I recently saw a post which said ‘Alert Investors already know about ULIPs’. Amazing half truth :).

Once upon a time Arun Shourie said “In India what you say depends on where you sit”. This is so amazingly true – look at the Women’s Bill. BJP says it supports the bill, Congress says it wants the bill passed, but the bill is stuck.

Now about ULIPs! I invested in ULIPs when I could get them at 0.8% asset management charges (Hdfc standard life insurance) and am reasonably happy with the performance. HOWEVER what is now hurting me is the poor performance of the fund – and I realize that I can only surrender it!

However there are enough calculators to show that many unit linked plans are ACTUALLY cheaper than mutual funds in the longer run – say 8 to 9 years. However there is a problem. Imagine if I run a website which survives on advertising – I need page views EVERYDAY to justify the money I charge for advertising. The conflict between advising (which is good for the client) and advertising (which is good for the website) is HUGE. So I have to talk like ‘review every quarter’ be watchful, see your portfolio (it adds no value to the customer)….etc.

So to say at the smart investor, alert investor, …all know about ULIP’s overcharging is the same old story. Keep saying the same old story so many times that people believe it.

However the life insurance companies are plain…..??? what do I say…? they have no web presence or media presence or media clout to make people understand the charging structure. And the teaching should start with finance MBAs, and journos in the personal finance area….sad it will not happen!

Related Articles:

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

  1. Dr Mohammed Ali Khan

    “However there are enough calculators to show that many unit linked plans are ACTUALLY cheaper than mutual funds in the longer run – say 8 to 9 years”
    Is it Subra..?
    Are they cheaper that Index funds ?I don’t understand..
    How so?

  2. I have bought Hdfc standard life insurance unit linked endowment plan. Originally I was allowed to top up as much as I want. For e.g. on a premium of Rs. 100,000 and a sum assured of Rs. 20 lakhs, I could top it up by 3L. So in 3 years I cd pay 4 (1+3)lakhs each year for the years 2004, 05, 06, 07. Now this was a period when there was a 2.5% entry load in mfs. Here the entry load was 1% in THE TOP UP. also the markets did well, was fully invested in equities, so the RISK CHARGES dropped. Amc charges was (continues to be) 0.8% p.a. THIS IS THE LOWEST. An etf costs 0.5% but u pay brokerage and demat charges of 0.85% (my wifes ac is with Icici bank.). Thus in 2010 with almost ZERO risk charges (acc value is greater than the sum assured) and a TAX FREE accumulation over the next 12 years, this money will do well…NO PROBLEMS!!

  3. Hi Sir,

    Last month i have joined in HDFC ULIP. I am woried about SEBI ban on ULIPs. And also confused about mutual fund and ULIP. Kindly guide me what are all the points we have note before investing.

    Thank You!

  4. Dhamotharan,

    – sebi-ban on ulip , investor need not worry. Ban on exisiting ulips is removed for now. Anycase long-story-short investor need not worry about this (actually whatever the outcome, it will mostly benefit investors).

    – MF vs ULIP
    Alas! You should have asked the question *before* you invested.
    MF + term insurance combination is way better than ULIPS

    – Is it still within free-look period ? Then you can think about returning it or not (after reading all these articles) .

    Anyway you can get one article here.
    Also other articles in same site.

    MF+Term insurance


    Other good articles in same site

    Dont mean to alarm you with all these articles, but facts be known earlier than never.

    [Disclaimer : I am not a financial planner. Above is my understanding only. Anycase use the information at your own risk ]

  5. Pingback: Weekly Digest of Personal Finance Articles (April 10-17, 2010) - Ranjan Varma's Blog
  6. Thank You Sir. First time i have invested the money. After investing the money i have googled about the product and found your article. (Good thing in the Bad Time!). I want to know the facts what ever it may be (Ofcourse i don’t have option). I am the begginer in this area, i want to learn more. Please advice.

    Articles are very nice and helpful. Once again thanking you and your valuable time.

  7. sir,
    NOT mentioned about premium allocation charges of 30 % in the first plus again 30 % in the second year.
    this policy brake even is 8 years @10 % cagr.
    thanks i am working in the above co.. for a living.

  8. break even is 8 years if you pay ONLY regular premium and the markets grow only at 10%. In my case I HAVE used the top ups fully, and my allocation was higher (bigger premium) …MY BREAK EVEN WAS 2 YEARS. Not sure whether it was 2 or 3 years – also u need to remember that it was at a time when mf load was 2.5%…

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.