wanted to write this on the side of caution.

Whenever some one says this is now or never option, be skeptical and completely on guard.

Even in mutual fund space, a closed ended value fund of a fund house was aggressively sold last month even though it has a good performing similar open ended fund. Aggressive campaign and high commission resulted in mobilizing of higher corpus. Before abolition of entry load in August 2009, there was aggressive pitching and selling of funds so that entry load on the same may be enjoyed; similar to what is being done by LIC agents done now.

It’s your money and any one pushing you to take a decision is definitely not working in your interest.

Tail Piece: We always make it a point to keep emphasizing on staying the course and have patience. Last week, Franklin India Blue Chip Fund completed 20 years. Rs.1 lakh invested in the fund 20 years ago is now worth Rs.53 lakhs, which works out to annualized return of 21.95% per annum. This is despite bull and bear markets, up and down business cycles, economic growth and slow down, depression and euphoria, performance and non performance of funds in some years etc… Much wealth is made by not doing frequent tinkering but patiently staying the course. I wish that we get such rewards by developing these traits.

3 Responses to “Beware of LIC agents pitch”

  1. DGI Sean Baron said

    Hi Muthu, planning to surrender my Jeevan Anand policy. Is it better to take loan on it or surrender it? 20 yrs term, out of which I have crossed 9 so far. Total premium paid so far = approx 2.xL, Surrender Value: 2.07L, Loan Available: 1.86L. Life Cover: 5L. Thanks

  2. Muthu said

    If you’ve term cover not less than 10 times of your annual income, then you can consider surrendering this policy.

  3. Shankarraju said

    Hi Muthu, Perfect article at the perfect time. All these problems an investor can avoid if he is not doing any decision during eleventh hour.

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