Jerry - “Terminate with extreme prejudice.”
(Movie - Apocalypse Now)
We all inevitably get into bad deals at some point. That’s just life.
Could be a bad job, a bad relationship, bad investment, or a bad location. It could be bad habits we can’t shake off.
I’ve had my share of bad deals. At various stages of life, I found myself working bad jobs, ended up having to live in cities I despised (both in India and US), was stuck in the rut of self-defeating habits, and made crappy investments.
Right now, I’m glad I’ve mostly wriggled out of many such vicious holes and have got my act together. Life has been good and I get out of bed everyday without a dark cloud of doom and gloom hanging overhead.
In this post, I’d like to touch upon one of the bad financial deals I’ve partially gotten out of. They might seem trivial compared to some major-shit people find themselves in. Neither is the money at stake here life-altering.
But they're still good reminders to always be watchful and constantly eliminate bullshit out of your life.
LIC Whole-Life Insurance Policies
I was a naive 24 year old guy that had recently started to draw a paycheck in my first job.
And what do most Indian parents do when their kids start earning?
They push and prod their kids into signing up for LIC life insurance policies in the name of “investment”, savings and tax-benefits. They call upon the “friendly neighborhood LIC agent” and let the agent loose on the hapless youngster.
My story was no different. An agent that my dad knew showed up one fine day, spouted insurance jargon that whooshed right past my ears, made me sign a stack of forms and before I knew it, I was the proud owner of 12 different LIC policies.
I found myself having to shell out nearly Rs. 1 lakh a year in premiums, for a laughable life-coverage of Rs. 50 lakhs that isn’t even inflation-adjusted.
A few years pass, and I ask the agent why he signed me up for 12 policies instead of one. He explains to me that down the line, I’ll have one policy maturing every year and I’ll have maturity income coming in every year for 12 straight years. He made me feel smart about being financially prudent.
Well, now I know that the more policies LIC agents get people to sign up for, the more commission they pocket. The slick agent had made me his sacrificial goat.
I diligently continued paying my annual premiums of Rs. 1 lakh for 10 years before the blinds of stupidity fell off of my eyes. This was right around the time I began voraciously soaking up on FIRE ideals. I started looking into where all that LIC premium money was going.
And this is where these dinosaur businesses start exhibiting how damn obsolete they are in today’s age.
These boomer1 shops excel at making it near impossible to get answers to super basic questions like -
Where is my money going? How much have I paid so far in premiums?
How is that money being managed? Where is it invested?
How has the invested money performed all these years? How does the performance stack up against benchmarks? What are the returns like?
How much annual bonus have I been getting?
What’s the lumpsum I’d be getting if I outlive my policy-term?
Sure, I might get these answers if I spend hours browsing web forums and pore through policy documents, punching numbers into calculators and spreadsheets. But I don’t want to work so hard to get my answers. I expect to be able to login to my online account and get these numbers presented to me in a few clicks.
After a few days of browsing and reading, I came to the conclusion that LIC whole life insurance policies are for the most part a huge scammy ripoff - you’re paying high premiums for low coverage, and the money you’re pumping in is getting hammered by inflation. It was time to get out of this bad deal.
It didn’t come as a surprise when I couldn’t do my account closures online or over the phone. It’s a boomer shop after all. So I visited the local LIC branch to get it done. And they upped the game further by stating I can’t do it in any branch, and that it has to be the “home-branch” where the policies were initiated. That’s my native town an overnight train journey away from Bangalore. Just, wow.
These crusty old brick-and-mortar institutions truly need to crash and burn. I vehemently look forward to the day these businesses no longer attract any new tech-savvy customers and all the slimy LIC agents are out of jobs.
Long story short, I then began collaborating with my dad who fortunately still lives in our “home-branch” town, filled out endless paper forms, made back-and-forth trips to the courier office to mail the forms to my home town. My 75-year old dad made trips to the home-branch, with each visit eating up all his morning, and with some of those visits turning out to be wasteful because I missed signing some required columns on those confusing forms, which led to further running around and paper-pushing.
The project dragged on for three months at snail’s pace before I eventually got all my stupid “LIC Jeevan Anand” policies closed prematurely.
Amount I paid in premiums over ten years - Around Rs. 10 lakh.
Amount I got back after all the early closure penalties - Around Rs. 8 lakh.
Over ten years, this is money that could have doubled to 20 lakhs had I put it into fixed deposits. It probably would even have tripled if I had invested it in the stock market.
It’s still a small amount in the grand scheme of things and I’m fortunate to be privileged enough for this loss to have no real impact to our overall financial well-being.
I’d rather terminate my ties with these scammy boomer shops with extreme prejudice even if it means taking a loss. I want these legally registered robbers out of my sight and out of my life.
TLDR - Don’t buy whole life insurance policies. Get a term insurance instead.
In my next post that I don’t know when I’ll get around to writing, I’ll talk about my ongoing struggle to get out of my second bad deal - Bangalore real estate.
Talk soon,
- Dog
Some political correctness is in order for my liberal pejorative usage of the term “boomer”. Please note I’m not being ageist here. My definition of “boomer” applies to anyone or anything that hasn’t adapted to changing times and continues to hold onto inefficient, obsolete mindsets and processes.
Dog, this also very much mirrors my LIC experience. Just that I am still in it. As soon as I got married and got a job, my parents brought the local slimy LIc agent over who pulled out numbers from his ass. I didn’t know better and before I knew it I was paying 1.5 lakhs out of an 8 lakh salary to LIC. This was upon my return to India. I later found out that guaranteed returns would only be half of what I was told. So, I asked my parents to cancel them when I returned back to the US. But they secretly kept paying the premiums and I only found out a couple of years later. I started paying them to keep them happy - we are 13 years into the policies.
I am really curious about why you feel Bangalore real estate is a bad deal and how you got out.
"In my next post, I’ll talk about my ongoing struggle to get out of my second bad deal - Bangalore real estate."
Really looking forward to this. I've noticed that rents in India are much cheaper than property prices. So there may be a huge asset bubble that will pop sooner or later.