your parents probably have a LIC policy they’ve been paying for 20 years. they think it’s an investment.
it’s not. here’s what it actually is.
an endowment plan bundles life insurance and a savings component together. sounds smart. one product doing two jobs. the problem is it does both jobs terribly.
real example. jeevan anand, one of LIC’s most popular plans. ₹50,000/year premium. 20 year term. total paid: ₹10 lakh. maturity amount: roughly ₹13-14 lakh. that’s approximately 3.5% annual returns. inflation is 6%. you just lost money while thinking you were saving it.
now look at the life cover. on that same ₹50,000/year premium you get maybe ₹8-10L of cover. a pure term insurance plan with the same premium gives you ₹1.5-2 crore of cover. same money. 15x more protection.
so why did your parents buy it? the LIC agent got 25-35% commission in year one. on a term plan he gets 5-7%. he didn’t sell them the wrong product because he was evil. he sold it because it paid him 5x more. the incentive was never your family’s wealth.
this has been going on for 50 years across crores of indian families. every year premiums go in. every year real returns stay below inflation. every year the agent renews his commission.
what your parents actually needed was simple. a term plan for protection. a mutual fund SIP for wealth building. keep insurance and investment completely separate. bundling them only benefits the person selling.
if your parents have an endowment plan right now, check the surrender value. compare it to what they’ve paid in. calculate what that money would be worth in an index fund.
the number will make you uncomfortable. but better uncomfortable now than broke at retirement.