I am not even getting into ‘Ulip vs Mutual funds’ – the experts know it, right?

I am trying to see what are the mistakes they make when they buy Unit linked Insurance plans. This is not an exhaustive list, it is just on the basis of interactions that i have had with my readers and in some investment seminars that i have attended:

a. They mostly have no clue about the Premium: Coverage ratio. Most people do not know how much they are covered for. They know the monthly / annual premium. In an aggressively sold UL the sum assured is likely to be 5 times and in a less aggressively sold one about 40 times.

b. No clue about the underlying fund: Many of these people can name their mutual fund schemes, but have no clue about the underlying assets in their ulips. Just no clue. A dumb salesman happily puts all the amount in a debt fund..saying ‘why take risk’. LOL

c. No clue of underlying schemes, so obviously no clue of present or past performance. For e.g. Hdfc used to have a good fund manager, but then changed the FM. Now the performance is bad. Charges are low, but portfolio is bad, what to do?

d. Not understanding lock in: If the agent said it has a 3 year lock in, most buyers believed that they could pay the premium ONLY for 3 years. EEEEEEEEkkkkkkkkkk such people should be banned from investing itself. And some others thought since the lock in is over, it SHOULD be removed. They were helped along the way by their ever helpful RMs.

e. Switching: what is that? the only good thing (if you understand how it works) in a ULIP is the ability to switch funds from one underlying class to another. MOST of the people did not know that this facility existed.

f. The most obvious one: buying from agents / bank relationship managers who had NO CLUE about how ulips work.


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  1. Sir you have told about the mistakes..Tell detailed about how to buy it?What are the important factors in it?What should be noted and asked with seller?How we benefit from that?Which are the best ULIP?Is ULIP is best?

  2. simple: do not buy ULIP. If you STILL want to buy there are many websites and blogs which will tell you the virtues of ULIP, but not this blog. Once upon a time I HAD BOUGHT a good ULIP…however the fund manager there has done so much damage that the low charges feels like an apology for a murder.

    buy term insurance, then invest in mutual funds or direct equity

  3. If ur net asset value (Sum total of all liquid and illiquid assets excluding one decent residence) is 1 crore or above u do not need life insurance u do not need health insurance.

    Just do good investing in the following manner:
    25% invest in good blue chip equities for long term.
    25% hold in FDs/Postoffice schemes/NCDebentures/Good company FDs.
    25% hold in cash and gold in case of a nuclear disaster or huge war so that u can flee to a safer place with the cash and gold.
    Also the cash and gold is handy for emergencies.
    15% use as working capital for ur business full time or partime. It can b anything. Network marketing/trading in futures/anything.
    10% keep for charity.

    U will never fail.

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