POSTED BY January 6, 2013 1:20 pm COMMENTS (3)ON
My father who is aged 62, was sold ICICI PRU Life stage wealth II policy by icicidirect agent.
Is this policy advisable at his age to be continued.
He belives if the same amoutn he puts in ELSS probably would generate a healthy return of 12-15%.
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3 replies on this article “ICICI Pru Life Stage Wealth II should we surrender it?”
If it was a younger person the answer would be a blind yes: stop premium cut your losses.
For a 62 year the answer could be yes provided you are clear about why this investment is being made or at least why you want to make it in ELSS>
If it is for your fathers future then you need to be clear about asset allocation and how much is the total equity exposure which as I said should not be more than 40% and actually could be lesser if this money is intended for funding retirement expenses in future
So in this case the goal, when the money is reqd and overall asset allocation should guide your answer
If you are clear that you want to invest 50 K per year in a more flexible product with more earning potential than the ULIP then go ahead
Thanks for your response.
As per brochure of the product
i.Premium discontinuance during the first five policy years:
If the policy is not revived within the period described above, the life
insurance cover and rider cover, if any, shall cease. At the end of the
period, the Fund Value including the Top up Fund Value, if any, shall be transferred to the discontinued policy fund (SFIN: ULIF 100 01/07/10
LDiscont 105) after deduction of applicable discontinuance charge as
described below. Thereafter, no other charges shall be deducted other
than the fund management charge of 0.5% p.a. of the discontinued policy
fund. In case of death before the end of the fifth policy year, the
discontinued policy fund value shall be paid to the nominee.
At the end of the fifth policy year, the discontinued policy fund value shall
be paid to you. The interest credited during the discontinued period is that
earned by the discontinued policy fund, subject to a minimum of the
interest applicable to savings bank accounts of State Bank of India, or any
other such rate that the Regulator mandates from time to time.
Yr in which Premium is discontinued Annual premium ≤ Rs. 25,000
Year 1 20% of lower of (Annual Premium or FV),
subject to a maximum of Rs. 3000
Year 2 15% of lower of (Annual Premium or FV),
subject to a maximum of Rs. 2000
Year 3 10% of lower of (Annual Premium or FV),
subject to a maximum of Rs. 1500
Year 4 5% of lower of (Annual Premium or FV),
subject to a maximum of Rs. 1000
Year 5 Nil
He currently has paid his first premium of 50,000 Rs.
Would it not be better to stop before second premium and atleast he has 50,000 Rs/year surplus for investment in ELSS/Equity etc…
ULIPs are inflexible products. Previously they had a lot of expenses associated with now but now they have been reduced. MF investing is way more flexible in terms of switching.
Buying a ULIP at any stage in life is not advisable and certainly not at 62, Since he has already got it, I think your father should hold on to it since getting out will be expensive for him
He could use the LifeCycle based Portfolio Strategy which means (100-age) 38-40% in stocks to begin with decreasing each year. This is a decent plan for him and should provide 8-10% average returns.
Of course MFs are better instruments and could (only could) provide higher returns. Since he has already got it, considering his age, he should make the most of it and not let MF returns bother him too much.
Even if one were to invest in MFs at his age he should have total exposure of 30-40% only so net return will not be 12-14% but more like 8-10% only