Terrible Lock In Product…

When Indians need to invest they look at Gold, Real estate, Post office, bank fixed deposits, life insurance, mutual funds…in that order.

Is it too wrong? According to P Chidambaram it is.

You are supposed to keep your money in ‘Financial Assets’ so that PC and his brethren can benefit. One of the brilliantly sold products is the ‘Endowment Policy’ – The classic endowment policy and its BETTER cousin the Unit Linked Endowment Policy.

Suppose you had bought a policy in 2003 for a period of 20 years. Say sum assured Rs. 30 lakhs, and the premium was Rs. 120,000.

You paid the premium (you were doing well all these years) – which means you have paid Rs. 120,000* 10 = Rs. 12,00,000. This also has some ‘bonuses’ attached to it…so the policy has a value of say Rs. 16,00,000.

So you think if you surrender it, you will get Rs. 16L, right?

Wrong. They will tell you that it cost them a) sales costs b) medical expenses c) other expenses…so they will deduct ‘something’ and pay you a lesser amount.

So ‘Sir we will deduct the first premium COMPLETELY (Rs. 1.2L) + a %age for each year, the bonuses are ‘attached’ so that is not available……blah blah and you will be given a cheque of Rs. 9,75,000.

Is it fair? Obviously not, completely not.

How come they do this? Simply because the old conventional policy does NOT give you a break up where the money was getting invested.

So what can be done?

Simple SELL the policies to a neutral buyer. Suppose my client wants to surrender this policy, he is getting Rs. 9.75L. Now a new person can come in and offer say Rs. 10.75L – and buy the policy. I as the policy holder would happy to get a higher amount than what the insurance company is paying..the only loser is the life insurance company.

Do you think this will happen in India?

Give me a break, all the money will run out of LIC.

Viaticals…anybody?

Should you blame anybody for buying gold? It is a clear message that the people of the country do not trust the balance sheets – so no equity, inflation is too high – so no debt, no mutual funds – very complicated a product, no life insurance – no returns, …

Soon he will stop buying Real Estate (impact cost of 10% is too damn high), no gold (made illegal anyway)….

lol..have money? spend it…

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5 Responses to “Terrible Lock In Product…”

  1. Finance Minister at it again. He intimidated RBI to cut rates by telling that ‘RBI should understand their mandate in the broader sense’. What a irresponsible statement this has been from the Finance Minister of a country which is struggling to avoid a financial sunami of unimaginable proportions.

    Please also read this….https://www.niticentral.com/2013/07/01/manmohan-singh-is-an-economic-disaster-in-charge-of-mounting-crisis-97761.html

    Shamelessly the UPA government is trying to buy time until the elections by threatening ( almost) RBI to cut the rates. RBI is obliging so far. That is altogether another issue.

    I was shocked to read that we continue to pay huge to our oil imports. Even though they oil commodity prices cooled off. An article in DNA says http://www.dnaindia.com/money/1855943/report-5-years-after-peak-145-oil-india-pays-more-today Rupee has depreciated more than 51% than the time when oil was trading at 145 per barrel. That means we may more than what we were paying to oil few years back.

    But strangely we attack gold. That is soft target and inspite of clearly knowing that people buy gold to hedge against killer inflation which caused by RBI and Government, these so called intelligents blaming people. The opposition is not raising any issue over this gross mis management of economy which baffles me.

    Better late than never. A life of few real estate agents is not important than a country. We have a raise interest rates by atleast 2 percentage and depreciate Rupee atleast upto 70 per dollar. Unless we do this, we all will go to dust.

    If we dont do it on our own we will be forced to take these measures anyway.

    Titbits:

    2500 crores recovered in mumbai most probably belongs to some powerful person and it is anybody’s guess we will never come to know who is behind this? This case will be closed in due course and we mango idiots will shamelessly live in this country……

  2. The real big investors in Gold and real estate are people with black and illgotten money. These are the only resources where they can dump really large amounts of money with less paperwork.

    Chidambaram should go after these investments with the same vengence which is shown for KYC after KYC being asked from small investors in mutual funds etc.

    I am really fed up with each visit to the bank or MF office resulting in them asking me to fill the same KYC forms again. It does not seem to stop.

  3. Hi Subra,

    Probably making the endowment policy a paid up one is better. What is your opinion?

    Thanks

  4. Hai subra,

    I am living in a rented house. Each time when I am shifting the house, Filling the KYC with bank and and mutual funds is herculean task. How can I make address proof immediately after shifting the house? each address proof is linked with some other address proof. If I want to get proof x you have to get Y if you have to Y then X is needed. I fedup with the address proof issue. This causes delay in investments.

  5. manmohan is extremely overrated as an economist (really,what did he do? the 1991 reforms was NOT his idea) and very underrated as a politician (he is likely our next PM as well).

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