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POSTED BY ON March 29, 2013 5:49 pm COMMENTS (9)
OK, Its bit embarrassing to tell the story. I bought this costly ULIP Metlife SmartLife back in June 2010 when I didn’t know the ABC about Financial Planning/SIPs/Cover and all. The plan provides a cover of 60 lacks till age of 60, with an annual premium of 1.20 lacks (Yes, I pay 10000 per month!! Dunno what I was thinking back then). I think I fell into the trap of high returns and numbers shown by the agent. The ULIP puts money into the Multiplier Fund II of metlife which is equity oriented.
And now I think I made a huge mistake. I should have taken a Term plan, and take the SIP route in Mutual funds. I was just too naïve about my finances back then (I am still I guess).
What should be the strategy with this ULIP? Should I continue with this plan, or move out once it completes the 3 years mandate? I am aware that the maximum charges to ULIP are applied during the first 3-5 years post which one can expect a decent growth.
But I am not sure about metlife multiplier fund II.
Any help would be much appreciated.
Regards
Finnaive
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Hi Finnaive,
I think the surrender charges are not nil after 5 years. It reduces by 10% year after year. So if you surrender Metlife ULIP in 5th year then 50% of your first premium paid (50% of 1.20L i.e. 60k) will be deducted as surrender charges. And if you surrender ULIP in 6th year then 40% of first premium paid (48k) will be deduced as surrender charges. So in your case by year 2020 the surrender charges will be zero.
Go for partial withdrawal option which means the premium amount will be adjusted from your existing fund value and you don’t have shell out 1.20L from your pocket. But you have to check with the customer care whether it will be allowed for your policy or not because it’s been only 3 years for your policy.
Dear Ashal
Thanks for the valuable suggestion. Yes not paying would be the better optioin.
Now on the declaration part, what do you mean when you say “in the first 2 years”..My policy is about to complete 3 years in May this year.
I also check with the account executive on the declaration, he is pretty sure that I dnt need to declare my other policies. Here is what he says in his words
“When you are taking a fresh policy, you need to give the declaration of existing policies.
You do not need to go and edit with old policies. ”
What should I do?
Thanks
Dear finnaive, not paying prem. any more in this policy & let it remain as it is may be your best option. Regarding the declaration of old policy, it’s mandatory to declare & it may become an issue in the first 2Y of your policy if claim is filed.
thanks
Ashal
Well, i checked with the customer care of this policy, they say the surrender charges are 100% if done before 3 years. and after 5 years its nill. So I do not think I have any other option other than continue with this. Pls feel free if you think there is a way out.
another note, I came to know I need to declare all other life policies I have with any life insurance. Now I have 2 other policies, LIC Jeevan ANand and Bajal Allianz (Ulip, sold to me by my brother’s friend 5 years back)..I have already declared LIC policy with metlife during form filling, however I didnt mention the Bajaj one. Is it mandate for me to declare the other policy as well
I checked with the account executive of metlife, he says its not needed and in case of any eventuality, cliams will be processed smoothly
I am confused should I declare or not/.
Pls help
Dear Finnaive, amputating a finger today or an arm tomorrow is a personal choice.
thanks
Ashal
Dear FFC, Ashal
Thanks for your valuable inputs.
Well, though I would like to exit out of the policy at the moment but I am also cognizant of the losses I will have to bear. The loss will be a big number which I am not confortable doing. So not really sure what to be done.
I am also short on the life cover, which I would complete with a simple Term Plan. No more ULIPs
Thanks
Finnaive
A ulip will take many years to break even. If you uncomfortable about the loss stay invested and spend the time learning more. List your goals and align your ulip with your goals. You will feel much better
Dear finnaive, if you surrender this ULIP, what ‘ll you do from here onwards & if continue the ulip, again what ‘ll you do in future from here onwards. Are you ready for the standard advice of surrender the policy, book your losses & start a term cover + MF combo? Only you can answer this question.
1.2L Rs. yly prem. indicates that you do have a good yly income in excess of 10L Rs. So your term cover requirement may be any where from 1.25C to 2Cr.
Thanks
Ashal
ULIPs can in principle give you good returns over the long run provided you know how to handle the portfolio. They are however complex products and best avoided. once you have one the options are:
1. You want simplicity and get out not worrying about loss. This is also true if the premium is eating up money that is need for other goals.
2. If cash availability is not an issue and you are willing to learn about the ulips portfolio and can wait for the long term the you could stay invested.
also remember most market instruments are going nowhere because of the state of the market.
So list you goals and determine the amt needed. determine life cover needed and health cover needed. if you have enough money to cover these then you could integrate the ULIP to your goal planning and learn about managing ulips.
The standard advice of getting out of complex product is easy to give but you need to bring your personal perspective and decide what to do.