Which is a good product to take? Mutual fund + term insurance or unit linked insurance plans?
Well it depends on the knowledge level of the buyer, and the smartness of the salesman (in India calling people who sell also financial planner is a regrettable fashion statement).
Well, let us take a case of you wanting to take a 23 year old kid who wants to take a Rs. 25L life insurance to cover a home loan. Most “honorable” advisers would suggest a term insurance of Rs. 25L.
However, it can be also structured as a Unit linked endowment plan with a much lower (yes you read right) TOTAL RISK COST.
Wov, how is this possible:
Pay a premium of Rs. 50k and get a sum assured of Rs. 25L (50 times the premium). Pay the premia for 5 years at least and then decide whether you wish to continue the same. In the meanwhile the amount of money in the policy would be building up. On death of the person, the amount payable should be SUM ASSURED OR policy value which ever is higher. (Be careful the operating word is OR).
How does a ul get cheaper than a term policy?
Ask your mutual fund advisor to tell you the TOTAL CHARGES (load + amc charges) on a fund growing @ 22%, monthly contribution of Rs. 100,000 for 30 years. (entry load 2%, amc charges 2.5%)
Compare this with a ulip plan with a 30 year run, growing at 22%, monthly contribution of Rs. 100,000 for 30 years (for a 23 yr old) (first year entry load 60%, amc charges 0.8%, and a TOP UP of Rs. 300,000 every year for the first 5 years.
If your consultant cannot …do the calculation, learn it yourself. You will be doubly blessed. The learning will pay for itself in the 3rd call from your RM.
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