Why ULIP’s are not good choice?

59 Comments on this post

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1. What is ULIP? wrote:

   [...] Why ULIP’s are not good choice? [...]

   June 20th, 2010 at 3:34 am
2. IRDA wins over SEBI on ULIP policy verdict wrote:

   [...] Last week finance ministry has announce that, IRDA has the full control on ULIP policies. SEBI has no rights to ask them to stop issuing the fresh policies. It came as the big blow to SEBI. Everyone expected that the verdict will come in favor of SEBI because the 80% of the money in ULIP policies are invested in the stock market. [...]

   June 21st, 2010 at 8:38 am
3. New Avatar of ULIP Policies wrote:

   [...] Why ULIP’s are not good choice?. This is the article written by me couple of months back. At the time of writing the article, ULIP is one of the most controversy product in the financial world. It is because of its high management charges and commission to the agents. The situation has changed after the chain of events like controversy on agents commission and SEBI’s ban on ULIP policies. The cap for charges on ULIP policies have been reduced by IRDA. It becomes the more competitive to mutual funds. This article explains the reforms on ULIP policies. It compares the present charges on ULIP policy with the older policies. If you have any doubts, please post it in the comments section. If you like the article, subscribe to our future articles here. [...]

   June 26th, 2010 at 8:39 pm

1. Naresh said:

   Is it possible to convert existing insurance to term insurance?
   Can you let us know your opinions about the LIC policies like Jeevan Anand, which offer retirement benefits as well? Can’t you treat them as investments?

   January 19th, 2010 at 10:11 pm
2. krishnas said:

   Hello Naresh,

   The insurance plan can not be changed. Also don’t consider the insurance plan as the investment.

   Jeevan Nidhi is providing the retirement benefits. Please check it.

   Thanks,
   Krishna

   January 19th, 2010 at 10:58 pm
3. Lokesh said:

   I think it all depends on plan provided.
   In my case for 3800/-(averaged) yearly as mortality charges I am getting cover of 10L + in case of my death my future premiums for ulip is paid by insurance company. My family will get 10L and at maturity of ulip all fund value.
   In a common term plan for 10L cover one have to spend similar amount 3500 to 4000 per annum. I am also giving same amount + getting extra benefit.

   January 20th, 2010 at 9:59 am
4. krishnas said:

   Hello Lokesh,

   I agree with your views. Also IRDA has reduced the charges on ULIP. I will be writing the seperate articles about the
   new charges. What is the ULIP policy you have taken? For 10 lacs, in term plan you pay less than 4000. In LIC, for 30 year person the 24 lac policy premium is 7000.

   Thanks,
   Krishna

   January 20th, 2010 at 7:33 pm
5. GNP said:

   Hi,

   I have taken Children plan from “HDFC”
   Policy Name: UL Young Star Suvidha Growth Fund.

   I am paying 4000/- per month.
   As you said they Charging around 25% for first two years.
   After rest of years they charge only 1% to 3% i think.

   Purpose i taken is purely investment, I wish to pay this 4k up to next 20yrs.

   After reading your comments on ULIP’s, am confusing.

   Shall i stop paying after 3rd year, can i continue?

   Thanks,
   GNP.

   January 21st, 2010 at 1:11 am
6. Lokesh said:

   Hi Krishna,
   I have HDFC young star super. Similar ULIP is from ICICI smart kid.
   I have compared the charges with LIC anmol jeevan for a 31yr old with 25yr term.

   January 21st, 2010 at 5:16 am
7. krishnas said:

   Hello GNP,

   Thank you for the comments. Here What I have posted is only the general opinion about the ULIP. Also I have mentioned that because the people are not educated on UILP, they are losing the money. What you have to do is, look into the policy you have taken and see what will be the return you will get each year.

   Also check the latest NAV price and compare with the invested price. If you have any doubts please reply to this comment.

   Do you have the online account?

   Thanks,
   Krishna

   January 21st, 2010 at 7:41 pm
8. krishnas said:

   Hello Lokesh,

   Thank you for the reply. What is your observation on comparing those policies with LIC?

   Thanks,
   Krishna

   January 21st, 2010 at 7:42 pm
9. GNP said:

   Krishna,

   Each Year return will depending on Sensex only right? So, How to Avrg return? My Goal is I want to continue this till the 25yrs term. I hope in 25yrs longterm by paying premimum monthly will help me to get get good return. What do you suggest?

   Yes, I have online A/C.

   Unit price when purchased is : 54.2/-
   And now 74.09/-

   Till now i paid 19 premiumns, so total till now i paid 76000/- now my fund value is 68171/-.

   Thanks,
   GNP.

   January 21st, 2010 at 11:59 pm
10. krishnas said:

    Hello GNP,

    So, your fund is one loss?
    Even after increasing the NAV value.

    Thanks,
    Krishna

    January 22nd, 2010 at 9:10 am
11. Aravinda. R said:

    Hi Krishna,

    Just happened to read your article and found you AGAIN suggesting/ advising your readers with incomplete and misleading information about insurance products in general and ULIPs in particular.
    _________________________________________________________

    You wrote -”This article explains about the ULIP and it compare with the mutual funds”.

    Me – Comparing an insurance policy with any other investment avenues, like shares/FDs/Mutual funds/real estate/jewelry etc, is like comparing oranges with apples. Whereas insurance is about getting immediate protection from potential financial tragedy, others are modes of savings and gaining appreciation of value over long term. Anybody who opts for ULIP policy must know he is trying to buy both ‘apple n orange’ i.e insurance cum investment.
    ________________________________________________________

    You wrote -”If you are looking into the coverage provided by the ULIPs, it is very low compare to the term insurance cover.”

    Me – Look at the simple term policy example you have given: “In LIC, for 30 year person the 24 lac policy premium is 7000″.

    Now, say, the insured person fortunately survives the term of 10 years. Now calculate the amount he stands to ‘lose’ because he ‘won’ in surviving! 10 years x Rs. 7000 + (potential interest, say, about 7.5%/annum, lost on each premium with each passing year) = Rs.70,000 + (approx. Rs.35,000) = Rs.1,05,000. Now, if you tell a prospective customer that if he survives the term of 10 years then he’ll lose more than 1 Lakh rupees, many people would be shocked! They won’t appreciate the fact that even though they may lose Rs.1 Lac, they are on the other hand providing a good coverage of 24 Lacs to their near n dear ones. It disturbs them to think that they’ll lose over Rs.1 Lac over a period of 10 years! Few, especially those in their 30s, would imagine themselves dead in next 10 years! Many such people then say- ‘ give me a policy which will give me my money back too if I survive’!

    So, to say, a ULIP policy charges more compared to a term policy, without giving the financial implications of a term policy in the event of survival is not fair. I, by default, advise people to get a term policy for a substantial sum, especially to those who are below 35yrs.
    ________________________________________________________

    You wrote – “Insurance will protect your family by giving the lump sum amount which is sufficient for your entire family. In that case you must have the life cover of about Rs.50 lacs (it varies for each family). None of the ULIP policy will give you such a huge amount.”

    Me – Who told you that “None of ULIP policy” will give a coverage for 50 lakhs? Coverage provided under any policy is just a matter of the proportion of premium paid. The quantum of premium may vary in different policies for a certain sum but to say ‘no ULIP policy gives coverage for 50 lakhs’ is wrong.
    ______________________________________________________

    You wrote – “I would suggest you to invest in the mutual funds, instead of ULIPs. If you are investing in the mutual funds, there is 1.25% charges deducted on each payment. Where as in the ULIP policies the deduction is nearly 25%.”

    Me – You didn’t care to explain why would a insurance company deduct 25%. Why the hell can’t the insurance companies charge just 1.25% like mutual funds AND give a life coverage guarantee for lakhs of rupees, No? Insurance companies are surely insane!!!
    _______________________________________________________

    You wrote- “Another drawback of the ULIP is charges on EACH INSTALLMENT of the premium. Almost 25% of your premium will be deducted as the charges.”

    Me – Omigoshhh…Here again you are guilty of giving incomplete and incorrect information. You didn’t bother to tell what would be the charges in an ULIP in the successive years! Any uninformed reader planning to buy ULIP, after reading your article, would think that a ULIP charges 25% on each of his premiums!!! That’s GROSSLY WRONG. If a ULIP has charges of 25-30% in the 1st and/or 2nd year, the subsequent charges would be in the range of 1-2%/annum. There are many ULIPs of many companies with different charging patterns. There are also ULIPs which have ‘loyalty reward’ options wherein a customer can get back upto 120% of his base premium if he makes a regular premium payments for a period of 10-15 years. So, one can get back the deducted charges if he invests over long term than just paying premiums for 3 years.

    And I’m sure you won’t explain the readers why such a seemingly high charge on premium is deducted in initial 1-2 years by some companies ( there are many which charge 3-6% every year for the 1st 10 years).You won’t tell them the reason why they get life coverage even as most of their premium is invested in equities. Did you ever tell your readers why they would continue to get the life coverage even though they may stop paying the premiums in an ULIP after 3 years? Perhaps you don’t know yourself? That charge is used to provide the coverage which would be equivalent to the charge applicable to a person buying a term policy for the same amount of coverage.
    ________________________________________________________

    Lastly, you wrote – “I hope this article will be eye opener for those who are investing on the ULIP policies.”

    Me – I’m sure your article will scare the hell out of anyone thinking of an ULIP policy!

    Please give complete and correct information about a financial/insurance product and then analyze the pros/cons of different investment options.

    Thanks,

    Aravinda. R (9036460350)
    justarvi@gmail.com

    January 22nd, 2010 at 9:35 am
12. krishnas said:

    Hello Arvinda,

    Still you are mis-understanding my article. From your comment, I can assume that you are insurance agent and selling the insurance products. I am happy to receive the comments, because every one here to post their opinion.
    I definitly, want to warn the people who choose the ULIP policy without the proper knowledge. I would like to say one point to our readers, many articles posting here is about the what I am seeing in the real life.

    There is many people who taken ULIP and lost more. Agents who mis sold the policies by saying “The amount will be doubled or tripled with in three years”. I don’t like if anyone giving the false promise.

    People who know the fundamentals, still buy the ULIP because they know how to choose the good policy. If those who don’t know, keep distance or get idea about the ULIP policy from friends and buy them.

    Also ULIP is not providing the more coverage like term policy. Also, IRDA has reduce the charges from October 2009. That is really a good move by IRDA. I will be writing a separate article about that soon. I am not against ULIP, but be careful before buying this policy.

    Any way, thank you for your comments. I would like to hear like this comments from you. If I am really mistaken, I will correct myself and update the article.

    Thanks,
    Krishna

    January 22nd, 2010 at 6:18 pm
13. GNP said:

    As per policy rules, the first 2yrs they will deduct 25% to 30% from each premium right? So, After 30% deduction from 76k, final investment is 53200k only, now it is 68000k around.

    I am assuming, from the third year onwards they charge only 1% or 3% max. So, in 25yrs of long term point of view. I think i did good one by taking this policy. Even if some thing happens to me company will continue the policy till the 25yrs, so even i get good insurance too.

    May be my assuming wrong, but hope all is well.

    January 23rd, 2010 at 10:58 am
14. krishnas said:

    Hello GNP,

    You are correct. If you are taking the ULIP policy then continue minimum of 10 years. Then only you will get very good return.

    Also, if you are taking the policy from Oct 1,2009 – The charges are reduced by the IRDA. Even first two years are low.

    Thanks,
    Krishna

    January 23rd, 2010 at 5:31 pm
15. Hari said:

    Aravind,
    I completely agree with Krishna comments. This article is targeted to those who don’t know the difference between ULIP, Mutual fund, investment & Term insurence. Please don’t confuse the readers with your comments.

    Readers,
    I would like to give more info on these topics for more understanding.

    Term insurence = Risk coverage. Best example is motor bike/car insurence. If you make accident then only you will get the money from insurence othervise you won’t get any money that you have paid as a part of premium every year. If you are accpeting motor vehicles policy then why don’t you accept term insurence policy??

    Mutual fund = Buying and managing the equity stocks by a well qualified fund manager. If you are not expert in stocks and want to keep your money in stocks, then Mutual funds are best option.

    ULIP = Mutual fund + Term insurence + Allocatin & Administrative charges(Fund management + Agent commission).

    I request readers to understand the difference among them. If you don’t understand search in internet read the valuable infromation provided in many blogs. Please don’t approach any agent, because they will confuse you and make you to commit on some ULIP policy where they have more commission. So don’t do that mistake.

    Once you are clear, then answer the questions to yourself first before taking any policy.

    a)Do I want investment or insurence? Am I clear what I want?

    b) If it is insurence, then how much do i required?(Ex:- 1lakh, 10lakhs or 50lakhs)

    c) If it is investment, then what is the investment objective or goal of the investment?

    d)Once you are clear on investment objective then how much money do you required? and when do you required this money? How much premium you can pay per month? How many premiums that you can pay to achive your goal?

    e) Review the information that you have answered
    – Investment/Insurence objective
    – Total money required by end of the term
    – No of years required to get the money back.
    – No of premiums that you can pay.
    – Monthly investment amount that you can affort.

    Now it is time to decide the investment instrument.(ULIP or Mutual fund or term insurence or combination). Browse internet and approach agetns get educate yourself how can they help you to meet your requirement. Some of tips that you need to remember when you speak with agents;

    1)Don’t compromise your requirements? Stick on your requirements. Don’t add or remove any item.

    2)There are many hidden charges and unknowns will be there in ULIP. Unfortunately agents won’t reveal all those points.

    3)Never trust agent words. Even if he is your father or brother.

    4)Don’t trust what aget says, Visit the oficial website of the insurence company, look at the terms and conditions and make sure you understood every thing.

    Once you are clear about the policy that you are going buy; then review their anual report in IRDA website. (www.irda.gov.in).

    All insurence anual report is present in IRDA web site. And every one can access the PDF.It will be approx 250 pages. Look at the following items in the anual report for the insurence company that you want to take,

    a) Percentage of pending claims
    b) Percentage of claims booked
    c) Percentage of claims processed
    d) Percentage of grievance pending
    e) Percentage of grievance processed

    Interesting thing is most of the agents don’t know complete details. They alwasy target to sell their product. If you approach the insurence company they reluctant to give the above details.

    I believe you have more information to take a good decission on your investment or insurence. If you want to take good policy then you need to spend time and put more effort to select the best one. If you are lazy then you are going to loose money and agents will gain. So do some home work and decide your self.

    Conculstion:-
    Last year i was desparate to take some policy to secure my daughter education in case some thing happens to my life in future. After doing enough research i arrived a conclusion, not even one policy suits my requirements. So i designed my own policy based on my requirements and started implementing.

    In my opinion combination of term insurence and Mutual fund will give good returns than ULIP.

    Krishnan,
    I almost all blogs of your web site and educated. I thankful to you and i wish you to continue.

    Thanks
    Hari

    January 24th, 2010 at 3:41 am
16. krishnas said:

    Hello Hari,

    Thank you for such a detailed explanation for understanding Term Insurance, Mutual Funds and ULIP. I really appreciate your effort to help other readers. Agree with your comment and it is completely based on the facts. It shows you have researched the subject before posting here.

    I too very sad that agents are more focused on selling the products rather educate the customers and sell them. IRDA has to come up with rescue the policy holders.

    Happy to hear that my blog helped you to learn the subject. I too keep on learning about the finance and posting it here.

    Thanks again for your comment and reading my articles!!

    Thanks,
    Krishna

    January 25th, 2010 at 1:17 am
17. Aravinda. R said:

    Krishna,

    To me, being duly certified by IRDA and AMFI, the incomplete information you’ve given about ULIPs is glaring. Just as it is incorrect and unethical for insurance agents to not give complete info about various charges applicable in an ULIP policy, so is it for you if you don’t give complete info about all the charges in an ULIP over the years and the reasons for such charges. You just made a grand n horrifying statement that a ULIP will deduct 25% on each installment of premium !!!

    And you say what you’ve written is based on what you have seen in real life. Tell me,
    * have you taken any ULIP policy?
    * if yes, have you read your ULIP policy’s account statement?
    * has your insurer deducted 25% or more in each policy year, say, for 4-5 years?

    When one GNP stated that his NAV has gone from Rs.54 to Rs.74, you exclaimed that he has made a loss! Without realizing that GNP was getting life coverage too for lakhs of rupees in the same period. If GNP’s fund value looks lesser even after a hike of 37% in NAV, it’s because of the insurance and other charges. Yet, if GNP bought a ULIP policy even when his need was, as he himself said, purely for investment, he should not have taken a ULIP. If investment was his only motive then an ELSS would have been much better.

    I agree, there are many insurance agents who mis-sell ULIPs. But then again an insurance company’s ULIP brochure contains all details of all charges. But even the so-called educated don’t spare a few minutes to go through the brochure once. Still, even for those who have taken a ULIP policy, the account summary of a ULIP policy gives complete list of charges/deductions – from the policy start to the last date, on a month-by-month basis. Nothing is hidden either in the beginning or at the end. People just need to inculcate financial discipline.

    January 26th, 2010 at 12:57 pm
18. Aravinda. R said:

    Hari,

    Care to show which of my comment is confusing?

    I don’t know how much research you did to design your own policy but don’t comment like – ‘There are many hidden charges and unknowns will be there in ULIP.’ That tells much about your research skills. Check out any ULIP policy brochure or go through any ULIP’s Account Summary. Each and every charge, on a month-by-month basis, will be mentioned in legible English.

    Most people don’t even go through the policy brochure spending 10 minutes and you expect them to do ‘research’ on net? Like this –

    “All insurence anual report is present in IRDA web site. And every one can access the PDF.It will be approx 250 pages. Look at the following items in the anual report for the insurence company that you want to take,

    a) Percentage of pending claims
    b) Percentage of claims booked
    c) Percentage of claims processed
    d) Percentage of grievance pending
    e) Percentage of grievance processed”

    ???

    LoL. Find a good adviser. Relax.

    January 26th, 2010 at 1:17 pm
19. Hari said:

    Aravind,
    My dear friend, I am trying to help the readers to understand the difference among these instruments.
    Agents are doing excellent jobs for their commission and their salaries. I am not blaming them. Because every one works in this world for money.

    It is policy holder responsability to know the terms and conditions and charges before taking the policy. If policy holder wants more returns from the investment then he has to do research before taking the policy othervise he is going to be the looser in the future.

    For your information;
    LIC is the only insurence company where they have processed the death claims 99% consistently.

    Where as other insurence companies(ICICI, HDFC standard life, max newyork etc) are processed 40% to 70%.

    For past 4 to 5 yrs the numbers are like that. Since IRDA put these numbers in the anual report, it became easy for me to decide the insurence company.

    When a policy holder taking the policy, he should make sure that there should not be any delay or problems to get the insurence money from the insurence company to the nominee on his death. So it is policy holders responsability to select the good insurence compnay rather than blindly trusting the agent words. And these details agent never reveal, because he will loose the business.

    Since you are agent you don’t understand our pain. And I wrote my comments to the investers not to agents.

    January 27th, 2010 at 5:32 am
20. Anirban said:

    I really appreciate the effort made by Krishna and Hari !! I have seen people who have taken ULIP thinking their money will get doubled in 3 to 5 years and then they will redeem the policy.When they see that even after three years of regular premium payment they are fund value is less than the investment made, they think the were fooled by their ‘IRDA Certified Agent’.

    Most ‘IRDA certified agents’ are very dull, don’t have sound knowledge about finance and investments. They only care about their commission and how to reedem an ulip and make the investor invest in a new ULIP. There is pressure on them to bring in more and more policies !! I believe that is how ULIP slowly transformed into an alternative for mutual funds.

    The Article which Krishna wrote was from a consumers perspective and not from an agent’s perspective.

    January 27th, 2010 at 9:11 am
21. Aravinda. R said:

    Hari,

    The point is the way Krishna gives info about ULIP when attempting to make a comparison between a ULIP policy and a mutual fund, which in itself is unreasonable. Mutual funds don’t provide life coverage. But if an investor prefers to combine his needs of insurance and investment, an ULIP need not be seen as disastrous. But that’s what Krishna’s article makes ULIPs appear to be, knowingly or unknowingly. He neither gave full details of the charges of an ULIP nor the reasons thereto.

    Of course an agent won’t ask for your comments. Anybody is welcome to give one’s opinion to other investors, just that the given info should be complete n correct.

    As for fools who believe an agent’s words that their money will be doubled in 3-5 years, they have only themselves to applaud. Such fools have always existed and always will. It’s for everyone to check up whether he can be fooled even by a very dull agent. Perhaps, sometimes we meet our match in life!

    January 27th, 2010 at 11:32 am
22. Hari said:

    Krishna,
    I am interested to listen specific articles from you. I am listing down here. I will be glad to listen from you.

    a) There are many mutual funds in the market by different AMC. How can i choose out of them?

    b) How can I manage my portfolio? I mean no one don’t know when the market goes up and down. How can I make best use of STP and SIP?

    c) How can I play with mutual funds with a systematic way so that i can make good returns?

    d) I want to learn the fundamental and technical analysis? How can I interpret the different parameters involved in picking the good stock(EPS, P/E ratio etc)

    e) I want to learn stocks. Provide me the good links which will help me to educate(Options, intraday etc). Since i want to get my hands dirty with stocks, I am keen on learning the subject.

    f) Is NPS(New pension system) is a good option for investing for the retirment? Pros and cons of it? Is it a good option taking Tier2 in NPS?

    January 28th, 2010 at 5:26 am
23. Suresh said:

    Hi Krishna,

    I have read the articles what u have explained above,and discuss with the other colleagues like hari and Arvinda also anirban,..regarding the ulips …

    1) question is i want to take policy can u pl z suggest me which one can i take , i am more concentrate on investment and also insurance .My savings is 3000 per month. pl z tell me which policy to take like mutual fund or term policy or ulips…. Because i am confused .

    2)recently i met an agent who say that ulips are cutting the only 3%, not more then the 3% they ar cut itseems,he said me to take 10yrs plan in ulips .still i didnt take the plan,i am waiting for write guide to who can tell me about the plan so that i can take and consider it..if possible call me my phone num:9900316395
    I am waiting for Ur advise….

    pl z help me and support it..
    regarding
    suresh

    January 29th, 2010 at 8:56 pm
24. lokesh reddy said:

    Hello sir, i would like to know more about a particluar ULIP. i.e., SBI SMART ULIP. It gurantees the highest NAV. But based on your previous comments/conversation i understood that even if NAV increases there is a chance of losing money(becoz of various charges). Then from the costumers point of view how can ULIP’s benift them. What i mean is when would the costumers get the benifits for their policy.

    January 31st, 2010 at 4:57 am
25. krishnas said:

    Hello Lokesh,

    The following are charges levied by the SBI Smart:

    Premium allocation charges : 15% in 1st yr, 5% for next 2-4 yrs for 3-5 yrs terms respectively.
    Admin charges – Rs 60/- per month for full term.
    For first three years, annual administration charges of Rs 5 per 1000 of sum assured.
    Fund management charge 1.5% pa. Fund management charge can be increased to 2.5% pa
    Mortality charge levied on 1st day of each policy month.

    But, the IRDA has put the cap of maximum 3% for any ULIP policy. So, it would have been reduced.

    If you are planing for at least 10 years, then take the ULIP policy. Otherwise it will not give you the better return.

    Thanks,
    Krishna

    January 31st, 2010 at 5:03 am
26. krishnas said:

    Hello Anirban,

    Thank you for the comments.
    I have written this article to help the consumers to protect their money. If some one who knows well about ULIP, he definitely buy the product if it suits his needs without listening to my comments. I encourage only people who have knowledge about “What is NAV?” and “how the premium is allocated” is safe to invest in ULIPs.

    If you don’t know how it benefits you, don’t take risk by just dreaming that your money will be doubled in three years.

    Thanks,
    Krishna

    January 31st, 2010 at 5:10 am
27. krishnas said:

    Hello Hari,

    Thank you for writing down the wish list. I will be trying to come up with more articles explaining the mutual funds and stock market. Myself I am investing in the various mutual funds, will do the through analysis on the funds and write it in future articles.

    It may take quite some time, because I am busy in writing other topics.
    Thank you for spending time on my site!!

    Thanks,
    Krishna

    January 31st, 2010 at 5:14 am
28. krishnas said:

    Hello Suresh,

    Thank you for the comments!!
    yes. After the recent announcement from IRDA, 3% is the maximum charges levied. To provide the clear idea on investment, I need the purpose of investment and other personal details like age, salary, etc.
    Don’t post it here. Please use the contact form and send me:
    http://www.thinkplaninvest.com/contact/

    Thanks,
    Krishna

    January 31st, 2010 at 5:19 am
29. Saithan Singh said:

    Hi Krishna,
    Thx for the knowledge reg. ULIP. I have already inv. in ulip 2 yrs back. in march 2010 2 yrs will be completed with a monthly premium of Rs 4000.How can i drive the best of benefits from this plan as i have already inv.

    Regards,
    Saithan Singh

    February 1st, 2010 at 12:37 am
30. krishnas said:

    Hello Saithan Singh,

    Lets first find out the performance of your policy. Post it here whether it is in the profit stage.
    Then we can discuss how to goahead.

    Thanks,
    Krishna

    February 1st, 2010 at 6:50 am
31. Abraham K. Thomas said:

    What do you say about the Shriram Ulips. Which is the best in their
    policies. As you mentioned if MF is better than policy which is the best in Shriram group.

    February 2nd, 2010 at 12:51 am
32. rajendra said:

    Dear Readers,

    I saw many comments and valubale time spent by many including Mr.Krishna, Hari and Arvinda,

    1. Recently I discussed my investement plan with an agent of SBI Life. He suggested me a ULIP with three year investement @ rs 50k ever year and benefit of Rs 28 lacs after some 20-25 years. Since he was rfred by my one of the best friend, I thought all is right.

    After 2 days , I was analyzing the excel sheet given by him , I found some hidden colums ,after unhiding those I found the ROI was at glaring 18%………

    What to do, once I changed it to 10% the benefits came down to just and just 7 lacs on 1.5 lacs after 17 yeras

    There are many colums , which can be read , if you know excel sheet.

    Second Point:

    Insurance is nothing but just a collection of money from policy holders , put in some investements plans ( as any stock amrket expert will do) with more conservatism ( some thing in debt funds) as we need to protect atleat the sum assured amount. They donot give from their profits.

    So in my openion Term plus Mutual is equal to ULip , if charges for ULIP and MF are same, as in logic insurance company must take some money from your premium to motality( Term policy is pure mortality charges)

    Since in India regulators are not as strict as US or developed country and we donot get adequate eduation on many finacial products ( or rather any consumer product be, telecom- till yesterady they were charging Rs 2-3 per minute with pulse of 1 minute now ther have slashed every thing, means they were chearing customers till date), hence either read the fine prints of ULIP or go to mutual fund , which are more safer than ULIP due to miselling by agents.

    Return from Mutual funds can be equal or more tha a ULIP as mutual funds has to show performance ( Inshort as well as long term) to be in business.

    Rajendra Joshi

    February 4th, 2010 at 4:47 am
33. satya said:

    Hi Krishna,
    I have investment plan and i want some one to qualify my plan. My plan goes here; Please provide me your valuable suggestions on this.

    Based on present financial situation, i can able to invest 32k per month for next 24 months. And i want to keep the investmed money for growth and i may need this investmed money after 13 to 16yrs. I am not going to with draw before the planned schedule.

    I choose MFs for investment. I planned following mutual funds on monthly SIPs on different days of the month. Here it goes;

    1)DSP BlackRock Equity Fund – Regular – Growth(SIP Date – 7th)
    2)HDFC TOP 200 FUND – GROWTH(SIP Date – 10th)
    3)Prudential Discovery Fund – Growth(SIP Date – 15th)
    4)Sundaram SMILE – Growth (SIP Date – 20th)
    5) ICICI power(SIP Date – 20th)
    6) Birla SL Frontline Equity -A (G) (SIP Date – 25th)
    7)ICICI infrasturcture(SIP Date – 5th)
    8)IDFC Imperial Equity Fund – Plan A (G)(SIP Date – 14th)

    I am going to invest 4k per month on the specified date every month. I picked these MFs after doing research/homework in money control and on agents suggestions.

    Investment Rules
    ~~~~~~~~~~~~~~~~

    1)I won’t withdraw this money before the 13yrs for any personal work.

    2)I will review my funds performance for every quarter and will take the call to switch the funds to some other MF if the fund is not performing well.

    3)After 2yrs i will redeem the units from one or some MFs to pay the premium of my term insurence which is 14k per year.

    4)If i need money by end of 14yrs. From 13th year onwards I will start transfering the units monthly to debt funds so that it will switch completely to debt fund by end of 14th year.

    5) By end of the 14the year, the corpus amount will be debt fund and i can able to with draw the money anytime that i want.

    I want some financial expert to qualify my plan.

    I will be very happy to listen the comments from the readers and author. Your comments will help me to refine/fine tune my plan so that i will get good returns.

    Thanks,
    satya

    February 4th, 2010 at 6:03 am
34. satya said:

    I forgotten to add one point.

    I have term insurence for 36lakhs and premium is 14k per year. I will be paying this premium after 2yrs from my investment amount(MF).

    February 4th, 2010 at 6:07 am
35. krishnas said:

    Hello Rajendra,

    hank you for the analysis and detailed answer. We should agree that the education on financial produvts are very less compare to other countries. When you have taken the ULIP policy?

    Thanks,
    Krishna

    February 5th, 2010 at 3:19 am
36. krishnas said:

    Hi Satya,

    Thank you for the comments.
    It is happy to see you have done good research and planning for the long term. I will be sending you the personal mail. It needs more time for me to review your profile. You can remaind me by using the contact form in the site.

    If you are interested, we can discuss over phone. I am helping many of the readers in our website for choosing the good investment plans.

    Thanks,
    Krishna

    February 5th, 2010 at 3:29 am
37. satya said:

    Hi krishna,
    Thank you for your reply. I will definetely contact you through contact form.
    Before i need your sugestin on MF investment channel.

    Right now i am using HDFC investment online account to invest into differetn mutual funds. It has some advts and dis advts.

    I want to know which is the best channel to buy mfs through online.

    Thanks
    Hari

    February 8th, 2010 at 11:27 am
38. krishnas said:

    Hello Satya,

    It depends on the fees and other features. I am comfortable in using ICICIdirect.com. Not sure about the other services.

    Thanks,
    Krishna

    February 8th, 2010 at 9:13 pm
39. Murali Mahadevan said:

    Dear Krishna,

    Thanks for posting the article. I wholehearteadly endorse your views. The only persons benefitting from the ULIPs are the agents. It is high time the government banned this product.

    Murali

    March 5th, 2010 at 2:33 am
40. piyush said:

    i would like to know that if an investor is choosing between FD and ULIP for a span of 10 years, then which option he should choose for a better return.

    March 7th, 2010 at 11:40 am
41. Hari said:

    Piyush,
    You are trying to compare two different characteristics instruments.

    FD – It is fixed deposit on a agreed upon interest rate. The amount is gurenteed on the maturity date. It doesn’t give any insurence amount for your life. It doesn’t give surprises on the maturity amount on maturity date. There is no risk in this investment.

    ULIP:- It is Unit linked insurence policy. It is insurence + investment instrument for good returns with moderate risk. Here sum assured is gurenteed if death occurs when the policy is in-effect. Unlike FD it doesn’t give you any gurenteed money on the maturity date. Since money will be deployed in marke it can give surprises with good/moderate or bad returns on maturity date.

    On summary, ULIP will give definetely good returns than FD in 10years horizon as long as you don’t terminate the policy in between.

    March 7th, 2010 at 10:29 pm
42. bhanupriya said:

    as u said that ulip is good for long term,say for 10 years as it depends on market condition,but i am not still clear with it ,as market conditions are uncertain so hw can we say that it is good for long term.??

    April 17th, 2010 at 9:41 pm
43. padmapriya r said:

    hi…………..what you say,i can accept only 50% only.
    because in ULIP insurance policy ,i accept the allocation amount is 25% is moving out,but still the take this amount only for first 3years,later it reduces,
    so if v pay our premium ,we can get good profit also the life cover……….so ulip insurance is also goodddddddd

    April 21st, 2010 at 7:22 am
44. Vpa said:

    Can you tell us about Term policy in detail..What is the premium range? What happens to the premium amount if we survive the term period?

    May 24th, 2010 at 2:31 am
45. TRL NARASIMHAM said:

    Today I surrendered my HDFC Unit linked Young star plus policy. I invested in June 2007. at that time my agent told it will fetch 30 -40 lacs in 15 -18 years. Today i found that my investment is Rs.85,000/- and my fund value is Rs. 85,670/-. My question is whether I done correct or wrong? Is t possible if I continue for the next 15 -18 years can I fetch Rs. 30 -40 lacs amount as my agent told?

    June 24th, 2010 at 3:33 am
46. TRL NARASIMHAM said:

    Mr. Krishna please give response

    June 24th, 2010 at 3:43 am
47. krishnas said:

    HI TRL NARASIMHAM,

    The ULIP is based on the market. When the market is doing good, the returns will be higher. But, in you case getting 30-40 lacs for just Rs.85000 is like day dream. No one can not guarantee anything. You can calculate 15-20% return every year.

    Thanks,
    Krishna

    June 24th, 2010 at 9:18 am
48. suresh said:

    ULIP is a good long term investment plan.
    Here long term is anything beyond 10 years.
    Don’t invest in ULIP if you are planning for anything less than 10 years.
    Mutual Fund is medium term investment.

    ULIP has high charges of upto 20 % in the first year but by the 3rd year the charges comes down to 4% or so.
    These charges are essentially for Insurance cover.
    Balance is entirely for investment.

    June 28th, 2010 at 11:40 pm
49. Vicky said:

    Hi Krishna,
    I’d buy Aviva Ulip in March 2010, & paid Rs. 25,000.
    Then after I did not paid any premium & did nothing with that policy.
    Will you please suggest me what is the status of my policy toady & how much money can i get Back from Company???

    July 15th, 2010 at 12:15 am
50. Vicky said:

    Hi Krishna,
    I’d buy Aviva Ulip in March 2010, & paid Rs. 25,000.
    Then after I did not paid any premium & did nothing with that policy.
    Will you please suggest me what is the status of my policy toady & how much money can i get Back from Company???

    Regards- Vicky

    July 15th, 2010 at 12:17 am
51. Vicky said:

    Sorry, krishna
    please ignore my previouse Comment..
    Actually i”d buy Axix Ulip in march 2007…
    It was in 2007….

    & paid Rs. 25,000.
    Then after I did not paid any premium & did nothing with that policy.
    Will you please suggest me what is the status of my policy toady & how much money can i get Back from Company???

    Regards- Vicky

    July 15th, 2010 at 12:29 am
52. krishnas said:

    Hello Suresh,

    Your opinions are perfectly right. It is good long term product. The charges have been reduce recently. You read this article for more details:
    http://www.thinkplaninvest.com/2010/06/new-avatar-of-ulip-policies/

    Thanks,
    Krishna

    July 17th, 2010 at 4:46 am
53. krishnas said:

    HI Vicky,

    After three years you will get the money back. But, it will be less because the charges have been deducted for the two years. You have to check the NAV value for the current fund value.

    Thanks,
    Krishna

    July 17th, 2010 at 4:52 am
54. Dhananjay said:

    Company Aviva Life Insurance Company India Pvt Ltd
    Plan Easy Life Plus Unit Linked – Growth Fund
    Premium Amount Rs. 25000
    Premiun Frequency Annual
    First Premium paid date 31-Mar-07
    Risk Commencement Date 31-Mar-07
    Sum Assured Rs. 2,50,000
    Maturity Date 31-Mar-17

    “NAV as on Date :
    July 16, 2010″ 32.79

    Srrender Value ????

    Note : Only First premium on afforsaid Date has been paid, then after no further premium due is been paid.

    Dear Krishna, From Above information what should be the surrender value of the stated ULIP. & also mentioned how to calculate Surrender value using NAV ? kindly state also to what extent surrender charges will apply after NAV to Surrender value Calculation??

    thanks
    Dhananjay

    July 19th, 2010 at 12:19 am
55. krishnas said:

    HI Dhananjay,

    It would be difficult for me to find the surrender values. Only the insurer can do that. It has many other charges that will be reflect in the statement given for each year.

    Thanks,
    Krishna

    July 22nd, 2010 at 6:56 pm
56. Gurpreet said:

    Hi Krishna,
    Really appreciate the way you are sharing knowladge and answering each and every query. I want you to answer one for me as well
    In 2006, I had bought ICICI Prudential ULIP[LifeTime] with 50000 annual premium(in fact my wife bought it before our marriage) .The sum assured is 300000.
    The premium allocation charges are
    for 1st year: 18 %
    2nd Year: 7.5 %
    3rd Year onwards: 4%
    And there are also mortality charges
    Now after paying 5 premiums(2.5L) till 2010, total market value of my Policy is close to 3.2 L.
    Now I am confused whether to carry on with the policy as even in case of death, we would get only 3L or the market value and the market value of my units is already more that.On the other end I am thinking that I can keep it just as market investment.My question to you is, should I keep paying the 50K as premium or instead invest that into any MF. How much charges do MF deduct from what we invest. Is it more that 4% that I’ll be paying my ULIP plan for premium allocation.
    Just wanten to know which one would be cheaper to me.

    I am not seeing any use of this policy as regard to insurance but just wondering if it is just being used as a market investment, which option would be beneficial, surrendering this and buying MF, remaining with the policy for few more years.

    I may be missing some point here due to my limited knowledge, so please do let me know if you require some other details for my policy.
    Thanks in advance.

    Gurpreet

    July 29th, 2010 at 5:17 am

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