1. Over time, young professionals tend to buy various life insurance policies, either bought by parents or for tax-saving or miss-sold to them.
2. Being endowment policies, they are inefficient as they neither give adequate returns nor adequate life cover for the premiums being paid to maintain them, and should either be allowed to lapse or surrendered or converted to paid-up plans.
3. If allowed to lapse early, premiums paid are foregone, without any further payment, and if surrendered after sufficient years, a portion of paid premiums is refunded as surrender value, with stoppage of life cover in both cases.
4. If converted into a paid-up scheme, the plan will continue for the total term for a reduced cover, without paying any more premiums, but the accumulated amount will be received only on maturity of the policy, which implies an opportunity cost since funds will remain blocked and will earn low returns instead of being deployed in a better investment product.
5. On the other hand, premiums saved due to a lapsed policy, or funds received out of a surrendered policy, can be immediately deployed in better investment products.
6. An adequate term insurance cover, preferably online, for the largest possible tenure at current competitive premium, should be taken before surrendering all endowment policies.
7. A systematic investment plan should be started simultaneously with the money that is saved on the premiums and the surrender value received from these policies.
8. In this way, the same outlay will provide good insurance cover as well as investments.