Lets Discuss quickly what happens when you stop paying your premiums in ULIPs before 3 yrs . So here is an interesting question and very bad answer. Its already there in your ULIP Brochure , but you never had the time to look at it .
Read What are the Most Important questions you should ask from a ULIP agent ?
One of the readers on this blog asks me
“I started investing in a sip of Lic Plan Money Plus T-193.I was assured of atleast 20% returns, but I Found out recently that my surrender value is much lesser than what I have invested. So I want to stop freeze this policy.But the agent says that the value of units will also freeze and I will not get the amt. as per the value of units at the time of lock in period. So when the lock in period is over(3 years), Iwill get amt. as per the current rates of the units. How far is it true
Now This is True , in LIC Money Plus and some other ULIPs, If you stop paying your Premiums but then your Units will be sold that time and your money will be Kept in Money Terms which you will get back after the lock in period is over . So for an example , if you take policy in Jan 2008 and Stop your premiums before 3 yrs of lock in period , you will get back the amount after 3 yrs are over , but the amount will not be as per the NAV after 3 yrs , but at the time when you stopped your ULIP payments. Note that you will get back your money only if you have paid full 1 yrs premium , If you have paid anything less than 1 yrs , then you wont get back your money if you stop it . All this information is generally never passed to Investors because of Heavy misselling in ULIPS
Now this is the rule from some of the ULIP’s , not all .. Some Ulips give you a choice of surrendering the Policy when you want , so you can tell them that you want them to sell your units or not . If you want , they will sell those and Keep it with them and then give you back after Lock in period of 3 yrs are over . You need to check your ULIP if its a choice or a forced rule . Check your Policy Documents and Find out whats written there .. Before Buying a Product make sure if a product suits your Requirement
Other Important Rules applicable when you Stop Paying premiums before 3 yrs
- Your Insurance Cover will immediately be Ceased , so you are not covered for any amount once you stop the Policy
- The Death Benefit is just your Fund Value
- Other Charges like Fund Management Charges and Yearly Expenses will still be Deducted .
- You can revive the Policy after 3 or 5 yrs depending on the Company rule
Question : So it means that If I stop My policy (means Premium Payments) before 3 yrs , I will still get back my money after 3 yrs ?
Answer : Yes, Many people think that They have to pay the premiums for atleast 3 yrs other wise they will not get their money back , That’s not true .
Conclusion
Who is to blame here ? Company or the Agent , my vote goes for the Investor Himself , Agent or Company are to be blamed , but for very less part . If you stop your Premiums before 3 yrs Its a costly Affair . So better buy your products before much thought and planning . ULIP’s are only to be bought for long term and you should be able to manage it well .
* Dont forget to check out the New Forums added in this blog
{ 132 comments… read them below or add one }
Damn that is so annoying. Most of us don’t bother to read the T&C completely and understand the intrinsic details. Thus we fall in to the trap and lose our money. We need to know the details before investing in any policy. Sadly this can only come when the investor has the right set of questions to ask the agents and there by get the awareness.
.-= Mohan´s last blog ..Solar Electricity – Part 3 =-.
yeah .. Buyers Beware is the matra we need
Hello Manish,
It is not worth investing in the MoneyPlus. As you told, there is more number of mis selling in the rural areas to tell the policy taker as the money will be doubled after 3 years some thing like that. Agents are nor exploring the facts of the product.
Thanks,
Krishna
.-= Krishna´s last blog ..Verify Tamil Nadu District Patta Details =-.
Yup , there has been more misselling in Small cities than bigger, But I wonder is Commonsense is high in Big cities than small cities, its debatable
Manish
.-= Manish´s last blog ..What happens if you stop your ULIPs before 3 years =-.
If the policy can sustain the mortality & sufficient to take care of the policy for another three years, than yes u may get the money back, or else there is a possibility that u may not get anything back. it is a wrong myth that the agents make good money in the 1st three years, sorry no…. it varies anywhere between 5-7% in the 1st year & 3-5% in the subsequent two years… Further I always suggest pl continue to pay for a long term as long as ur comfortable to pay & allow it to be there for atleast for 10-15 years horizan…. u will see better returns & for more beneficial than a MF. Dont stop LI products with three years pay. otherwise dont purchase them, unless it is bought with a specific purpose… even if u stop paying let it be there & allow it to grow & take it at the right time. The only {“MANTRA IN MARKET RELATED PLANS IS “TIMING THE MARKET OR TIME IN THE MARKET.”}
Prasad
Why do you say that it varies anywhere between 5-7% in 1st year ? Its know that ULIP’s first year agent commission is around 30% , Are you talking about LIC ULIP’s in particular , may be its true in that case .
Manish
As per the guidelines of IRDA, now the commission of all ULIP policies have been reduced to 7% in first year and 2-3% in subsequent years of the Premium Paying Terms. Even some companies pay only for the first year @ 2-3% if it is a Single Premium Policy of ULIP and not any more. So this maximum limit of commission is fixed for all companies without any minimum limit.
bhai insurance ka funda alga hai. pahale app lo mediclaim then term and then investment plan. but peoples do exact revere and then think what they had done is wrong.
I think this must be the worst possible way to invest.
And i have invested in one this year….so have to pay in it for next 2 more in order for the unit to keep growing whatever amount it grows to.
No Himanshu ..
Seems like there is some confusion . You can stop your Premiums after 1 yrs payment , after that its depends on your company ULIP rules , if it will stop growing or not !! .. check your policy documents whats written there ? So do not invest more in it if you are not satisfied and can make better investment decision .
Manish
Hi manish,
I also had a same problem with HDFC Ulip, wanted to stop it before 3 years. I was adviced to continue the policy for 3 years then stop it. If stopped after 3 years the policy can be made as paid up. Is this advisable?
What is meant by making it “Paid-up” after 3 yrs .. In Ulips , its your choice if you want to pay for 3 yrs or continue . Its your choice to sell the units and take everything or let is continue to grow .
Who advised you to continue for 3 yrs ? It must be agent who gets a good chunk till first 3 yrs , anyways after 3 yrs his commisions drops so much that he is not atall concerned if you continue or not .
If you ask me , I would say you better continue it for full tenure (thats the way you should go) , or get out of it when you feel its not correct .. there is no compulsion that you have to pay for 3 yrs . Just that your money will be locked for 3 yrs . thats all .
Manish
Hi Manish,
Thanks for the info. The advice was given at the front desk of the Insurance company ! Anyhow I have stopped the ulip now, I have not withdrawn the amount invested. Should I leave the amount to grow or should I withdraw and invest it elsewhere ? If the value of the ulip dips, will I lose all the money invested? Should we monitor the ulips value frequently.
Thanks
Kiran
If its less than 3 yrs , you cant do anything , you have to wait till 3 yrs to take money out .
If its more than 3 yrs , now its your choide what you want to do. I would say get rid of it and start your fresh investment planning .
Manish
Hello
I wold suggest following starategy.
1) if the current value is more than total investment – Surrender the Policy
2) If the amount is less, check for the % loss and take a decision. If you think that you can book the losses, exit from the policy
3) If you continue with the policy make sure you understand that the Company will deduct below charges in the form of units
1) Insurance maintenance charges – Monthly basis with Service tax
Hi Manish,
I have paid the first premium for future generali Ulip of Rs 22,000. I have decide that i will surrender it after 3 years without paying any more premium.Recently, i heard the lockin period is changed to 5 years.So do I need to wait for 5 years to surrender it. First premium was paid on Oct 2009.
Dais
Did the rule came after your buying the policy ? In which case the mandatory lock up period might be 3 yrs only , however even if its 3 yrs , the surrender charges are generally NIL only after 5 yrs, also if you sell it before 5 yrs , then the proceeds will be taxable , nothing to do with the new rules regarding these .
Manish
Hi Manish,
I’ve a query. I had taken a ULIP from LIC and had made initial payment of Rs.5000/-. But due to unforseen circumstances I could not continue paying the premium. The policy was taken in Jul 2008. Now is it possible for me to revive this ULIP by making the payments+late fee
Please clarify.
Thanks
Suresh
Was this premium which you paid for full 1 year ? Or was it for just 3 months or 6 months . Revival of policy is generally possible only if you have paid your premiums for 1 yrs and then stopped . Most of the ULIPS allow reviving till 3-5 yrs after stopping the policy ,
make sure you have enough reason for continuing the policy , May be stopping it was a great decision even if not intentional
Manish
Suresh,
Is the ULIP policy is a Single premium policy ? In case of single premium no need to pay the next installment. You can surrender the policy after 3 years by selling the no of units at corresponding NAV.
Manish,
I have a query with ULIPs. i have made the premium payments for 3 years and now i have stopped. Will my sum assured be reduced accordingly ?
Also, will the accumulation of the fund value stop at 3 years or will continue till the end of the term ?
in that case, When will be the accumulated fund value be given to me ?
Your views..
Thanks,
Shantharam
Shantharam
After you pay your premiums for ULIP and stop .
You insurance will still be there and mortality rates will be cut every year from your Fund value . Your Fund value will move according the fund performance . You can take your money out whenever you want .. Just make sure that you try to take it out after 5 yrs .. so there are no charges .
Manish
Manish
Might be a stupid question…but will the sum assured be reduced in proportion of the premiums paid ?
Shantharam
No , if you stop after 3 yrs.. your cover will be same , it will not be reduced , just that your mortality charges will be cut by cancellation of units every year
Manish
Manish,
Cancellation of units will happen monthly and not yearly.
Rahul
Ahh .. does cancellation of unit for mortality charges happen every month ? I didnt knew this?
Manish
There is one small correction, manish… once you stop your premium payment… cover will blow off not reduced down specially in ULIP PVt Company case… LIC offer few plan which reduced the sum assured after stop paying the premium but not pure ULIP plan.
Hi Manish,
Can you suggest any Tax saving scheme Please. I have two ULIP from HDFC so that I could claim under section 80c as tax benefit, I am wondering if I stop my ULIP then where should I invest to save tax ? Is all taxing saving scheme has locking period of 3 years ?
for long term I have already planned for HDFC Top 200 (G) thorugh SIP, Also is there any charge on premium of SIP to HDFC Top 100 if I buy from ICICI bank? or should I direct go to HDFC mutual fund and buy this product directly there ?
Thank you,
Balbir
Balbir
You should always link your long term plans with your tax saving instruments (atleast try) , so that you dont feel any issue by locking them . Minimum lock in is 3 yrs in any instrument , MF , and ULIP have 3 yrs lock in , Tax saving FD has 5 yrs, PPF 15 yrs, NSC 6 yrs
So for long term plan with tax saving MF (ELSS) . try Sundaram , Canera rebaco and HDFC taxsaver .
Also ICICI will charge Rs 30 or 1.5% which ever is lower for every SIP , HDFC has Rs 100 flat for 3 months i guess (confirm this)
Thanks Manish for your reply..
“Also ICICI will charge Rs 30 or 1.5% which ever is lower for every SIP , HDFC has Rs 100 flat for 3 months i guess (confirm this)”
While going through many articles in jagoinvestor, somewhere in comment I read like
If I buy mutual fund from agent (Bank) instead of AMC (fund management house) then every premium there is
some charge levied by agent. So you suggested to buy directly from the fund house.
Could you please provide me that URL link of your article.
When I start reading any article in jagoinvestor then it is like breathking reading of a suspense novel which leads
to late night sleeping, I just keep following everylink and all tabs in firefox becomes jagoinvestor and value search.
Just like wikipedia..
Thanks for educating people like me, who is illiterate in investment domain. I made mistake in initial year, but ‘der aaye durast aaye’
Thank you,
Balbir
hehe .. its was so funny comment
I liked it ..
http://www.jagoinvestor.com/archives is the place you can find all articles .. The article you wanted is http://www.jagoinvestor.com/2009/08/new-mutual-funds-charges-from-icici.html
Manish
After learning that it is agent who gets benefited more (due to high commission paid by fund house) in the first three year. Just wondering how much a agent can get as a commission if one is paying ULIP premium of 1,00,000/- per annum ?
Does agent get commission from every premium till the term of ULIP policy or just the initial three years or just during the PPT (Premium paying term) ? I am just curios and this info would help me as a point while suggesting my friends against ULIP ( who just joined the corporate world ).
Thank you,
Balbir
Balbir
ULIP agent or Any Insurance Agent get his commision for every premium paid by Investor ,, in the initial year its high and later it goes down
Manish
Hello Manish,
I am a recent visitor of your site. Your site is very interesting and very informative. I have taken ICICI Prudential Life Time Super and I have paid 20000 yearly for the past 3 years. Term – 10 years. Assured Amount – 5 Lakhs. Current value – 69970.
Can I continue with this ULIP? Any suggestions.
Arun
So the return of ULIP in 3 yrs has been around 8% for you . If you can continue in this for long term . I would suggest go ahead and keep investing , make sure you take switching decision well ..
If you dont want to get involved a lot , better get out of it and invest in MF systematically
Manish
Thanks Manish for your suggestions
Can you please provide an analysis on Birla Platinum plus III as they mentioned “HIGHEST Unit Price Recorded on any business days between May 15 2009 to August 16 2016″a and the agent was keen in making me buy this and informed that he has also invested in this plan.
Policy Terms : 10 years
Premium Paying Term : First 3 years only
This sounds good, but is there any catch. what is the alternate and better option you suggest?
Thanks,
Arun
Arun
I really cant look into details because of time limit , but there has to be some catch and hence , i would suggest , go with simpler things like SIP , Term etc ..
“If you dont understand it , dont take it” is the rule
Manish
There is no catch in it… Well its platinium Plus IV has come after that and stop on 15 Dec 2009…. The funda behind this is that…they launched a new close ended fund called platinum plus iv with notional value of 10 like every fund start… since its life time of 7 year every day company will note down the nav.. if its higher than previous day it will be locked for you as gurrante….. This they will do continuously till 7 year achived and then what ever the highest NAV noted in between this period will be kept separate for you as guranted maturity amount… isn’t it nice
it is… if you see the fund performance for platinum plus II you will really feel good about this… I would say better than plain mf’s anytime…
I have Kotak Safe investment ULIP for 7 year premium term and 3 years are completed.
I thought to stop it start investing same amount in ELSS Mutual funds but came to know that if ULIP is stopped before 5 years, the tax benefits claimed earlier will be assumed “income from other source” and need to pay tax on same. if this is the case, the tax will be high for 30% bracket.
Any suggestions? How to deal this situation?
What !!! .. Who told you this ?
I dont think there is any thing like that ?
manish
Hi Manish,
Below is one of link. I read in couple of websites. From below details, let me know If my understanding is not correct.
http://www.taxworry.com/2008/07/be-ready-to-pay-tax-on-surrender-of.html
Unit Linked Insurance Plan (ULIP)
Be Ready To Pay Tax On Surrender of ULIP or Pension Plan !
I had some Life Insurance Policies with SBI Life ( i)Under their Unit Linked Scheme (ii) Pension Scheme.After continuing for 3 years,I had to surrender the above policies as I needed money. Kindly advise me whether
whether surrender value will be be added to current year’s income and taxable?
whether the value of the Units/ Investments or Profit thereon,purchased by the Insurance Company out of my policy premium and now,sold for effecting my surrender request will be required to be shown separately / added to Income for computing Tax.
Prabhat Dev Mondal , Patna
Your question relates to two types of investments -ULIP and Pension . While the units of ULIP are capital assets under I T Act , pension is not considered capital asset. Therefore , their treatment under I T Act is different. But before you do that it should be seen -what are the schemes under which the people generally invest in these kinds of product.
Investment under ULIP is eligible for deduction u/s 80C up to Rs 1 Lakh. Clause 5 of Section 80C states as under
(5) Where, in any
previous year, an assessee
(i) …………
(ii) terminates his participation in any
unit-linked insurance plan referred to in clause (x) or clause (xi)
of sub-section (2), by notice to that effect or where he ceases to participate
by reason of failure to pay any contribution, by not reviving his participation, before contributions in respect of such participation have been
paid for five years; or
then,
(a) no deduction shall be allowed to the assessee
under sub-section (1) with reference to any of the sums, referred to in clauses(i), (x), (xi) and (xviii) of sub-section (2), paid in such previous year; and
(b) the aggregate amount of the deductions of income so allowed in respect of the previous year or years preceding such previous year, shall be deemed to be the income of the assessee of such previous year and shall be liable to tax in the assessment year relevant to such previous year.
In plain word, if the ULIP is terminated or ceased to be participated by assessee , all the deduction claimed till the year of termination or participation shall be treated as income of the year in which surrender or termination of participation was effected by the assessee.
In your case , you surrendered the scheme within 3 years , therefore , aggregate deduction claimed till last year, will be added to your income as “income from other sources”.
Satish
I will have to look on this . I am not sure .. But after 3 yrs what ever money you get , that will be tax free totally.. before that , i am my self not sure
manish
Hi Manish,
see this article http://www.themoneyquest.com/2008/09/10-common-income-tax-fallacies.html
I think it’s explained here in easy way.. and it’s saying there will be tax after 3 or 4 year. Is it correct?
9. ULIPs can be surrendered after 3 or 4 years
Of course, you can surrender them but there are tax consequences. It has been specifically mentioned in section 80C that in case of termination of ULIPs before 5 years, all the deductions claimed earlier will be treated as income of the year in which surrender or termination takes place. Therefore aggregate deduction claimed earlier u/s 80C on payment of ULIP premium will be treated as “income from other sources” and you will be liable to pay tax on it. For further details, please read Unravelling the Ulips: 5 Secrets You Should Know About
Satish
It seems to be correct . I came to know about it myself
manish
This is actually shocking.
I was about to discontinue my ULIP after 3 years, this would have definately led to disaster.
Though i am confused in one point. The article states that you can make payment for 4th and 5 th year by making partial withdrawals in the ULIP.
Please suggest how to do that.
I have a KOTAK safe ULIP
Thanks
Hitesh
HItesh
I think its not a rule for partial withdrawel , i think its funny , if you withdraw 99% its fine, if you withdraw 100% then its not fine .
Manish
Hi manish
how is ICICI life time gold plan?
can u through some light on this plan?
worth taking or not?
Its a regular ULIP from ICICI . Here are the features .
• A regular premium Unit-linked endowment policy that offers potentially higher returns through the Multiplier Fund.
• Option to choose from 7 different investment funds.
• Systematic withdrawal of money from fourth year of Policy term.
• Higher of the fund value and sum assured payable as death benefits.
• Option to switch between funds up to 4 times a year, absolutely free.
• Available with optional Waiver of premium Rider.
• Tax benefits under Sections 80C, 80D and 10 (10D) of the Income Tax Act, 1961.
So nothing differnet in this ULIP . If you want to buy ULIP only , there are better choices .
Manish
THANKS MANISH
1) PLEASE NAME SOME GOOD PLANS IN ULIPS
2) WHAT SHOULD I DO NOW, BECAUSE I HAVE TAKEN THIS ICICI LIFE TIME GOLD PLAN, I MEAN HW TO MANAGE IT,PLEASE SUGGEST.
Some plans from Sun Birla and Aegon religare is good . Mainly look for low premium allocation charges .
I see people has made there ULIP paid-up after 3 years. Just wanted to know whether I can use top-up facilities even after the policy has been paid-up.
Thank you,
Balbir
Balbir
by making a ULIP paid-up , you mean that you the stopped paying the premium , correct ?
You can use top up only if the policy is going on , so first you need to revive the policy
manish
Hi Manish,
What is fund switching. I have a ULIP icici prudential life time gold. When do you think it as a good idea to switch ?
Fund swithcing means to switch your money from one type of fund to another fund . So you can switch from a risky fund to a safer fund or vice versa .
When is the good time ? . this is a tough question . this is something you need to learn by experience and if you have time and interest in Stock market , one needs to have knowledge for this , thats the reason ULIP is not suitbale for some one who is with less knowledge , interest and time
manish
Hi Raghu,
Manish has already mentioned this tips in one of the article, though it
require to understand the market tendency, so it is all about interest
and time. I, Myself is in the learning curve still.
=======================
Switch to Equity : When Nifty PE goes above 16 after it has touched 12-13 .
Switch to Debt : When NIfty PE goes down below 20 after it has touched 24-25
=======================
Also when the NAV is all time LOW then use the top up facility and buy more units.
Switching is useless facility when the investor do not know when and how to use it.
This is one of my colleagues told me when I was offered another ULIP plan from
my friend. I had to say him ‘NO’, it was tough but finally he understood.
“When people make you fool you become intelligent”. Even in friendship agent
are certainly not your friend if they force(emotionally, knowing you can not say NO)
you to buy ULIP.
Simply if you do not understand something then do not buy it. or you can’t understand it
fully until you are in trap
I took ULIP two years ago and neve cared to check units allocated to me, current NAV price
and charges they were deducting. But now.. it is up to me how to play this game
Thank you,
Balbir
Thanks for the detailed explaination
Well done
Manish
i was not sure about the above conclusion i think it should be
=======================
Switch to Equity : When Nifty PE goes BELOW 16 after it has touched 12-13 .
Switch to Debt : When NIfty PE goes ABOVE 20 after it has touched 24-25
=======================
I have a question about above switching, Do we need to consider NIFTY PE for any kind of ULIP’s? or Only ULIP’s which are invested in NIFTY?
correct me if i am wrong.
I got to know the below information from one of the blog.Can i use fund switching by taking below info.
PE Ratio Equity Exposure % Debt Exposure %
Below 13 90 – 100 0 – 10
13 – 16 70 – 90 10 – 30
16 – 20 50 – 70 30 – 50
20 – 24 20 – 50 50 – 80
Above 24 0 – 20 80 – 100
Durga
We can use Nifty PE infomation to switch in ULIP , but this would mean switching at very low speed as these things happen in many years . What we need is a mechanism to switch within months or atleast 3-4 times a year .
Manish
Manish,
In your opinion is it better to switch to Balanced fund(equity 30% – 60%) with the current market condition(Current PE is 23)?
Durga
Yes , but be open to expect to see market move for another 6 months , that can happen
Manish
Also, I am not sure if one can use fund switching when PPT(Premium Paying Term) has over or policy has been paid-up. I need to check with the customer care guy.
Why I want to know because once the policy has been paid-up and just before the maturity if market crashed and going down, then there would be no point to withdraw the money with low NAV price, I could use fund switching and move my units to debt.
Thank you,
Balbir
Correct .. please check and let everyone know .. I would recommend that at the time of goal , better start withdrawing your money before 3-4 yrs in systematic way .. let SIP concept apply there also .
manish
Hi Manish,
I checked with my agent/customer care guy [LIC and HDFC] and they confirmed that switching would be applicable for the paid-up policy. But I would confirm from the branch once I get time to visit there branch.
I have one concern on your statement from http://www.jagoinvestor.com/2008/06/things-you-didnt-knew-there-are-many.html
ULIPS : The deductions availed under sec 80C is taken back if you surrender your ULIP before 5 yrs. If you surrender your policy in 4th or 5th year , then all hte premium paid till date will be added to your salary for that current year and you will have to pay tax on that too. ULIPS just put restriction on paying of premium fr the first 3 yrs, but offer tax benefit under 80C if you hold it for minimum 5 yrs
Is above statement is true?? do we have to pay tax on the earning from ULIP also?
Thank you,
Balbir
Balbir
yes , that seems to be correct thing about ULIP . I am still investigating the fact, but i have read this at some places and looks like its true . Still needs to be confirmed .
hi manish
i took the policy in kotk ‘kotak flexi plan’.in this plan i have to pay RS 50000/y.till now i paid one year. i have to pay another 2 years.but due to some reason i am not able to pay.so i amm thinking to stop pay to premium.at this point what will happened first year premium.
thanks & regards
M.V.Madhu sudhana reddy
manish please reply i am waiting.
oops .. I some how missed this one
So as I said in this same article , you should see your policy documents (see on their site) and find out what do they say for premium stopped before 3 yrs. Generally you will your policy will be stopped but your units will keep moving as per market movements and then at the end of 3 yrs , you can then take your money . But check the policy details .
Manish
Being myself one of those of so called advisor… I would like to clear this point here… yes you can stop paying premium after after first year… Once you stop paying the premium before first three year… your invested amount pulled out from investment mode and put in to suspence account and that will be hand it back to client once 3 year period over but… but having said that , you don’t have to forget most companies charge heavy penalty name of surrender charges which eat 80% of invested amount if you stop the premium in first three year. So my adivce to all of you investor is that don’t be panic and act stupidly or make hasty decession, like one you make before entering contract with company for ULIP.
Akhil
Thanks for your comment . Do all the companies put 80% as surrender charges ? Realllly ? I was looking at a friends ULIP policy from HDFC and it did not mention anything like that , Did we forget to check something ? Please let us know ?
Manish
Yes Manish.. most of the companies charge this charges… 80% can’t generalise, but yes charges are there… if you want to check see first three year your surrender value and fund value is never be same in illustration…. only after three years or now irda make 5 years minimum time to remain invested in ulip… After said period both surrender value and fund value would appear same.. it means surrender charges are not applicable after that point.
Akhil
ok , i have not checked this yet myself
. I will take your words 
What is that 5 yrs thing ? its not lock in , right ?
Manish
No lock in period is still 3 year… But plan can not be surrender before 5 year…
Understand like this.. I am investing 1000 rs pa in ulip.
I have to continuously pay this amount for 3 year before i can touch part of my money or start taking withdrawal out of my fund value limit to one policy premium should be kept in my account. if i withdraw full amount then its will be charged because it consider as policy surrender.
Akhil
But when I see the policy documents of ULIP’s , there are rules for surrendering the policy (stopping the premiums) before 3 yrs ? What about that ?
Manish
I just refer to one plan which is hdfc endowment plus… this particular plan charges 100% if you stop after first year premium
so definitely manish you forget to read something 
HI All,
One who already invested in ULIP and one who are new but looking avenue for investment and under impression ULIP is like big bad evil… who eat all your hard earn money… Like my suggestion to all my client… Few thing you should notice before entering in ULIP, Like manish also mention so many time earlier topics…
1) Your horizon should be very well clear. If you entering ULIP, it is long term plan where if not atleast 10 year plus should be your goal… If anybody looking ulip with horizon of 5 year please this is not for you. Invest in mutual funds/ ElSS if tax saving is your concern.
2) ULIP is one product which is really good if you invest continuesly and for long term. if you see the total charges through out the period/term.. comes close to 2.5% and if you do some little exercise you dig out few plans in ulip which charge around 1.8% in total…
3) ULIP is comparatively Flexible product compare to ELSS because you have power to switch fund from equity to debt and safeguard your corpus, which is not possible in last… Also many company’s offer life cycle option now a days which manage the ratio of equity and debt automatically and switch your fund every year….
4) Last my point is ULIP is not the end of your investment… its one more available option which you can include in your portfolio like other avenue of investment… FD, Mf’s/ELSS, ppf, bonds.. etc…
I believe manish also agree with me.. most of the financial expert suggest one long term plan to be incorporated in your portfolio…But if you as an investor really aware and understand the product before commit you will find yourself more comfortable and make a most out of it….
So what you can do is keep reading this blog from Manish.. because I personally find this one very useful… Thanks Manish
Akhil
Akhil
Nice points from your side ..Good one . Lets discuss 2nd point a little more . Given that MF’s can be bought without load now , dont you think it would not be good idea for someone to invest in MF only rather than ULIP (I am talking about those who dont do switches m, who are lazy) .
I agree with you that ULIP’s can be very amazing products if one has some market idea and can take good switching decisions
. Thanks for your contribution 
Manish
Well Manish… keep charges aside for a moment… I would like to counter MF by point which I taken out from your one case study… where you prove person who start with 100% equity and second with ratio of 70:30.. at the end of term person who started with mixture will do better over first person
so if tax benefits is your concern and you believe this case study you know ULIP is good over MF.
But if you not doing tax planning but wanted to invest then MF is better option.. but you know debt fund attract flat tax of 20% or 10% without indexation, on the proceeding.. and if you go toward growth fund you again exposed to high risk of market. which for mid term is okay but you can not hang with mf for long term because you don’t know if last moment market volatility might do the money erosion…. which would harm your fund value badly…
LOL ULIP is winning so far.. let see what more point we can explore.
Now a Days plan in ULIP offers you auto switch facility or dynamic floor fund.. which 100% manage by the fund manager and ratio of equity and debt control automatically, so if you lazy also you have an option in ULIP.
Charges:- MF is the winner
hehe I don’t want to comment… okay okay on serious note..
Before we start, you as an individual should know in this world nothing come for free… if company is doing all this thing to provide you peace of mind… they are entitled to charge you also or they not..
If mf loads will be taken off then also recurring charges 2.5% will be there…. which includes fmc and admin charges just like in ulip.
ULIP is quite costly if you see the charges of first three years to 5 years.. but once you came out this period charges falls to extent which limit them to 2.25% ithrough out the term. (changes according to plan features).
Conclusion: I kept it rest till you not complete the picture then we do the conclusion
Hi Balbir,
No as far as I know working in same industry…. if you stop your premium payment before three year, you will not be charged for tax. because locking period still there for your paid up amount which is 3 year. And 4 and 5 th year if you stop paying the premium, company will charge you surrender charges… After 5 year onward you found fund value and surrender benefits are same means there is not exit load After 5 year onward…. Again not all the companies charge you on 4 and 5 year… its depends on plan features.
Akhil
I also read somewhere that “ULIPS : The deductions availed under sec 80C is taken back if you surrender your ULIP before 5 yrs. If you surrender your policy in 4th or 5th year , then all hte premium paid till date will be added to your salary for that current year and you will have to pay tax on that too. ULIPS just put restriction on paying of premium fr the first 3 yrs, but offer tax benefit under 80C if you hold it for minimum 5 yrs”
I am not confirmed , but can you recheck this and confirm ?
Manish
Sure this interesting point, me to curious because as far as I know this point is not communicate to us… As you know IRDA done some changes in guideline that’s the reason all the companies force to change there existing plan to new….. one Change is that IRDA Put cap of 3% on charges… no company can charges beyond said limit…. so i am not surprise If that point, what you just mention also incorporated… because if you see 75-90% (rough idea) people withdraw from this plan post three years….
I always believe the enemy of ULIP is no body, but stupid companies policies and bad presentation skills. This plan is highly miscommunicated and that’s the main problem with it.
Any how Pension Plan and ULIP are different in sense of tax treatment…. So my above comment is purely with regards of ulip… Am also not so sure about pension plan…. All I know at the vesting period only 1/3 part of your corpus is tax free which you take out as lump sum.For rest amount you have to purchase annuity from same or any other insurer which again treated as your income and you have to pay tax on that amount.
Akhil
If you closely look you will realise that 100% of your money is tax free at maturity (Sec 10) . Just that you have to pay tax on yearly income on the annuity , which is totally acceptable because its income for that particular year . with pension plans imagine , you get all your money at the end , you keep 1/3rd amount , dont pay tax on that and for rest 2/3rd also dont pay tax , but then invest it in an annuity plan . So overall there is no tax on 100% part . Just that you can take 1/3rd with you
Manish
hmm how come.. manish try again… 1/3 part of your corpus you took lump sump as tax free.. but rest of the amount you have to purchase annuity which attract tax you can’t save tax on that…its treated as your income…
Hi manish, i have invested in ulip of canaraHSBC , and it was done very quickly by the agent as i had to leave india within next 4days.
My query is ” if i stop my next premiums (2nd,3rd,4th and 5th yrs) what money will be refundable of my total money invested in the first year?
As i was away out at high seas could not do anything for stopping it in its initial 15 days trial offer, do i stand any chance to present a case for refund to IRDA?
kindly advice
vinod
Vinod
one of my teammate was also missold the same CanaraHSBC ULIP : http://www.jagoinvestor.com/2009/07/perfect-example-of-ulip-misselling.html
I am not sure if it would be very helpful to surrender the policy now : http://www.jagoinvestor.com/2009/11/what-happens-if-you-stop-your-ulips-before-3-years.html
Manish
HI Manish,
Sorry I am interrupting again, since you asked this from manish.. But I would suggest not to stop because you don’t have any chance and more over… the investment added back to your income and you have to pay tax on that…..apart from that company deduct surrender charges and rest of the amount will be handed back to you after said period of 3 years.
Yes manish, I took a confirmation….. If you stop paying your premium any time between 3 years of locking period, your investment added back to you income in subsequent year, which year you stop paying the due premium and total paid up premium will added back to that year income and you will be tax on that… not applicable on 4 year onward only first 3 year premium….
Akhil
Thanks for confirming this
.. ULIP looks more evil to me now 
Manish
ELSS come with same ruling…
its govt choice not compaines :p Manish
Hello all ! I am in serious trouble because of ULIPs. 3 years ago, my father bought units worth Rs. 50,000 from ING Vysya. We were looking forward to them maturing last month, but when I went to their office, they told me the following things -
1. The fund value is Rs. 45,000.
2. They said that as my father paid only one installment, we cannot have the money back for another 2 years (total 5 years lock-in).
3. I said what is the guarantee that the fund will perform in the next 2 years considering its abysmal performance. They said no gurantees, but they assured me that they have deducted their annual maintenance charges and this is why the amount is low, other wise it would be around Rs. 48,000. Some reassurance.
I just want my money back because I do not trust this company one bit. Is there any way we can get it ?
Unhappy
Sad , but the issue is you cant do anything . Even though you are unhappy and unsatisfied with this company , You have to take some blame on yourself that you never bothered to read the policy document and never took effort to understand the product where you are investing in .
Policy document will have all the things clearly mentioned and Had you given 30 min while you bought it , you could have saved all this trouble .
The company is correct in whatever they said , even though unethical upto some extent . Take this as a learning experience .
Incase you are optimistic about the future (2 yrs) and feel that the markets will perform , better leave your money in equity option .otherwise you can do 2 things
1. Switch everything to debt , this will not make you much returns , but will save your money from falldown .
2. Ask them to liquidate your money and give to you after 2 yrs ( check their rules)
No matter what , you are in mess just like lacs of other investors who took things for granted
. I feel helpless 
Manish
Very valuable information on ULIPs. You are doing a great job on educating people.I dont know where to put this comment, so I am posting it here:
1. The retirement planning article is awesome. When i told my dad abt 2.9 crores corpus @ time of retirement, he was dumbstruck. It told me that I need to be more aware of investment options and suitable vehicles to drive me safe to the said corpus in 20-25 years from now.
2. The gold ETFs, had never heard of it. Now i am thinking on getting some investment in this.
3. The ulip information was very helpful and can guide my family on same.
4. the article on – want to take a risk vs afford to take a risk. pinching. to say the least.i
calculated exactly how much i can afford to risk and started investment accordingly.
5. SIP taught that they can inculcate good discipline and one need not tiem the market.
6. Taught me PPF to say the least!!!
How ever i have one question; i knw few trustworthy local co-op banks which give 10-12% per year.shall i go for this or debt funds?
Mukul
10-12% on FD ? which co-op bank ?
manish
A local one, I know.
I have taken MONEY PLUS policy from LIC of India on Feb. 2007 (ULIP), and paid 2nd. year annual premium also. I am not deposited 3rd. year’s premium . Please tell me what’s the present status of my such policy.
Please Help me.
Harish
Generally u should look at your policy document . However the general status would be that you will get money after 3 yrs of lock in . where is your agent ? ask him ..
Manish
I have paid Rs 1,00,000 as my premium for LIC UNIT PLUS-II REGULAR.
My 3 yr tenure is getting over in june2010.
Could you please advise
1.) should i continue paying my 24k premium for 8 yrs to avoid any loss or is it beneficial to terminate the policy after 3 yrs with loss of 1%.
2.) Can i stop paying anuual premium after 3 yrs and continue the ULIP for 20 yrs. In such case would it be beneficial or loss.
Kindly advise.
Regards,
Rachna
Rachna
As we talked in this article , ULIPs is something you should stop immediately if you dont understand it , you cant take care of switching effectively
1. Dont see the loss you are getting right now , see what is the profit you will make by stopping the policy .
2. It wont be much beneficial , because anyways different charges will be cut by cancellation of units .
Manish
Manish
Hello Manish,
I was surfing net to get more info on ULIPs and its terms & conditions, and found your blog here…u r really doing a gr8 job by helping so many people lost in the world of investments !!
So point is I need ur advice…I bought a ULIP of ICICI Pru – Life Time Super in 2007 for a term of 20 years. I paid the premium of Rs 30000 per yr till 2009 and now this yr was thinking to not to pay it further, I called their Customer Care and got to know that If I opt not to pay from this yr, the policy will be closed after 2 yr from now and the amount will be trsfd to me, another option he suggested was to pay the mortality charges (deducted thru my units) in which case my policy will be continued till the time I pay these charges. As of today the fund value I have is Rs. 1,11,000.
Kindly advice if I should continue paying the premium for this year and for coming years as well…? Or should I opt for this mortality charges option.
Also I shall be thankful if you can throw some light on the allocation charges…I guess first yr it was 20%, in second yr 7.5%, in third yr 4%, in fourth yr ?, and later ?
pshrivastava
You should first try to understand what kind of investor are you ?
Are you a person who keeps an eye on market movement and can take right switching decisions ? If yes, you can then keep the policy else you should close it .
See http://www.jagoinvestor.com/2009/02/how-to-manage-ulips.html , For Allocation charges its best that you look at the policy document .
manish
Thanks for the info and your response.
It was really quick
Hi Manish,
In 2007 I took Lic money plus enrolled for 5 years premium payment and 3 years have paid the premium. The policy says, it is a 5 year term. The progress of money plus is not good and I do not want to continue paying premium for the remaining 2 years. Can you suggest me
1. what is this 5 year term ? Is this the locking period !
2. If suppose i discontinue paying the premium, after 5 years, on what NAV i will get the
money back?
Girish
generally this 5 year would be maturity tenure after which there are no surrender charges . before that you might be charged surrender charges .
manish
Manish, thank you for your kind reply. Yes, I am stuck and am arranging funds from somewhere else, however the person who sold me this ULIP is a personal friend, and he offered to loan me the full amount of the policy as he himself was not told about the 5 year lock-in. I am going to be very wary of these companies from now on.
Unhappy
Nice to know that , tell your friend that she should be aware of facts from next time .
manish
Dear Manish
Please advice on following:-
I am the holder of policy, money plus since mar 2007. I have paid two instlments in 07, 08 total worth Rs. 20000/-. Now three yrs being completed in 20 Mar 2010. Please advice me how i will get. I have not been allotted any units. Agent are saying that i will get 17000/- only out of 20000 which i have invested. Please advice at an early date. Positve and early reoply is solicted plz
ds Negi
I can do an early reply (just 10-15 min if you see) but what is Positive Reply ? what do you mean by that ?
So the thing , your money 20000 was invested for 2 yrs , but the ups and downs in market has not taken your money to anywhere … its almost at same place where is was , just that the costs in initial years have eaten away some 3-4k and your current value is 17,000 , if you surrender it now , you will get money after 1-2 yrs (see your policy docs) .
Best thing would be to stop it if you dont understand how to take advantage of switching in the best way .
Manish
Dear Manish,
I have taken HDFC Young star champion policy in 2009 with premium of Rs. 50000 p.a. for 5 yrs. Can you pls. suggest as to how is the performance of this scheme and should I continue to pay premium for 5 yrs.
Suresh
Suresh
You should look at the ULIP NAV to find out the performance of the fund . without understanding your overall situation its not possible to comment on wheather you should continue this or not
Manish
Hi Manish,
Can you pl guide me? I have taken a ULIP policy with ICICI for 15lacs for 15years premium being 25k pa. I’ve already paid 3 years premium so far and fund value as on date is just 83k. Now after reading your comments on ULIPS and Term policy, i am planning to discontinue the same and take a term plan may be iprotect. Further, i have taken jeevan Anand (SI 3lacs, premium 24k pa, 12 years) for which i have paid 3 years premium, however i intend to continue this policy. pl advise.
Thanks in advance.
Pramod
Your ULIPs value is low because of the charges mainly , it might do better in future , you have paid most of the charges anyways , you continuing it would be ok provided you are ready to learn how to use ULIPS .
Regarding your LIC policy you do the maths yourself that if you continue it what happens and if you stop it and use future premiums in something else what happens then .
Manish
Hi Manish, I am an avid reader of ur blog. please review LIC pension plus.I am going to buy this plan.My age is 27yrs.Is it a good plan for me.Pls help me out.
Sanjay
Its a unit linked plan and i recommend only buy it if you understand how to do switch correctly, else no use.
Manish
Hi Manish,
I’ve a query. I had taken a Prudential fund (Life time insurance super) from ICICI Bank Bahrain and had made initial payment of Rs.50,000/- . But due to unforseen circumstances I could not continue paying the premium. The policy was taken in Feb 2007. Now is it possible for me to get my money back. I didnt paid continue one year.
Please clarify.
Thanks
Midlaj
MIdlaj
Is it a ULIP ? What was the locking period, better look in the policy documents ?
Manish
Hi,
I purcahsed a ICICI ULIP Life time Super in Aug 2007 and the current fund value is 220000..I’m still continuing the premiums (Monthly)…is this advisable?? When can I take this amount out??
Anil
You should be looking at the performance of the fund , your ability to hand this fund in future and future charges to decide if you want to contuinue or not .
Ask your question or have a look at already asked questions on our forum : http://www.jagoinvestor.com/forum/category/questions/ulip/
Hi, manish, i want some info, since i have invested in ULIP as fallow
1. Rs 2000 monthly- BSLI dream plan from October 2009
2. Rs 1500 monthly – BSLI dream plan from December 2009
3. Rs 1500 monthly – BSLI dream plan from December 2009
Now i am finding no growth on my investments so far made on ULIPs, and i am thinking that above 5000rs i want invest in good MFs (open ended) for SIP for 1year or more
if i stop the making premium before 3years completion, do i get back the money whatever so far i have paid the premium after 3years pls. confirm, it will be great help and relief for me.
IF YES, pls. suggest me any good MFs straightaway i will invest in MFs.
Thanks Shivakumar
ShivaKumar
If you have completed 1 yrs of payment , then you get it , else not .
Manish
Now a days United Bank Of India is giving 9.75% interest for 8-10 years duration Fixed Deposit. What oters banks are giving? Where to invest best for a senior citizen at present?
Pijush
You can check it here : http://www.way2goals.com/Project2/chooseBank.html
manish
Hi Manish,
Good to read so many facts on the ULIP. We have SBI Unit Plus – 2 regular ULIP since June 2007 opted for my mother age 50. We have already paid for 4 yrs and we are not very good in tracking market or doing the switch aptly. This is the only insurance / investment plan they have and both my parents are not having any other investments on their name. Is it wise to continue this plan further? If we discontinue it now or after the fifth yr, what would be the charges? Considering their age can you please suggest some good investments plans for them if this is not the apt one.
i have paid LIC Money plus policy 20000 for 4 years (2007,08,09,10) but my agents said that pay for fifth year also, so is it worth to pay money plus for fifth year also. i came to know that the nav value is very less even we are not getting what we invest also so far.
please suggest me to pay for fifth year also
Phani
Yes .. the NAV will depend on market value only .. so investing for 5th year is suggested only if you feel markets will go up now
Manish
Hi,
I have taken ICICI Life time super in 2007 & paid Premium for first 2 years, but couldnt paid the 3rd & 4th year preimium, now after 2.5 years I want to pay the 3rd & 4th year premium, so is it possible
Amit
Yes, it can be revived , adn yo ucan continue it , read the policy document about it
Manish
Hi Manish,
I have invested 3 years(25000*3) in HDFC ULIP . Now I checked my fund value is 48000 only. They deducted service charge and as well as monthly charges.
I am thinking may be its more worst in future .Should I continue this plan or I have to withdraw ?..
Will it profit in long terms ?.
Please suggest me ASAP.
Syed
Yes there are service charges and monthly charges in these plans which you were not aware of .. better close this and start putting money in SIP mutual fnds
Manish
can i get back my first premium amount as the policy has been lapsed three years back.
Sashikant
Yes you can get it back , but not the first year premium , but your fund value . Contact the company
Hi Manish,
I have invested Rs 36,000 per year in Kotak ULIP and now the fund value is 45,000. I am very much worried by looking into the amount. I have completed the lock in period of 3 yrs , what can i do now as ULIP is not returning the atleast amount which I invested i.e 1 lac…
Please suggest me what to do , as its a huge loss.
Fayaz
Better get out of it .. wanting to get back what you invested is a psychological block in mind , nothing else .. if you have to wait for 10 yrs to get back your money , then will you wait it ?
No , it does not make sense.. better get out and forget the past
Manish