Need advice on this Metlife ULIP

POSTED BY Bibhubrata Narendra ON September 14, 2012 3:06 pm COMMENTS (3)

Hi,

I have a MetSmartPlus ULIP that was started in 2008 with an annual premium of 20k/year. Now, I want to get rid of this as soon as possible after taking into consideration the below points. Please have a look at those points I have thought of and share your views and advice on them

1. The policy has a surrender charge of 60% of the annual premium now and this charge gets reduced by 10% every year. So its Nil only after 10th year.
2. Unlike most of the ULIPs the initial charges are evenly distributed over 10 years(6% per year) instead of heavy charge on the first year
3. The surrender value will be taxable now as the policy has not yet completed 5 years(Not sure about this, so any help will be appreciated).
4. I intend to invest the entire corpus in equity mutual funds

Now, I guess I have just 2 options (as I can think of):
1. Surrender the policy after paying one more premium and get the tax benefit. Surrender charges would be 50% of the annual premium however.
2. Surrender the policy after 10th anniversary

Can there be any other better options like making the policy paid-up (I don’t care about the insurance as I have already taken a term insurance) or continuing with policy for long term (20-25 years is fine with me)

Thanks in advance for your precious time.
Best Regards,
Bibhu

3 replies on this article “Need advice on this Metlife ULIP”

  1. Dear Bibhu, please surrender now. Surrender is not taxable to you now. Please read the section 80C of Income Tax. Invest the surrender amount in the MF of your choice. In case you want to save that 10% surrender amount, you can do so by keeping policy as it is without paying any more prem. for next 1Y.

    Thanks

    Ashal

    1. Bibhubrata Narendra says:

      Dear Ashal, Thanks for your reply. Just wanted to consider one more point before going for the surrender – The tax implication.

      A lot of fuss is going on about the New Direct tax code which might remove ELSS as a tax saving instrument. In that case, ULIPs would remain the only market(Equity) linked tax saving instrument available (as far as my knowledge goes). Don’t you think in that case ULIPs would give better post tax returns in long term compared to mutual funds considering a 20% tax bracket?

      Again, as I said these are all speculations about ELSS, not being considered as tax saving tool post DTC. Do you think it would be worth holding on to the ULIPs till things become clearer may be in next 1-2 years.

      Thanks
      Bibhu

      1. Dear Bibhu, DTC is merely a talk as on date & there is a lot of walk to do to reach a final destination in DTC. When DTC is going to be implemented & what ‘ll be it’s final shape, my guess is as good as yours’.

        Please do not worry for DTC as of now. Regarding the Eq. linked investment under section 80C, my dear friend, NPS is there.

        Thanks

        Ashal

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