When an agent comes to sell you a ULIP product, you should ask following are the questions you should ask him . Before doing any thing he should tell you What is a ULIP . Following are 6 Important questions you should ask an ULIP agent before buying a policy from him .
1. What are the returns offered by this ULIP ?
As per the rules of IRDA , an agent should only give illustration assuming 6% and 10% returns, However If he says that in long term its safe to expect more than 10% , It would be fine . But if he starts claiming that It “will” return 18% , 20% or million % returns , be cautious , He is not the right agent .
2. What are the Charges in this ULIP ?
He should give you detailed Information on all the charges of ULIP ,the main one called Premium Allocation Charges . If he tries to hide any Charge from you , I am sure its not because of his dishonesty and no other reason . Ask him the company brochure mentioning the exact charges .
3. How does it suit my Risk Profile and fit in my requirement ?
Before suggesting you the ULIP , the agent should have asked you all the details about your Cash flow (salary , Expenses) and your future goals with ULIP investment should address . He should also try to understand if you can take the risks associated with ULIP . If he does not ask you these thinks , ask him back why he has not asked you these questions . Get the word out of his throat .
4. How is it better than other ULIPS ?
Ask him what is unique with his ULIPS , make sure he does start all non-sense of Sec 80C benefit , high returns and all .. Every ULIP has it . Ask him what are the special features with ULIP and how do they address your requirement . If he claims that his company ULIP is best and no other ULIP can match it , ask him for references if any states that . Just a plain claim from agents will not do .An agent must have enough knowledge to make you understand how to make best use of your ULIPS .
5. How does it score over Term Insurance + Mutual funds combination ?
ULIPS are combination of Insurance and Investment product , There is no point in taking it, if it cant perform better than Term Insurance + Mutual funds SIP . Switch benefits in ULIPS are the main benefit in ULIPS. He must put pressure on that point , If not he is him self not aware of it . Refrain from taking the policy if he starts claiming that returns from ULIPS will be much higher than Mutual funds .
6. What was the performance during Market Crash ?
Agents generally try to put up rosy picture and hence refrain from disclosing the funds performance in bad markets. If the fund has done bad , that is acceptable . Its investor responsibility to take care of switching and asset allocation . So there is nothing wrong in performing bad in bad markets . Agents will first try to avoid the confrontation , but finally may tell you that they did bad and returns are very low . Ask him for exact number in return and try to find out how other ULIPS performed .
My personal Experiences
I have never come across any ULIP agent who has tried to sell the product in a professional manner . This has its own reasons like meeting Sales Target pressure or poor training to Agents. Anyways ,its not acceptable and can not be accepted . For so many years , Mis-selling is happening in India .
Conclusion :
Your hard earned money should go in proper investments . There should not be hurry in taking action , So dont feel shy in asking questions once or twice or thrice , understand the product and its suitability with your requirement.
No product is good or bad , its only bad or good depending on your requirements . So be informed Investor and dont fall prey to Idiotic agents .
Dont do mistake done by tons of investors who took ULIPS for 3 years
- To save tax
- To make exceptional returns from Stock markets .
- To make them self believe its a happening product because it looks so complex .
Please share with me if you have taken ULIP for wrong reasons
- Do you think that ULIPS will have any success in future .. I feel yes
{ 70 comments… read them below or add one }
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Contact me on : devarchit@siliconindia.com
devarchit
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manish
good one manish !
I came across a similar agent selling ULIPs. The worst part he doesn’t know what is NAV ?!! he says that NAV will never fall and will only keep rising.He kept on telling that this particular ULIP will give me 30% return. When I questioned him what is NAV- he had no words to say.
@Swathi
he he
your agent was not the worst !! . Atleast he didnt say that he will give it in writing that the company promises 20% per annum .
If some one does that , ask them to do this and ask him to call his manager and have him confirm this .
I dont know what kind of training these companies give to agents . I strongly believe that jagoinvestor blog readers are any time superior than any mutual funds or ULIP advisors .
Manish
How does ULIP compare with NPS? What kind of growth do you foresee for NPS?
@Praveen
the biggest thing is the costs associated . With ULIPS its huge in initial years around 20-40% and over long term it would still be 1-2% per annum .
With NPS is like free , almost .009% i guess . thats a free lunch .
Other thing is that with NPS the maturity value is 100% taxable . but with ULIPS its taxfree .
Note : people are trying to convince govt to make the maturity amount tax free .
Overall
NPS is not the best choice to go for right now , this is not a indication that ULIPS is !! .
Simple Mutual funds SIP is most powerful i beleive .
What do you think about ULIP vs Mutual fund SIP ?
Manish
Hi Manish,
I agree… I had been been hooked by a insurance agent 4 yearsback into buying Jeevan anand,Money back policy and one another policy.. The reasoning was that we get assured return and also insurance coverage..Sounded good that time..Later I realized that it was a foolish investment to make.. Now I closed one of the insurance policies and taken term ins..But Iam still continuing with Jeevan anand as the loss would be 70% and I cant bring myself to do that.
@Karthik
Good that you closed the policies which you realised are junk , Continuing with Jeevan Anand may make sense because already 4 yrs have gone . You can also make it a paid up policy , thats one choice .
Manish
I dont agree with above blogs where there are ULIPS without charges ,only fund management,policy admin,mortality charges and no Premium alocation charges,And there is no charge in first year also….
@kris
I did not understand your commnent. There are some companies which claim that they dont have Premuium allocation charges . Not sure about them .
Manish
Manish, would like some suggestion from you. actually i have bought a ULIP 3 years back. I was paying 20,000 p.a for, The term is 10 years and cover is just 1,50,000. I was so foolish to buy such a plan. But now i don't know what to do? wheather to continue or change or just withdraw.
I am single and have no such financial dependent.
Kindly advice
Zindagi
gaurkullu@gmail.com
@zindagi
So now you are out of lock in period . Now you can do following
1. See the total fund value . You have made total 60k payment , so calculate what is your return till date . i guess it would be negative only at present . But if you are ready to take money out , take it out and start SIP in mutual funds and take a term insurance .
2. Continue the plan (after researching it if it suits you) for long term and regulary put money in it , dont forget to increase your life cover through term insurance .
Manish
Manish,
You have excellent suggestions in general but I disagree with your recommendations to Zindagi. Zindagi has no dependants. Best plan for him is absolutely no insurance. I have listed the full details here:
http://businesspandit.wordpress.com/2009/07/14/i-dont-need-life-insurance
@Business Pundit
ooops .. Looks like i missed that line where he said that he dont have financial dependents .
You are correct that he should have no insurance at all .
However , taking Life Insurancemay have other reasons too other than having financial dependents . May be you want to leave a good lumpsum to your dependents (even though they are not financially dependent on you) .
I read your article .It was very nice
manish
dear Sir,
I have [urchased an icici prudential ULIP on 2007 november.I do not understand much but the annual amount is 50000.in 2008 I could not pay the amount & ICICI gave me a letter that it got cancelled.Can I get back some money from it.Pls help.
Manish,
i have been following up your artcile on ULIPS
Need your comments on UTI ULIP
I am 35, With insurance cover upto 5 lakhs from LIC Jeevan anand,lIC PMELT 12.50 Lacs & 1 lakh from SBI LIFE subarshan
i am an NRI, & Planning to Invest in UTI ULIP with 15 yrs for 15 lacs
Or Option of term insurance with agaon religare for 25 lacs
Please throw some light on the options available to increase coverage
Regards
Shekhar Sawant
shekhary2k2000@gmail.com
dear shekhar sawant.
your term plan is o.k from religare. kindly tell us some info. what you are looking in uti ulip. for long term look for diversified mutual funds.
Dont do mistake done by tons of investors who took ULIPS for 3 years
I didn't unserstand correctly ur above line.
Do u mean if we purchase any ULIP policy shd. continue for more than 3 years?What r advantages of it?
I think one advantage could be less charges after 3 years.So more investment.Other thing in long race it could give more profit/returns.
What else can be the reason?
@Yogi
Generally , we would like to keep our costs for a product as low as possible , If you invest in mutual funds , they have costs same every time .. so in all the time frame there cost is same (entry load of 2.25% , earliar) ..
But in ULIPs , the costs for 10+ yrs are recovered in the starting years only , mainly in 1st and 2nd year .. So if you dont stay in ULIPS for more than 10 yrs , yout cost will be very high .. So if your first year PAC is 40% , second has 5% and there after 2% and you quit after 3 yrs , Your cost will be around 14-15% approx .
Now I am not saying that overall you will be in loss .. it may happen that your ULIP has done great and you made profits .. we are only talking about getting the full value …
So quiting ULIP before 10 yrs .. makes it very costly products
Manish
I am planning to invest in SBI Smart ULIP,Just I need your suggestion can I go for 3 or 5 Yrs plan.Which one is best for ROI.
@Moga
ULIP’s are not a 3 or 5 yrs product . Unless you want to be with it for 10 yrs , does not make sense to go for ULIP at all . Apart from this , do you know when to do switching and take advantage of market movements ? Who suggested you SBI ?
You should look at Aegon Religare ULIP , its pretty nice one . Recommended , but again more than 10 yrs only .
Manish
Bravo! lol manish you making my work more hard… by spreading awareness, joke apart I am 110% agree.. Yes after all you putting your hard earned money in stake and you have all right to ask all this above question to person who is there to give you advice…
Akhil
Nice to get a comment from your for the first time. One has to definately ask more and more questions before one takes a product . the main idea is to know it well for the simple reason of its your money
.
Looks like you bought a ULIP ?
just kidding . did you ?
Manish
Well in case of MF vs ULIP….
1) MF’s yes- if my risk apatite is higher then average investor
2) Mf’s yes- if my goal is around 5-6 year.
3)Ulip yes- if I want to invest for 10 year plus
4)Ulip yes- if my risk apatite doesn’t allowed me to exposed 100% on equity side.
5)Ulip yes- if capital protection is my prime concern. most of the ulip plan come with downside gurantee. MF doesn’t come with any such gurantee.
Well if you ask me which one is better… I would say mf’s with combination of term plan and Ulip both can be better if you know how to manage it out. because investing blindly and close your eyes afterword, would not work in any case.
Akhil
I agree with your point on “Anything can be better , just that one has to know what he is doing ” .. good point . Looking forward to connect with you
. You seem to be a interesting person 
Manish
Hi ,
I have a query.I took reliance super investmen tassure plan.Is it a guud plan or i should stop this plan .I pay 20,000 PA.till now i have paid 15k.Is it worth investing plan.
Raghaw
you have bought an ULIP and it has the same issues we discuss on this blog . Its a costly plan and may not suit your profile . have your asked your company what is the IRR of this plan ? What are the costs ? Ask them what is Premium allocation charge of this plan ?
I think it would be wise to get out of it and settle with something simple
Manish
Hi Manish,
Should I invest in any ICICI Ulip because one of my freinds says ICICI Ulip plans gives best returns around 30% annualy.
After reading your blog I need you suggestion wheather she is right or wrong
Rameshwari
The point is not that how much return it gave , there are other issue .. if you invest 100 and then they take 40 as their expenses , and then invest your 60 and it earns 30% , what is the point in that .. its better than you invest the same in mutual funds and take 25% return . thats much better.
We have already disucussed on ULIps on this blog and final conclusion is that ULIP’s are enough complicated that general investors should stay away from that .
Manish
Hello Maninsh,
i am a fresher who just started earning and invested in BIRLA SUNLIFE PLATINUM-III ULIP Plan. I am investing 50k per year with 2.5 lakh Sum assured but i am not getting much of resturn as expected. Could you please suggest as i am planning to move out with this.
Since my agent never told me about charges that i need to pay for policy.
please reply @dpandey86@gmail.com
Thanks.
Deepak
If you do not think you should be present in the ULIP , i would say get out . Consider it as lesson and start fresh . No issues with making mistakes
Manish
I have been keeping away from ULIPS. Recently reliance people said they are launching a new ULIP which will give the highest NAV. I also asked them abt other charges… The first year charges are 20% and in ten years it will be around 2-3% is what they told …They said u can go for higher or lower mortlaity charges dependeing on the coverage i want …
can u throw some light into this so that i know the pros and cons …
Sobha
Highest NAV ulip is discussed here : http://www.indianexpress.com/news/no-free-lunches-in-financial-markets/568433/0
Dont fall in trap of fancy strategies diuscussed . there is nothing called “best policy” .
Manish
Sure don’t fall in fancy trap… But use your brain.. are you risk averse, you wan’t capital guarantee with decent return, all that with tax benefits… If your answer’s is yes.. this product is for… well manish for you or people who are expert in field of investment its very easy to manipulate things but for simple investor its not that easy… they don’t have anything to do with fixed income instrument or equity participation… they simply want to know what I ll going to get after said period… well telling them market performance can’t be predictable but if you remain invested for 10 years you surely make out… It won’t dig in investor throat easily…. Yes companies who offer such plan simply invest reverse balanced scenario where debt exposer normally remain higher then equity… But tell me if you try to maintain same portfolio for your self individually would you make out decent return??
Answer is no.. because FD returns are taxable you cannot match the performance of fund.
Well everything which shine, not always gold…but Critics are not always true…
Akhil
the first point is to know that these Highest NAV plans are not even better than normal plans in ULIP . the point is that customers are cheated by showing them fancy policies and names , why dont they disclose the working of the plan before hand instead of putting in fine prints with smaller fonts .
manish
Manish
Yes it is better then normal ulip one way.. Its true this plan not offer self manage option in the hand of investor (the real number of investor who exercise switching option is minimal). But fund manager take control of corpus and tweak the ratio of equity and debt…. Company is taking calculated risk here its very clear and they just can’t let things go out of their hand… well they come with short pay option short term and less at charges what else you want
…. In mf’s you can not ask question or make fund manager change his strategy no matter whether fund perform or not. all you can do is get out of it. Here also the same thing…
Sobha, I know manish won’t agree with me on this and his suggestion would be go invest in mutual fund plus take term plan for cover
….. But if you made up your mind for ULIP or want to give chance ULIP against all odd.. check few other available option before go with reliance… I would not personally suggest reliance, check out LIC wealth plus if you looking for some mid term plan with short pay option…. If you can remain invested longer means 10-20 year, and comfortable paying regularly then choose any plan from birla or bajaj allianz….
Bajaj allianz igain check this particular plan… its low on cost because its sold directly without any advisor or agent… you can purchase this plan only through website of bajajallianz….
lol you can increase and decrease mortality charges anywhere… what’s new in it, its nothing but sales jargon… just avoid it
Akhil
Can you give more review on bajaj Allianz igain policy ? We can do a cost return comparision and then find out which one is better ? What is the IRR of it ?
manish
You didn’t make any mistake… since plan you enters is really decent plan charges are not much compare to any regular ulip plan.. beside only come with short pay option of three years… Just pay three year and don’t touch your money after that for at least 5 years… You won’t regret, mark my word
)
Akhil
Why do you suggest for paying only for 3 yrs and then wait for 5 yrs ? Is it not a good option to keep investing in ULIP regularly , how about the consistency part of investing ?
What is your justification ?
Manish
Yap surely its not good advice for normal ulip.. Manish this plan is LPP ( Limited Premium Paying) plan.. Mean by default it come with 3 pay option.. you can’t pay more in it… Beside this plan is low of charges…. check out icici pinnacle or LIC wealth plus… really decent plan its a copy of Birla platinum plus series…. If you want documented proof the benefits of PP return.. I recently check out the fund value of investor who invested 2 lac in this plan.. first year anniversary his fund value 2.87 lac (after adjusting charges) of course
so buddy every time ulip is not bad…
Akhil
Lets not talk about 1-3 yrs return , what is the 10-15 yrs return expectations of this policy and how much work is required to be done what if a person invests in PPF + Term + MF ?
The long term comparision makes sense .
Manish
Yes Manish, absolutely agree annualize return is not a point to discuss about.. since every equity fund perform well above decent last one year thanks to share market… but you can not generalize it… still with ulip plan you can expect bare minimum return of 14% yoy over a long run…. since ULIP started only 10 year back.. and I didn’t come across anybody who completed the 10 year in this type of plan. I can’t talk on real return. But still the 14%- 15% ROI you can expect without any doubt. what you say manish have you done any projection base study on ULIP return.
Actually if you ask me… Term + MF sound good.. but practically in my sense it not worth it… this is my take, I don’t know how you see this combination.
Point on which I doubt this combination…
1) If risk cover is your priorities (In case of Home loan, Personal loan or family protection). The amount you paid would justify for decent coverage only, if you taken it early stage of your life… because 33 onward decent coverage of 40 lac would work around 12k premium. which is costly and utter waste of money…. you paying only charges for coverage. ULIP after charges worked better for same coverage.
2) MF’s is good but growth fund exposure toward equity is upto 90 % and plus in longer run its not offer you option to lock your capital appreciation at regular interval…. I missed big time reading your artical (how to look beyond short term return in mutual fund)
3) PPF is really decent mean to do long term saving with all the protection and slightly higher return over SB Ac…. But looking period of 15 year and cap of 70 K sound unfavourable to me… I think cap should increase in PPF so ppl can do additional saving with clear goal in mind… If you know some outstanding expenses which is going to come in your near future… you can make provision for that by doing additional saving…
thanks Manish and Akhil for your valuable advice…………will keep in mind before any final decision:)
Sure .. Keep commenting
Cheers deepak
One more thing… its not related with this link anyhow.. but thought I ll ask you
…. I ve read somewhere indian market is the only market where FDI can expect 20% ROI…. Do you think 20% is possible??
One more tip! I know it’s not documented or anybody tasted it but I only observe… Always invest in ULIP with mid term point of view that’s 10 year and you can choose any available plan in the market which offer you 10 year term. either short pay or regular pay option… You will notice the IRR worked out better compare to long term plan.
… Manish can you please validate this point, I think its true…
Hi,
Nice informative article.
I am a doctor by profession and therefore didnt know much aout investing when i passed out of college in 2007.
When i was about to file my first income Tax, i was “Guided” by a friend (innocently ofcourse” to an agent selling ULIPS for tax saving.
He touted so many terms and abbreviations with the biggest being SAFE.
I was taken in and signed up for a KOTAK safe investment plan.
thats is when i started reading about investment and modes of investiong, Dos and DOnts.
To my utter horror, i was shocked to know about the charges, especially PAC.
43 percent of my installement went to the PAC charges.
I was of the belief that i cannot opt out,(thanks to you , now i know i can).
Now i have finally paid three installments, now i am in a dilemma.. what should i do?
I have paid most of their charges as ULIPS charge max in first three years, but i am not happy with whole thing.
Please advice if i should discontinue ULIP and invest in MF.(insurance is not a requirement as i am only 27 and am suitably covered for that with LIC).
Thank you
Hitesh
Hitesh
Mostly you have paid the charges in ULIP m, so optiong out from cost point does not make sense,. however from operability point it might make sense as ULIP’s are complicated products and does not suit people like you .
Would like to know about your Insurance cover and How is it “Suitably covered” . I think your insurance cover should be around 1 crore .
manish
Thanks for your reply Manish,
The reason i wanted to discontinue the ULIP is that if i invest that money in MF, i am quite confident i will be able to offset the relative loss i have had by investing in this ULIP.
PLus even though the charges now on will be less, they wont be negligible, i will still have to pay all those weird sounding charges.
Wouldnt it be better to stop spending more money on ULIP to recover the loss i have had by these charges and invest fresh in MF-equity.
Regarding the Insurance, i am 27, single with no responsibility or debt, therefore i aws of the opinion that i do not need much insurance now.
I have a LIC of 5 L which i thought woould be sufficient as of now. I plan to get married late next year and would go for a term insurance of a crore from then.
Please advise if i am correct in my approach and what changes would you advice in my planning?
Thank you for your reply.
Hitesh
Hitesh
You are on the right path .. good going
Manish
I want to invest in Lic’s Wealth Plus Rs.25000/-p.a(3yr),but i am not sure how much return after 8 yr.
Ali
Read it : http://www.jagoinvestor.com/2010/03/review-of-lics-wealth-plus-how-agents-are-miselling-it.html
http://www.jagoinvestor.com/2010/03/how-do-highest-nav-guarantee-plans-work.html
Manish
superb articles….and very informative as well. keep it up (looking forward to new ones)
aditya
Thanks .. its coming in .. in the mean while please go through the http://www.jagoinvestor.com/archives to find more articles .
manish
Manish, I need suggestion from you.
I have bought a ICICI ULIP 3 years back. Permium of 30,000 per year with 2Lakh coverage. Based on current NAV, I see annual return of 11% .
I have also got a LIC Jeevan Anand (Premium 24,000 annually with 3 Lakhs coverage) which is bought 4.5 year before.
Please suggest whether to continue these policies or should I stop them and go for Term plan.
Vishal
Term plans has no relation to what policies you have, if you are underinsured , then what you have and what you dont have does not matter .the main thing is to get term insurance and get your self covered.I would say stop your endowment policy atleast .
Manish
Manish, 1 question.
I have a term insurance.
I invest in ELSS MF’s regularly for investment cum tax saving.
For religious reasons, I cannot invest in any interest paying investment, leaving only ELSS MF and Equity ULIP for tax saving. (Perhaps you can research and let me know if you think there is any other Shariah complaint tax saving option.)
I was thinking that is there any reason I should switch some amount from ELSS MF to ULIP? (Say out of 1 Lakh that I invest in ELSS every year, now I take a ULIP of 30K for 20 years)
Is there any reason you would recommend doing it?
Hi,
ELSS offers tax benefit and a pure equity exposure, hence may be considered a riskier product. ULIP on the other hand offers insurance and investment in equity and debt funds that underlie the plan. Those of you who are looking for additional insurance may opt for ULIP. To know which product could suit you better, please write to us at customer.feedback@religare.in. To keep updated with the latest news, views and tips on ELSS, ULIP’s and other financial products, please join us at http://www.facebook.com/Religare.Enterprises and http://twitter.com/religare_rel
Regards,
The Religare Customer Care Team
Religare Enterprises
Would it be possible for you guys to give a full explaination on why iTerm has so high claim rejection ratio to the readers here ?
Manish
Manish / Akhil
I have a max new york’s ulip since last five years. Premium is 15000 p.a. At present the current value is @ 72000 . Total invested is 75000. Also i enquired with the company if i can stop the policy ? they told me that since its old ulip there will be a deduction of 40% of annual target premium at 6th year , 30% at 7th year and so on . Zero deduction is only after 9th year.
Can u advice me what should i do with the policy ?
Hitesh
Hitesh
What is the exact policy name, please see the policy document on net and verify if they are correct . Unfortunately , they might be correct , if thats what is written in the document .
The fact that you signed it means you agree to terms and conditions
Manish
Dear Manish, I am 35 and married. I get lic cover of 20L. I am saving 50k per month after pay my insurence and expenses. Pls. suggest me where I can put thie money. I don’t know about ULIP or MF but thinking to put in NSP. What u suggest. My e-mail:- biltu2004_das@yahoo.co.in
Kumar
You should be using Mutual funds and invest in it for long term , dont get into NPS right now , you can do better with mutual funds
Manish
Thanks Manish, Can u suggest some good MF?
http://www.jagoinvestor.com/2009/08/list-of-best-equity-diversified-mutual.html
Manish
Conclusion: For a novice with no idea of market, a long term ULIP can fetch more than FD, but if you are a Graduate (i mean a bit smart) then better invest in Mutual funds and Term plans.
I tool ICICI Pru “Life Term” in 2004.
Though 3 yr was the locking period, but I am continuing it. Every year I am paying 25K since 2004. Life Insurance is meagre Rs1.25 Lac but than it is giving me returns better than FD or PPF can give.
Current Value = Rs 2.50 Lac for my total investment of 1.75 Lac made over 7 yrs i.e more than 10%
Formula for Calculation :
Future Value of present Annuity = A((1+R/m)^N*m-1)/(R/m)
Symbol Desm= no. of times interest is counted in a year
P= Value of Money Investes
Q=Value of Money
R=rate of interest
N=No. of Years
m=Bsis for interst calculation(for monthly basis m=12,for quarterly basis m=4 and so on)
Siddharth
You might want to do a IRR analysis and see what is your Return .
Manish
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