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ULIPs : A good investment?

(Some of you have asked for the “basics” of investing – I’m writing an article about this, and hope to have it ready soon)

Meanwhile, I was recently evaluating Unit Linked Insurance Plans (ULIPs) – the idea here is that you put in your money and it “grows” with time. So you also have life cover (i.e. your family gets money if you die) and money also grows at the same time. You get “units” like in mutual funds, and the value of these units grows because the company invests it for you. You also get a tax benefit under section 80C.

That’s a very simple way to look at things. But is it actually better than using other options? What is the real “cost” of such a plan?

I was pointed to for a comparison. This is a “single premium” plan (you don’t have to pay every year), with a Rs. 50,000 minimum premium.

Now you need to know – is this plan the best way to go?

Let’s take an example of someone (say Ajay, 30 yrs old) who wants to invest Rs. 50,000. This will include investment amount plus premium for an insurance policy, sum assured of Rs. 250,000. Let’s say Ajay has no problem locking his money in for three years, but wants to exit after three years.

In a ULIP, Ajay would pay (taking the Pru ICICI LifeLink 2 as an example):

– Entry load of 5% = Rs. 2,500
– Admin charges of Rs. 20 p.m. = Rs. 240 per year.
– Mortality charges of Rs. 360 per year .
– Fund related charges of 1.5% (maximiser plan) = Rs. 750.

This means the amount that is paid out as charges is: Rs. 3,850. Money actually invested using ULIP is Rs. 46,150/-

Now if Ajay decided to use ELSS for investment and a term plan for insurance.

Term plan cost (@Rs. 300 per lakh for 2.5 lakhs) = Rs. 750. (most plans have a minimum, but this is just for illustration)

Money left for investment = Rs. 49,250. If Ajay puts this in an ELSS he gets charged:

– 2.5% entry load = Rs. 1,232.
– Fund management (it’s a hidden cost in MFs) @1.5% = Rs. 740

So money invested using ELSS is Rs. 47,278/-

That means, if you use the ULIP route, around 2.5% LESS of your money is invested.

There’s another disadvantage. Let’s say Ajay dies in the third year – How much does his family get?

In ULIP case, the limit is the HIGHER of invested units or the sum assured, in this case: Rs. 2,50,000.

In ELSS+TermPlan case, ELSS is recovered in full, around Rs. 50,000 (Assuming terribly low growth in three years of the invested amount) Term plan pays out full sum assured of Rs. 2,50,000. What this means is the family gets Rs. 3,00,000.

Looking at this, I feel ULIP is not a good option when compared to taking a term plan for insurance and ELSS for investment. (That’s putting it lightly. Frankly, it’s a lousy investment)

(note: tax savings on both schemes are the same)

Further Note:
I personally cannot invest Rs. 50,000 as a single time premium – I would rather choose something that takes 20 to 30 K per year, and grows. For THAT, the ICICIplan is : LifeTime Pension II

But, guess what, in the first year I lose 22% of my money to allocation fees in that plan!!!!

I would much rather choose TermPlan + ELSS. Or TermPlan plus a FIXED deposit.

ELSS has it’s disadvantages too, but those are far overridden by the costs of ULIP. I would actually suggest a regular Equity Fund plus a term plan.

Update (29.1.2006): Manish Chauhan has written an article on this as well, and says with an example that ULIPs aren’t going to return anywhere close to the Term Plan + Mutual Fund option.

Update 2 (3.4.2006):This Rediff article has more on ULIPs vs. Mutual Funds. An interesting read.

  • Ravi says:


    I admire your sound knowledge of the investment domain and your writing style which conveys the message so well. I will be an avid reader of your blog and please dont mind if you get frequent cries for advice. Keep up the good work.

    – Ravi

  • Deepak Shenoy says:

    >Hey Ravi,

    Fire away! I have been busy the last few weeks, but I will take time to answer your questions!

  • illchillu says:

    >Hi Deepak…

    Gr8 work…but I would like to add a totally different perspective…

    Suppose Ajay is 24 years old just like me, and earning some 30K a months and Ajay knows a bit bout equity market so he maintains his own portfolio.

    Now comes April and he is told that he is suppose to pay income tax of 25k…
    Ok now let us look at his options

    1.He pays tax…naaaah not an option for me.

    2.He goes for 3 years lock in of his money (may it be insurance or mutual fund or Elss and whatnot) n gets handsome returns…Yuuup can be a option who don no how to invest n do not want to buy a car or get married or any thing like that in these three years.

    Lets take a case of unit gain single premium of Bajaj Allianz.

    Ajay invests 70K in single premium plan n pays n overall (entry load + mortality + processing) 2% i.e. Rs 1400. By this Ajay saves his 14K in income tax,
    Let us assume trend continues or the condition becomes worse, but we can safely say that on April 1 2006, NAV will increase at least by 2%. So on April 1st Ajay draws all his money back (with no returns even) as these are the open ended plans his returns are 20% (which he saved on income tax) , 20% in 3 months fair enough isn’t it .

    So all u Ajay’s out there use your hard earned money intelligently for further queries
    Ping me 24×7 .

  • Deepak Shenoy says:


    Thanks for dropping in!

    To answer your question: Firstly, you have an interesting plan and I will analyze it carefully here.

    Let’s take your transaction charges. Rs. 70,000 invested has:
    – Transaction charge of 0.5% = 350/-
    – Bid/Offer Spread of 5% = 3500/-
    – Fund mgmt charge of 2.25% (1.25% admin charge and 1% investment charge)= 1575/-

    This itself is Rs. 5425/-

    Mortality charges: You need to get at least Rs. 350,000 insurance to get tax benefits. That for your age, is 427/-

    Totally you pay around 5800. So gains are much lesser as you can see.

    All from:

    Additionally: My auditor’s just told me that any early withdrawal from an insurance policy is deemed income – so you pay tax the next year on the money. Soon IRDA will also propose rules to ensure lock in of insured units.

    All the same, there might be a window of opportunity this year (2005-06) for doing something like this.

  • Parul Gupta says:

    >Hi Deepak,

    Your Blog’s been very useful – great work! Like many here, I am one of those young professionals new to the world of investing (even earning for that matter :-))and am just starting to learn a bit about it.

    I had a specific question about insurance. I have heard from a couple of sources that a term cover is better than fixed period covers (eg. LIC Jeevan mitra) which have much higher premiums which give out some tax-free payout at the end of a maturity period (the above has of 21 yrs). Intuitively, it makes sense too. But my insurance agent is trying to sell hard the latter without reasons very clear to me, maybe they get better brokerage there?

    A comparison, in fact any information, would be highly appreciated.


  • Deepak Shenoy says:


    You are right and your agent is wrong. Term plans are better than “cash value” plans – the ones that return your premium back. The returned premiums don’t give you any serious returns. (Largely they have returned sub 6% for me – yes, I was also taken in with this idea!)

    If your agent tells you that the premium is returned tax free: remember that India is moving to an EET regime soon, which means all returns of premiums or maturity values of Insurance policies will be taxed. Right now they are not taxed, but from next year they will be taxed. (This will most likely apply to you even if you have bought now, since the maturity value will come to you after the change)

    “Pure term” plans are plans where you money doesn’t come back and at your age, you will pay less than Rs. 280 per lakh insured! Meaning, if you want insurance for a 30 year term, for 50 Lakhs, you only pay around Rs. 11,000 premium per year. At this point you get a tax saving on this premium too. (Govt. is not expected to change that)

    50 Lakhs is a pretty big sum! And consider that if you tried to take that with “premium money returned” – the cash value plan – you will pay around Rs. 40,000 per year!

    Hope this helps,

  • Mcheal says:

    >Hi Deepak,
    I would like to thank you for all the light u have provided on ULIP’s…my financal background is zero 🙁 , This helped me a lot. I’m early awaiting for ur article on Basis of Investment.. hope it comes out soon!
    I’m 24 and earing 20k a month. Since i’ll have to pay taxes.. I was thinking abt two plans to invest in on a monthly basis for a long terms (anywhere between 5-20 years). I had a look at Prudential’s Life time and Life Time II (I have no Idea how to classify them as ULIPS or Term plans.. how to you identify them?) My intension is to invest, save tax and expect good returns + insurance and a provision to make partial withdrawals as per the need. Most agents I know, have told me that my money if invested in lifetime or lifetimeII can provide me with a grow of, anywhere between 10-25%.. is this true? Is this a wise decision to invest.
    kindly advice me as i’m looking at a monthly investment scheme which will save taxes and provide growth!

    Thanks in advance.


  • Deepak Shenoy says:


    Don’t invest in ulips. You would rather take a pure term plan for insurance. ICICI has only one term plan, called LifeGuard, and take the “Level Term Assurance without return of premium” option.

    For a 15 lakh premium (plus 10 lakh accident assurance) you will pay around Rs. 5,520 per year for 30 years. (for age 24)

    Note: This is money that won’t come back, but if you want it to be returned your premium goes up to Rs. 10,579 per year! Not worth it, since you can get higher returns for the additional money you pay.

    Open an SIP (systematic investment plan) with a mutual fund offering ELSS schemes. Pay around 1500 per month for your income level and increase the amount when your salary goes up.

    I’ve invested in HDFC Taxsaver over the last four months. This fund has now returned nearly 20% already since then. ICICI’s ulips real returns are a lot lower, because the allocation is lower and also, the no of units lost every month take away from your returns.

    Hope this helps.

  • Saikat says:


    Good analysis…but few details would like to get clarified from you. Firstly I am not sure about the rate of mortality you are taking at Rs.300/lakh for your example, I have taken two ULIP from ICICI-Life Link and Bajaj Allianze UG Plus with a cover of Rs.1000000 each, the premium for ICICI being Rs.60000 pa and bajaj being Rs.15000 pa. The mortality charges for ICICI is Rs.194/lakh and bajaj being Rs.142/lakh with ADB rider it works out to another Rs.35 more /lakh for 10 lakhs max.You can check the calculation details in their website also. My age considered 34 for the latest Bajaj Allnz.I took.

    I understand the concept of the mortality charges is like this… this goes up for first few years till the investments reach the sum assured level then it becomes ZERO. Say for example my policy for ICICI-LL on a very conservative approach also my UV will definitely become 10 lakhs in 10 years paying 60k pa (considering I have got my break even in less than a year after paying 18% charges and other charges including mortality)so there will not be any mortality charges thereafter (this is since the companies risk liability ceases once the SA equals unit values), the same applies to Bajaj Allnz for that I am making top ups for which only 2% charges but this will help me to get my UV near to SA faster.

    There is another way to look into this…any LT you need to pay for the full term and the expenses are anyday more than mortality of ULIPs(I think you are considering this for ULIP calculations).Lowest in the market is Kotak for non smokers..I took a quote for Rs.75000 one shot for 20 lakhs for 20yrs or Rs.8000 approx a month for 20 lakhs which works out to Rs.160000 for 20 yrs without any riders. So either you pay one shot or pay monthly/…..yearly etc. its your cash outgo for the desired term if u stop the cover ceases. So psycologically if you can manage without a cash outgo it is better right ? And above all your investments are also growing from which u pay a part for some time only.

    Please let me know if I am wrong with my views.

  • Deepak Shenoy says:


    Mortality charge: Remember that in ULIPs the initial mortality rate is lesser but increases as your age grows. I mean when you are 55 your mortality charge is 500 per lakh, approx. So it averages out with a term policy. (my Rs. 360 per year was an averaged out value)

    Another thing: you’re saying in a ULIP you pay no more mortality charges after your SA becomes equal to your units’ value. After that it’s just an investment! Where is the risk at all? If you die, then only the unit value passes to your successors – whereas, in a term policy + ELSS mutual fund way (which I suggest) your successors will get that money PLUS the amount you put into investment in the ELSS fund!

    In a term policy you don’t need to pay for the whole term – if your investments do very well and you don’t want to pay the term insurance any more, simply stop your term payments, and you will stop the cover also.

    What you want to concentrate on is to differentiate between insurance and investment. Your goal must not be to have your investment reach your sum assured value – ALWAYS have a separate SA value, which your successors get if you die. Insurance is for your successors – your family, kids etc., never for yourself.

    Investments are firstly for yourself and then for your successors. I.E. they take care of you when you are older, and they will pass on to your next of kin.

    These are entirely different concepts. But ULIPs and endowments confuse the two – and make intelligent people like you suffer because you could have done FAR better had you separated them!

    In your example: You pay 60k p.a. to a ULIP. You say that in 10 years your units value will be equal to 10 lakhs, your sum assured, so no more mortality charges. Let’s say you took a term plan (Rs. 300 per lakh = Rs. 3000 per year). Remaining Rs. 57,000 – put that into an mutual fund. A balanced fund (which is like the balance plan that you refer) like HDFC prudence has given returns of 61% last year, but let’s take 15% average. The fund returns are 13 lakhs for the 57k per year investment! (after accounting for 2.25% entry load)

    If you compare the investment with a ULIP the mortality charges every year, plus the fund management charges and other charges you will find that an equivalent approach on term insurance + mutual fund beats ULIP returns by nearly 10% over the first 10 years.

    The biggest advantage is that you keep the concepts of insurance and investment separate. The sum available to your successors is always sum assured PLUS investment value, not “whatever is larger” as in a ulip.

    – Deepak

  • Saikat says:


    I appreciate your eye for detail and your analysis. I really appreciate your point that we confuse normally endowment vis a vis ULIP thats very true.

    But why I made the point was referring to your main article ULIPs : A good investment?
    so understandably I was inclined to make a point about ULIP on investment point of view vis a vis balancing the insurance cost factor.

    Your points were well taken but still I would like to add few other benefits I thought ULIPs provide. 1)Flexibility to pay for three premium years and have the option to stop the premium payment option though the insurance cover will continue (ofcourse mortality rates will be deducted from the UV). Even you can withdraw from the ULIP for flexibilty same as ELSS.
    2)You continue for 3 premium years and third year onwards just do topup where the charges for ICICI ULIP being 1% and Bajaj Allnz being 2% considering other charges like fund management etc. it works out to almost the same as ELSS(2.5% entry load + hidden fund management charges where no clarity/guidelines exist for NAV unlike given by IRDA for ULIPs).
    3)If you take ULIP purely as insurance instrument also it will have the following advantages: The mortality charges in case of ULIP increases with age while for any term plan it is calculated on average as rightly pointed by you so you pay more for quite a few years at the beginning, please refer the table below :

    Bajaj Allnz.(UG Plus)see brochure from net.
    (Annual Mortality charge per 1000 Sum Assured of life cover)
    Age Mortality Charge Age Mortality Charge Age Mortality Charge
    8 0.78 31 1.29 54 8.62
    9 0.78 32 1.32 55 9.47
    10 0.78 33 1.37 56 10.38
    11 0.78 34 1.44 57 11.32
    12 0.78 35 1.53 58 12.13
    13 0.78 36 1.63 59 13.15
    14 0.78 37 1.75 60 14.38
    15 0.85 38 1.89 61 15.83
    16 0.91 39 2.05 62 17.49
    17 0.96 40 2.26 63 19.37
    18 1.01 41 2.47 64 21.47
    19 1.06 42 2.66 65 23.78
    20 1.10 43 2.86 66 25.00
    21 1.14 44 3.12 67 28.18
    22 1.17 45 3.42 68 31.71
    23 1.20 46 3.78 69 35.61
    24 1.22 47 4.20 70 39.92
    25 1.25 48 4.67
    26 1.26 49 5.19
    27 1.27 50 5.77
    28 1.28 51 6.40
    29 1.29 52 7.09
    30 1.29 53 7.83

    Take a look at a term plan quote of KOtak below for non smokers:
    Kotak Preferred Term Plan 20 2,000,000 6,704.42 + Sevice Tax @ 10.2% considering my age of 34 years without any riders. It works out to Rs.335 per lakh constant while in ULIP mortality Rs.335 charge will come at age 45 years so I will be paying the charges less for next 11 years that also since I am a non smoker while normal term plan charges are double, please see the following :

    Kotak Term Assurance Plan 20 3,000,000 13,942.69 + Service Tax

    here it works out to Rs.465 per lakh.

    Taking the proverb that ‘money saved = money earned’ I feel that whatever the small differences getting saved in the first 10 years and its cumulation over a period will smooth out the additional charges later while incremental charges paid during the begining years if invested properly could have generated good retun over an period of time.
    4)Term Plan maximum I got for 30 (64 years)years from Kotak for my age of 34 years, while for ICICI I can choose to cover for 100 years and Baj.Allnz for max. 70 years. I can also choose to increase or decrease the cover in ULIP (subject to the no. of times allowed in each product and medicals.

    I dont know what will be your views on the above but will be extremely happy to get it.

  • Deepak Shenoy says:


    Thanks for that. I appreciate your points as well, and I will try to give my views on them one by one.

    1) Flexibility wise: ULIPs provide the same level as a term plan plus ELSS, as you said.

    2) You said after three years you can choose to pay only top ups. My experience is that you cannot. You can only pay top ups if you have ALREADY paid the regular premium! Also even if you have paid a lumpsum single premium, IRDA has dictated that your Life COVER *must* be enhanced if you use top ups (to 500% of the total premium including top ups). That affects mortality charge and therefore lowers your investment return.

    Also note that if you chose the SIP option in ELSS your entry load is down to 1%.

    You had mentioned that ELSS has no fixed guidelines or clarity exists for fund management charges. SEBI mandates a maximum of 2.5% a year,most funds charge lesser than that (and publish it). Read this link at rediff for more details.

    3) Mortality charges: I put your values into an excel sheet and calculated for Rs. 10 lakhs. For age 34, for a 30 year plan, compared to your Rs. 335 per lakh for term, here is the analysis:
    – Upto Age 44 you pay less mortality charges. Let’s say that you get a 15% return on whatever is lesser than term plan, so how much do you earn, cumulative till Age 44? Rs. 15000 approx.
    – BUT, if you consider after that your mortality charges are HIGHER in ULIP, and you take the 15% hit on the extra amount, then you become negative at age 51, which is 17 years from your start. This is including the amount you had gained, i.e. 15,000, in the first 10 years.
    – Going forward, you end up losing 1,40,000 totally at age 64! I.E. From age 51 to 64 you lose so much more mortality charges, which could have been invested to get 1,40,000 at age 64.
    – Next, The total mortality charge you have paid at age 64 = Rs. 2,25,000 for ULIP, Rs. 104,000 for Term.

    Looking at the above I think the lesser amount in the first ten years does not offset the overall loss much! ULIPs pay 50% more mortality charges, have an opportunity cost of another 50% of the mortality charge, meaning that with the term plan option you could have made back your term payments by simply investing the excess ULIP mortality charges in the last twenty years!
    – Your mortality charge at age 64 is Rs. 21470 for 10 lakhs.

    Of course I am assuming constant sum insured. ULIPs tend to reduce the sum assured every year, which is not good according to me – you need a constant sum assured as insurance, until it makes no difference at all.

    Also, you took the example of Kotak’s smoker plan, which is the costliest in the market. Most other term plans offer the 340 Rs. per lakh rate for the 34 year age bracket.

    One more thing to note is that mortality charges (tables) are going to be changing every year. Right now none of these insurance companies have had to deal with too many claims because the largest segment of people taking insurance are in the 30 to 50 year bracket. In the next ten years, many more death claims will come in because of old age or disease – and they will then hike the mortality rates UP! ULIP owners get affected with this increase, but term plan owners do not as it’s a fixed rate contract.

    4) Term plan maximums vs. ULIP: ULIPs offer long runs because your mortality charges increase like crazy in the last few years – and they expect that by 30 years you would easily have covered the sum assured with your investment. You are the loser in that case, because mortality charges get higher and higher as you grow old, when you need the money more and more! You should take term plans when you are 40 and 50 – some insurers will allow that – and that will cover most of your insurance requirements.

    Technically you shouldn’t need very high insurance cover after the age of 70, because by then your children would be able to fend for themselves. Your spouse would need money but you should be covered with investments.

    Lastly I would like to add that one great disadvantage with ULIPs is visibility. While ULIPs publish their NAVs daily, they still don’t do proper portfolio disclosure (they are not needed to) and don’t tell you exactly where money is invested! Secondly they reduce mortality charges, fund management charges, etc. from your UNITS – and your returns change. Sometimes your net value can be lower today than yesterday even if the NAV went up! (because they removed units today) MUtual funds on the other hand never ever remove units so if the NAV goes up, your value goes up, period.

    Saikat, I hope this clarifies things a little more. I’d like to thank you because I have now done more research and found more points which I never thought of earlier!

  • Saikat says:


    I appreciate always your patience and deligent research.

    Now coming back to your earlier points:
    1) You felt that there is no minimum periods for these plans, as I told u earlier that ICICI Life Time has option for 3 premium years, wherein after that u can use that as a saving account leaving a minimum amount for the mortality charges. Can u please suggest me what is that all about is that a gimmick ?

    2) I wanted to get your suggestion that say at age 44 what will be cost of a new Term plan lets say for 15 years. Just I wanted to make sure whether term plan entry at age 44 will still be cheaper.
    3) With regard to your point on topups since typically if u take my case of cover 10 lakhs each I think the 500% of premium takes care.
    4) Have you made any research on the lowest cost term cover provider, if so please let us know.
    5) I beg to differ with your last point about ULIPs do not have transparent portfolio disclosure. I am getting regular(quarterly) newslater from ICICI Prulife which have detailed portfolio and the % holding of the stocks sectorwise. Bajaj also I have in hand their March issue.
    6) Maybe another advantage of ULIPs though maynot be major but can be handy in choppy markets which I personally expect to be coming in the short term is that ‘fund switching’ from different options of balanced, protector,debt etc. Upto 4 switches are free after that Rs.100/switch while this is not available in ELSS u need to exit & enter afresh with applicable load each time of 2.25%/1%.

    We can continue discussions with with varous investment/related issues, if possible provide your personal email address mine is

  • Deepak Shenoy says:


    Again, thanks for your comments.

    1) The “gimmick” isn’t in the fact that you can use the account like a savings account, which you can. It’s the fact that your sum assured INCLUDES your investment is the gimmick – typically your insurance needs must be addressed separately.

    2) Term plans : at age 44 if you take a 15 year plan you are going to pay between 5600 and 7000 per year. Of course you’d rather take a term plan now.

    3) Top ups: In your case your top ups in the first two years are ok, after that your top ups will hit mortality if you had a fixed SA.

    4) Lowest cost term provider: AMP Sanmar, which is now Reliance Life Insurance.

    5) ULIPs don’t disclose this publicly so you simply cannot evaluate this independently. Also because of no regulation, they are not forced to do it monthly/daily like MFs.

    6) Choppy market exits: I agree that you can shift but frankly, I have seen people only lose money with this method, in ULIPs! I don’t recommend fund shifting at all, because long term approaches means buy at dips, not sell at dips! No one can time the market, not even fund managers – so there’s no point shifting funds around unless you either need money, or have grown older and can’t handle the risk. But as you said the advantage is there, though not major.

    Saikat, my personal mail is deepakshenoy in the gmail domain (To avoid spam I write it that way)

  • Sanjeev says:


    Great analysis!

    How do you rate regular pension plans per se? They have pathetically low returs, but people say that they could work well as a retirement scheme coupled with equity investments, given their safe nature

  • Deepak Shenoy says:

    >Thanks, Sanjeev.

    Pension plans are interesting purely because they are superannuation plans with more liquidity than, say, a provident fund. Employers will nowadays offer x% of a persons salary as superannuation, and since this is not chargeable to FBT (upto 1 lakh in 2006-07) you get tax free money. (and then an employee’s contribution is subject to a further 1 lakh deduction)

    You could put that into a PF, but that money is locked too long. In a pension plan you can get out after three-six years (assuming the EET regime doesn’t come in with retrospective effect) so liquidity is greater.

    Returns wise they aren’t good for investment. Choose wisely, get out early if you can save tax. The actual pension is worthless as the amount they offer would be terribly insufficient to run a household when you retire. So take the money out before you retire.

  • Sanjeev says:

    >Thanks for your comments Deepak. You are right…regular pension plans would not be able to suffice for retirement.

    So, would you suggest that it would make sense for an individual to stay away from Pension plans and ULIPs, and instead concentrate on equity markets for a longer term? In a market that has reached the 11,000 level, does that still make sense? I have been thinking about starting investing in an SIP, but wanted to know if I am too late in the game

  • Deepak Shenoy says:


    Equity should be a part of your portfolio – and if you’re under forty, a significant part. For me it’s nearly 80% (the rest are fixed deposits)

    You would think that AT 11,000 there’s no way to get in. But consider this: In the last there days, a share I own named “Opto Circuits” grew from 270 to 414! This is not a small time company or share, it’s a mid-cap, and I have been buying it after carefully analysing its fundamentals, thinking for the long term.

    This means there are STILL good deals in the market, but you can’t just buy any share anymore. For instance, I think all the car company shares are overvalued – Tata Motors, Maruti Udyog. But in the two wheeler market, Hero Honda has been stagnant at 900 for a while, but has been growing its revenues/profits consistently – there may be a buy there!

    For mutual funds, choose one that is both large and mid-cap. HDFC Equity has always been good, though you can also consider Reliance Growth Fund and SBI Magnum’s Equity fund. These have good exposure to both. For now, don’t go the SIP route directly – invest equal amounts in two/three funds, see how they perform with your money over the next few months and then choose the best for the SIP.

    – Deepak

  • Anonymous says:

    >Dear Friends,
    I have read your comments on ULIP etc,
    But i would be very grateful if you could help me to find out which one is more safe and lucrative, Mutual funds or Bajaj ULIP(UNIT GAIN, UNITGAIN PLUS). Now i am puzzling which one to select. I found Bajaj ULIPs’ are more safe. And i have noticed that Bajaj should improve its schemes(UnitGain,UnitGain Plus),
    Please give your comments on above,

  • Anonymous says:


    I am software engineer and i have decided to put the money in LifeTime plan of ICICI prudential. Now they are taking 1500 p.month of premium. They also said that whatever happens, in worst case you will get 64,000 return after 3 years locking period. So from 54,000 to 64,000 and that is 10,000 of benefit at the end of 3 years. If we calculate 8% of rate of bank saving account then we get 63,000. So please provide me help with the amount in which i should invest my money.

  • Deepak Shenoy says:

    If you consider compounding monthly the rate is 10.79% (for the amount to grow to 64,000 with Rs. 1500 per month in three years)

    In excel use the formula =RATE(3*12,1500,0,-64000,1)*12 and you will see what I mean.

    10.79% is not bad at all, especially if it’s guaranteed!

  • Anonymous says:


    Good analysis friend. Request you to through some light on best available term insurance based on your experience and research. (Criteria: age: 32 years, low premium, good service, high claim rate etc)


  • surfryder says:


    i got quite a lot info from ur posts. i am very new to the investment ball-game. ‘have recently invested an amt of 20K in ICICI Pru Lifetime Super and another 15K in LIC marketplus. now having invested these amts in the risk exposure instruments do u think that i shud go for a traditional insurance (is that what u call term-plan?). say if i take a money endowment policy from LIC for 21 yrs term (actual payment term is 15yrs) with a premium of 5 lakh. the return projected is somewhere around 16 lakh. is this figure gurranted anyway?
    or shud i go with a bajaj flexilife plan which is again an ULIP but has a min 15yrs payment terms and 3% gurranted returns? it’s NAV hovers at 21 and gives a coverage of 70 yrs. plz suggest.

    i am looking to invest 1 lakh p.a with the investment objectives like tax exemption, 10-15% returns with moderate risk exposure. so where else i shud invest?

    my portfolio is approx like this at the moment:
    ICICIPru Lifetime – 20K
    LIC market plus – 15K
    ELSS MF – Fidelity Taxsaver growth – 5K (plan to invest upto 15K)
    PPF – 15K (planned)
    Traditional insurance – 20K (planned)

    what else can i do? is this distribution ok? also suggest which term policy is suitable and best in the current context.


  • Deepak Shenoy says:


    Thanks, glad you liked it. I don’t like ULIPs (for many reasons I’ve quoted here, and some new ones because of the new rules) at all so I do not recommend you invest in a ULIP at all.

    Don’t go for money-back or endowment plans – they are a waste of money.

    What you should do is invest in a “term plan” – meaning get basic insurance cover without your money back, for around Rs. 300 per lakh assured. Then, with the remaining money, invest in a good ELSS, like HDFC TaxSaver fund.

    For a “traditional” term plan, if you put in 20K per year, you can get coverage of around Rs. 60 lakhs 🙂 But that money isn’t coming back (you probably don’t even needa 60 lakh coverage).

    For term plans: goto my article on term plans.

    Your portfolio looks ok but heavily into insurance (which is not at all a good investment). Put more money in mutual funds ELSS or in direct equities.

  • jagadees says:

    >Recently I took a UNIT GAIN policy of BAJAJ ALLIANZ. Surprise,thier allocation charge in first year is 70%. Other ULIPS charge maximum 25%. WHy such a big difference? Anyone can ansswer my doubt

  • M K says:

    >Dear Deepak,

    ULIP is not a short term investment.It is a long term investment.To exit after three years is just an option.So you don’t compare ULIP with anyother plans.If at all you want to compare,then compare the returns of ULIP after 10 years with any plans.Iam sure no plans can give such returns.Prove me if iam wrong.


  • Deepak Shenoy says:

    >Baiju, None of the ULIP plans have lasted 10 years, but tell you what, maybe I will compare the returns on Jan 1, 2007 for all plans that have lasted five years. It’s not going to be an easy comparison because of units going out every month, but I will do it and lets see how the returns differ.

  • M K says:


    I do understand its a new plan but allow the ULIP plan to project its returns after 10 years,before that why do you want to critise.You take an example of mutual fund and ULIP for 10 years and compare the returns.You will come to know which is better.

  • Deepak Shenoy says:

    >Baiju, I’m sorry but honestly the Ulip plans have severely underperformed MF returns in teh last three years after you consider the loads. That is why I say it is a bad investment. The funda of compounding is that you invest today and it compounds tomororrow. In ulips, a huge chunk of what you pay today goes as commissions and load, so what is left will have less to grow, even at the same growth rate!

    Until they can prove they are equal to mutual fund+Term insurance, I will criticize ULIPs.

  • Mirror says:

    Your comments were useful.However,I heard that the MF’s deduct some Fund Management Charges(FMC) from the NAV and the NAV that we see is lesser than the actual.This cost is hidden to the end customer. Only the Entry Load and the Exit Load(if any) are visible to the end customer. Is this true?

  • Deepak Shenoy says:

    >Mohit, All fund management charges (including those by ULIPs) are usually deducted from the NAV of both mutual funds and ULIPs. (Earlier ULIPs would declare higher NAV but reduce units instead, but now that practice has reduced)

    This charge is usually around 2-2.5% per year, deducted daily. While this is a charge in funds and new ulips, it is shown in the offer document with upper limits – i.e. funds cannot charge more than X% as given in their offer documents.

  • Mirror says:

    >Hi Deepak,
    Well this is true, but i read that the percentage Fund management charges as charged by MF’s are on the whole corpus amount whereas in ULIPS, these are only on the premium paid.So if we see over a period of 10 years,the Fund management charge we pay to a MF becomes huge than what we pay for ULIPS.require your valuable inputs.
    -Mohit Sharma

  • Deepak Shenoy says:

    >Mohit: I think MFs and ULIPs both calculate fund management charge on the same thing – the net assets of the fund. In fact it is a percentage of the fund value you own, same for ULIPs and Mutual Funds. Unfortunately ULIPs don’t have the rigorous disclosure requirements that MFs have, so there’s no real way to verify for ULIPs, but I believe the charges apply the same way to both.

  • Anonymous says:

    >Hi Deepak,
    I have a question on the surrender charges in ULIPs.
    I came across Bajaj Allianz’s Capital Gain ULIP. It says the surrender charges after 3 years will be 1-(1/1.05)^n * Value of Capital Units.

    My question is, what is this Capital unit??. is this the units that are purchased from 1st year’s premium??

  • Deepak Shenoy says:

    >Anonymous: I’m not entirely sure but I know that you can exit insurance schemes completely after three years, so this probably means your entire capital, not just the units in the first year….

  • Renny says:


    Needed some advice from you on where to invest for a safe future and better returns.. I got married last month and both of us are earning.. we would like to invest some part of our earnings every month.. Below are the details you need to consider..
    My age: 27, Wife: 23
    Our monthly income comes around 65K.
    We have a home loan with an EMI of Rs.17,500 for 15 years.. With home loan interest increasing..we would like to pre-close some amount from the housing loan from our savings at end of year.
    We have a combined annual LIC poliy of about 60K and combined monthly ICICI Prulife ULIP of about 7k.

    we are not so good with our understanding of finanacial planning..
    Where and how much do you think we should be investing more on a monthly basis and can you suggest specific funds that are doing good.

  • Deepak Shenoy says:

    >Renny: Firstly, congratulations on your marriage!

    Coming to your finances, You have a home loan with EMI of Rs. 17500 – I’m assuming this is about a Rs. 20 lakh loan? Make sure you have term insurance of at least that much – that would cover you insurance wise.

    When you say “Lic policy of 60K” is that sum assured or premium per year? If it’s the former, please note some of the insurance articles on this site to increase your sum assured and ONLY buy term plans.

    ULIPs aren’t too good for you, because of the charges. I would recommend that you exit them as soon as you can.

    Because of your home loan, you will get the full 80C tax benefit by just the home loan premium (I think) per year. So you should concentrate your savings on growth potential.

    But because you have high debt, I would recommend you buy a “balanced” mutual fund like HDFC Prudence fund instead. You can also take a combination of an aggressive mutual fund like SBI Magnum Global fund and an income fund like HDFC Monthly Income Plan or Reliance MIP.

    I would recommend that you put in your excess savings into investments. Maintain about six months expenses in a bank deposit or a liquid fund and the rest can go into the above investments. The amount of money is immaterial, some months you will have more and some months less, but whatever is excess please put it into investments.

    You may have to plan around having children, keeping funds for retirement etc. But at this point, focus on accumulation; once things are more clear about your future (i.e. where you will be, years when you’re having children etc.) you can allocate part of your funds for different purposes.

    Mail me at deepakshenoy at gmail for more info, and I hope the earlier has helped!

  • Anonymous says:

    >Hi Deepak,
    I have read your views about ULIP’s and with your views I can see that u are not in favour of ULIP’s . Well I have come acrros a ULIP plan by MAX LIFE NEWYORK , called as LIFE INVEST which has 2 options, wherein one option says that the death benefit is SUM ASSURED + FUND VALUE . so what do u suggest that this plan is good in respect of term plan as this gives the above benefit

  • Sharath says:

    >You said LIC Market plus come under section 80c of tax saver schemes. But no where does it say under Market plus or in the bond that it comes under section 80c. So can you provide more information about this? Please.

  • Deepak Shenoy says:

    >All LIC policies come under 80C afaik – this link has more:

  • Miten says:

    >Hi Deepak,
    I have read your views about ULIP’s and with your views I can see that u are not in favour of ULIP’s . Well I have come acrros a ULIP plan by MAX LIFE NEWYORK , called as LIFE INVEST which has 2 options, wherein one option says that the death benefit is SUM ASSURED + FUND VALUE . so what do u suggest that this plan is good in respect of term plan as this gives the above benefit . pls reply to his query . Thanks

  • Miten says:

    >Hi Deepak,
    AS mentioned by ou in you earlier that in ULIP plans the mortality charges can be changed by the company , but I have gone across through 4 insurance companies ULIP plans and that have gauranteed the mortality charges for the entire contract and also they have mentioned the upper max limit to which they can charge in all the other expenses . So still u suggest that ULIP’S are not good investments

  • Deepak Shenoy says:

    >miten: Guaranteed mortality charges means that the mortality table they give you will not change. But hte table itself has increasing charges for mortality – check it out, you will see that in teh same ULIP, when you become 50 you will pay more than four times what you pay at age 30.

    Also upper max limits are changeable as per ULIP brochures.

    The max new york life new policy looks interesting though currently i don’t have enough time to analyse. Will do so some time later…thanks for that!

  • Miten says:

    >HI Deepak,
    Thanks for your feed back , I apperciate it. Yes what u mentioned about the increasing mortality charges inccreases is true as u said which I am aware of, but my concern was that that in near future if the company facesclaims than can they increase the charge, so that was my concern. Anyways I will wait or your analysis on the Max new york plan. Meanwhile Just for your info , Birls Sunlife has launced a new plan called as SUPREME LIFE here also the DEATH BENEFIT is SA + FUND VALUE , so please do look in that plan too , it has been launched yesterday so u may not have heard of it .ALSo i would like your COMMENTS on investment for my kid and thinking of going for HDFC YOUNGSTAR PLUS . PLEASE ADVICE. will await your suggestion. ALso please let me know your email ID for any refrences

  • Anonymous says:

    >Hi Deepak,

    I came across this blog whle searching for some information about “Kotak Safe Investment Plan II Guaranteed Growth”. from what i have read, you don’t seem to consider ULIP’s as a good option for investment. however, the above mentioned plan is a ULIP. I would like to know what do you think of this plan. i am new to the world of investment and insurance is ‘newest’ to me.

    Please reply.


  • Prashant says:

    >Hi Deepak,
    Excellent piece of blog. Have got some more insights into investing. Am a new investor and a late entrant to Mutual funds , Insurance etc.

    I am 33 and have just started my investments in Mutual fund last september. With the current drop in the Sensex most of the investments are currently in the negative. In any case Mutual fund is supposed to be a long term investment and returns are supposed to be good over the long term.

    Recently, I read an article on an inflight magazine which said that if a person starts investing 4K montly at the age of 23 in Mutual funds SIP, then he would end up having 2.57 crores by the time he retires.

    My question is how do you calculate the above returns. Is there an excel formulae which can be used to calculate the returns for SIP or is there an excel template that I can download from somewhere.

    Do let me know.


  • Anonymous says:

    >Hi Deepak,
    For a tax saving pupose I think ELSS are far better that any other scheme as of now. NSC , PPF , FD, are not worth it. I feel investing 1.1 lakh(2007-08) is a good option for me (23 years old) and wait till I retire to encash the amount so the risk associated with equities is reduced. Am I correct deepak. Please correct if I am wrong.


  • Anonymous says:

    >Hi Deepak,

    I’ve had a very bad experience with Birla Sunlife ULIP. My banker sold it to me without giving complete details of the hidden charges.I am planning to exit my ULIP plan. My annual premium is 70k. SA is 7 lakhs.

    I want to bring the hidden charges to the notice of people visting your blog so that they are aware of this and do not get hooked by a smooth sales pitch.

    I have pasted the relevant extract from their latest mail below.

    At present I am trying to figure out my exit plan. Your views would be helpful.

    We would further like to inform you that from your premium received, we
    deduct a loading fee. The policy loading fee is an up-front charge
    recovered as a percentage of the Life Insurance Coverage Premium and varies
    as per the year in which the payment is made.

    The same is 65 % of the base plan premium in the first policy year. This is
    due to high administrative expenses in the initial years of the policy, as
    we need to recover costs towards commissions, underwriting and other
    activities involved with the issuance of the policy.

    Further, the loading fees would be only 7.5 % of the base plan premium in
    the second and third policy years and 5.0 % from the fourth policy year

    Apart from the policy loading fee, following policy fees and charges will
    be recovered from the policy fund :

    1) Charges towards the cost of insurance is deducted by cancellation of
    units from the fund at the prevailing unit price on a monthly basis. The
    annual insurance charges per thousand face amount for sample ages for
    healthy lives are as follows:
    |Sex/Age (Yrs)|20 |30 |40 |50 |60 |
    | | | | | | |
    |Female |0.90 |1.16 |1.66 |4.03 |10.66 |
    |Male |1.02 |1.17 |2.15 |5.53 |13.73 |

    2) An investment management fee not exceeding 1.5% p.a. of the fund is
    charged by adjustment of daily unit prices. Currently this fee is 1% p.a.

    3) The following policy administration fees are deducted by cancellation of
    units on a monthly basis :

    (a) Rs 22 per month

    (b) An annual charge of Rs 2.88 per thousand face amount will be deducted
    in the first 10 years of the policy except in the second year where it will
    be Rs 15.24 per thousand face amount. From the 11th year onwards this
    annual charge will increase subject to a maximum of 3.75% per year.

    4) Service Tax @ 10% and 2% as Education Cess (Effective rate of 10.2%) on
    the risk premium is levied with effect from June 22, 2005 vide Government
    of India Notification No. 11/04-ST dated September 10, 2004. However,
    kindly note that the Budget 2006 has increased the service tax from 10% to
    12% with education cess remaining the same at 2%. As such, the effective
    rate is 12.24% (12% + 2% of 12%).

  • Deepak Shenoy says:

    >Anonymous: thanks for that. I have posted your comment and given my comments there.

  • Anonymous says:

    >Hi Deepak,

    I am aregular reader of your blogs. I am 25yrs old and new to investments. I am investing 2000/- each in two ELSS Magnum Tax Gain and HDFC Tax Saver through SIP. I am also investing 500/- each in Sunderam’s Select Mid Cap , Magnum Global,Magnum Contra through SIP.I wanted to know is my portfolio needs some examination? Am biased towards Mid Caps? One more thinh I was approarced by one agent regarding Bajaj Allianz Capital Unit Gain scheme of 95% allocation from the 1st year itself. He told that I can work as an insurance co-ordinator and earn some money through referals.Is he misguiding me in terms of plan and benifits?
    Waiting for your cross examination…

  • Deepak Shenoy says:

    >SK: Your portfolio is definitely a mid-cap aligned one, as the funds you ‘ve selected have a very high mid-cap exposure. I’d suggest an index fund (HDFC Index fund or UTI Master Index Fund) to get a large cap exposure, at low cost (typically 0% entry load)

    Bajaj Allianz Capital Unit Gain gives you 95% upto 2 lakhs premium. They also have this:
    Initial Management Charge: 5% p.a. of the Capital Units during the policy term subject to a
    maximum of 20 years.

    Also their surrender charge is like this:
    Surrender charge: Surrender Charge is applicable only on Capital Units
    If three years regular premiums are not paid and the policy has lapsed, the Surrender Charge
    would be 100 % of the Capital Units.
    If first three years regular premiums have been paid in full, surrender charge is given as:
    [1 – (1/1.05)N ] * value of Capital

    This is confusing, so here is the funda: For a 20 year term, exiting after five years means losing 52% of your first years premium (minus initial management charge minus other charges), after 10 means losing 20% of it, and after 19 years means losing 5% of it. Only first years premium has a surrender charge though.

    Effectively the cost to you is 10% of the first years premiums, 5% of subsequent premiums, and other charges like fund management charge, policy charge of 600 per year, mortality charges etc. Plus of course, if you pre-close, there is a surrender charge for the first years units.

    Your call really, but do understand that the cost to you as allocation is 10% of your first premium, not 5%. Other ULIPs have lower charges so you might want to look at them (some like Aviva ahve 100% allocation for future years)

  • Anonymous says:

    >Hi Deepak,
    Many Thanks for the examination on my portfolio. Some more for you 🙂
    Please find some time for these..

    1.I am new to the investment world. Can you please suggest me an ideal portfolio having mutual funds(The names) and ULIPS(If u think they are needed) which will create wealth on a long run.

    2.You talked about some plans from AVIVA. I checked from their website, but didn’t get a right one.Will you please suggest one.

    3.Can you suggest me that the Capital Unit Gain from bajaj Allianz having referral benifit will compensate/cross the charges under the plan?

    4.One more thing, while reading your blogs and some sites like , I also started hating ULIPs. Still are they advantageous from any point of view?


  • Deepak Shenoy says:

    >SK, Ulips wise I would suggest none – I don’t know any really that are worth it from a savings perspective. ULIPs are good for someone who is used to endowment policies but wants better and market linked returns. Also they are good for those who want a single policy to invest to a certain goal (say a childs marriage or such) because it can give them that goal through insurance or savings. Unfortuantely that doesn’t work too well with most ulips which have a maximum on the sum assured, and the mortality charges increase every year.

    I’d suggest a term plan plus mutual funds any day.

    Aviva has a Life Bond 5 plan where you pay more than 100,000 a year as premium and you get full allocation . One of the best I’ve seen but there’s not much in terms of insurance; plus I have to still see performance.

    Bajaj wise: I don’t know about referral benefits. If anyone offers you that make sure it is on a printed letterhead signed by a senior management person otherwise they will simply deny such things (or if it’s in hte brochure also that’s ok)

    Ulips can be beneficial if they are sold in the right way. They should be insurance vehicles mainly, and later prove to be investment vehicles. But they are usually sold to be the latter.

  • MS says:

    >Hi Deepak,

    Please tell whether i have invested wisely in the following
    1)I have taken LIC’s money plus policy for which I am paying a premium of Rs 10,000 per annum.
    2)I have taken Life time super policy for which i m paying a premium of Rs 2,00 per month
    3)SIP of SBI (Magnum tax gain) Rs 1000 per month.

    PLease advice me .



  • MS says:

    >Hi Deepak,

    Please ignore my previous blog

    Please tell whether i have invested wisely in the following
    1)I have taken LIC’s money plus policy for which I am paying a premium of Rs 10,000 per annum.
    2)I have taken Life time super policy (ICICI Prulife) for which i m paying a premium of Rs 2,000 per month
    3)SIP of SBI (Magnum tax gain) Rs 1000 per month.

    PLease advice me .



  • himanshu says:

    >hi All,

    the blog and the comments have been a great source of information. i never was interested in the economic talk but then it all got changed today.

    You all have been discussing the returns and entry charges in the various plans. but have anyone taken a consideration to what the EXIT CHARGES are?????

    last year, i realised too late (in february) the need to invest a lakh to save tax. in the hurry, i bought 30k of icici maximiser fund. then i realised the high entry cost (20%) and decided i wanted something with a low admin charges fund. so the guy i was taking advise from gave me bajaj alliaz capital unit gain. what i did not realise was that he is selling me a 21 yr term ULIP plan with a premium of 40k annual. now when i look at the policies, it says the cost of exit is,
    [1-(1/1.05)^n] X value of find at the time of exit. (n is the number of years remaining before your actual term.

    so for example i want to exit after 10 years, i will still have to pay those buggers as mush as 46% of the fund value. in a worst case scenario, that might be the actual grosth, or even more than that.

    in comparison, other funds charge nothing or next to mothing in case of exit before 3 years….

    is’nt that plain robbery?

  • Arijit says:

    >Hi Deepak

    It was great reading your article and am hopeful you can help me with my query/problem.
    I am investing 18000/- per year on Lifetime II ULIP policy of ICICI prudential for the last 3 yrs. I have put 80% into the maximiser and 20% into the balancer funds. Somehow recently i figured out that the maturity date of this policy is 2079 which is totally absurd (understanbly the agent cheated me). The sum assured is showing as 300,000 and i started the policy at the age of 25.
    Could you please help me understand how i can get any benefit out this policy , like when can i get any returns from the maximiser and balancer funds, can i surrender and withdraw my money, if so how much can i withdraw, as I believe there is no point in paying Rs. 18000 per year for the rest of my life. I am currently abroad and do not plan to return in the next 3-4 years.
    Any suggestions or help is highly appreciated. (Kindly reply me back if my question does not appear to be clear).

  • Deepak Shenoy says:

    >Arijit: Stop paying further premiums after the first three years. When you come back to India, say after a fwe years, apply to surrender the policy and get your money back (if they allow you to do it online or through the phone, you can do it now as well)

    How much you will get is a function of how much surrender value is written in your policy document and how much time has elapsed since your first premium was paid. check the docs, I’m sure there will be a clear indicator there.

  • vijay jain says:

    >where should i do my invest for insurace…
    either go for ulip or kotak smart advantage fund or a term plan or lic where for 25 yr plan of 2500000/- i have to pay 8390/- or go for jivan motra plan of lic where premium is 22853 for 25yr..for 5 lac /- triple cover…
    pl advice me…

  • vijay jain says:

    >where should i do my invest for insurace…
    either go for ulip or kotak smart advantage fund or a term plan or lic where for 25 yr plan of 2500000/- i have to pay 8390/- or go for jivan motra plan of lic where premium is 22853 for 25yr..for 5 lac /- triple cover…
    pl advice me…

  • Anonymous says:

    >I have read various comments relating to comparison between ULIP & Mutual Fund + Term Plan which suggesting that going for Mutual Fund + Term Plan will be more beneficial.
    Recently, i have heard about HDFC Young Star Version 2 Plan – and the main feature says, if something happens to the investor, then the insurance company will repay the sum assured to the family + the insurance company will pay all future premiums on behalf of the investor and during the maturity, the nominee (child) will get the maturity value of investment amount.
    Pl. analyst and advice more about this plan whether this is advisable to invest or not

  • munishkural says:

    >Dear friends
    I invest Rs 60000 in ICICI PRULIFE maximiser plus through SIP of 5000Rs per month for the last two years, aim of investment is tax saving and long term investment.i am now in third year what should i do shall i carryon with the investment or quit after completion of three yrs is it a sound investment with longterm profile(5 to 7 yrs or more)plese advise thanks

  • Merryl says:

    I have been going through all these blogs but i still have a question. I have purchased an Babja Capital gain ulip which is now closed. The lock in period was for 3 years and the allocation was 97%. The amount of premium is 50000 and the sum assured is 300000. Do you want me to contimue after the lock-in period or exit.

  • sumitava says:

    >Hi Deepak,

    This is Sumit here.Hope you are doing good.I use to read articles written by you and find them very useful.Thanks for writing such articles.

    I need a word of advice from you regarding a ULIP investment.

    I am 27, having an annual income of 7 lacs, looking for aggressive growth & returns in short term and not at all looking for long term investments or pension plans.I am planning to purchase a house and a car in another 2 years.

    Of late, a financial advisor from ICICI Prudential approached me and told me about their Lifestage Pension ULIP plan. Though I believe you must be aware about the features of the plan, but for your convenience I would like to run you through the salient features of the plan.These are according to the advisor from ICICI:

    1. In this plan, the lock-in period is 3 years, wherein I can pay a premium of minimum 15000 each of the first 3 years.After that either I can conitinue to pay premium till the vesting age of 50 years,till policy matures or can stop paying the premium opting for cover continuance for rest of the term.Once the policy matures after 23 years, I can choose from different pension payment options available with the bank.The pension income would be taxabale.
    2. There will be no premium allocation charges unlike other ULIPs available in the market which makes the investible amount to 100% of the premium paid by me.Though, a policy administration charge of 0.5% per month (i.e. 6% p.a) & fund management charge of 2.25% p.a would be there.There will be no mortality charges levied as this is a pure investment plan and no insurance coverage is there.Charges might change at any point of time, which if disagreed,allows me to discontinue with the policy and withdraw the units in the funds at the then prevailing Fund Value without any surrender charges.
    3. The policy allows me to choose from different fund options ranging from defensive debt funds to aggresive equity funds or a mix of both depending upon present market scenario.
    4. Top-up facility is available with a premium allocation charge of 1% p.a.
    5. There is no surrender charges in case I want to discontinue with the policy after 3 years and the entire Fund Value can be withdrawn after 3 years.
    6. Tax benefit will be available u/s 80CCC. I am not looking from tax-saving perspective though and think home loan, if taken, can take care of tax-exemption.

    However, when I went through the product brochure downloaded from their website I found the following facts which are not matching with some of the facts produced by the advisor or he has not clarified:

    1. There was no mention in the brochure that the policy invests in Pension Maximiser fund which the advisor talked about reportedly giving highest returns amongst funds that the plan invests in.Other funds are not having good NAVs currently.
    2. There are surrender charges of 8% of Fund Value for withdrawing amount after 3 years. Only after 10 years there are no surrender charges.Also, the amount received on surrender is taxable.
    3. It is not clear if I opt for cover continuance after I stop paying premium after 3rd year, whether or nor foreclosure of the policy is permittted.

    I shall be highly grateful to you if you could kindly let me know is this a good investment product to purchase or should I not take it and go for some other option if I am especially looking for short term investments with high returns?

    Looking forward to your response.

    Thanking you in anticipation,

    Best Regards,


  • IEM Alumni says:


    Thanks for your hard effort. I am zero in financial planning. But your advice helped me a lot. I am seriously thinking of a term insurance + SIP to start of with. I am looking for some SIP with good growth. PLanning to start with 2000/- pm. Please suggest some good companies as there are many in market to confuse.


  • Saikat says:

    >Hi Deepak,

    What do you feel about the market heading to? World recession effect. I guess good time to invest what u say? But all my ULIPs are battered very badly.



  • Anonymous says:

    >hi deepak,
    i am 31 yrs old, hav a 02 yr old son for whom i intend to invest in some plan ……….idea is to get a helathy corpus when he turns 18. hav gone thru ur blog and seems ULIP is certainly nt a safe option. what else can u suggest? one more thing….any comparison between plans of LIC and private cos.


  • manjuvani says:

    >Hi Deepak,

    Thanks for your advise, i am a NRI from UK, without any knowledge i have took 2 ULIP policies from

    Bajaj-allianze …NEW FAMILY GAIN paying 50,000/- p.A.. paying from 2 yrs…

    i will contact branch & cancell the 2 ULIP immediately

  • anusha says:


    i am investing 1.25 lakhs per annum in ulip policy for a term of 15 years.
    How much can i expect at the end of my term.
    I am quite afraid after reading your blog about my savings.
    Please suggest me since i heard that ulip is best way to invest for long term

  • anusha says:

    >and forgot to mention it is max life ulip policy

  • Deepak Shenoy says:

    >anusha: please go check your policy since you invested, what is the current value, how much you paid in commissions and how much you will pay etc. No one can predict how much you will get, but at least you know how much you have left in the fund today…

  • anusha says:

    >actually i paid it 2 dasy back only 🙁

  • Deepak Shenoy says:

    >Anusha: Quick advise – to stop your policy you get a 15 day "free look" – that means you must return your policy within 15 days of getting it, and you'll get your money back (minus some costs) (If your cheque has not cleared, you might be able to stop payment on it) But DO NOT give it back to your advisor, take it straight to the insurance company office, return it and get a receipt.

    I don't know which policy etc. but I checked their web site and they don't mention the charges. That is a bad sign. Get out before it's too late.

  • anusha says:

    >the policy is
    max newyork life amsure magic builder they say that the premium amount is gauranteed.

  • RAMESH says:

    >I am NRI.I invested 5lcas in Bajaj Alliance shield plus plan.Which requres only one payment.And insurance is 1.1 times rather than five times of investment.I have been told that expenses are minimal.
    I am a retire.I donot need insurance.Is it a good investment.Also I have been advised that it is tax free for NRI,if money came from NRE account.Is it true?Because most policy requires three payments and not one.Also most company requires you to buy life insurance policy for five times the value of your investment.
    Please advise.I am still within two week look over period.

    Thank you.


  • Deepak Shenoy says:

    >Raju: Return the policy immediately. I have written why in a separate post:

  • Giridharan says:

    >Hi Deepak,

    I am giri and 28 years old. I have very less knowledge in investment/insurance stuff. I am a software engineer and i have plans to invest money. I was just looking out the options, an agent from ICICI pru approached me who had put up a stall in our office and he advised me to invest in ULIP with 50K per anum for 3 years and he said i can withdraw from 5th year. Is it a good option to go with this, can you please suggest me alternate options of investing. I dont want to invest for tax purpose.

  • Deepak Shenoy says:

    >Giri: Don't buy the ULIP please. If you need to get exposure to some risk – which is where the reward tends to be higher – Put your money in a decent mutual fund for the long term – I'd say buy something like HDFC Equity Fund or HDFC Prudence fund. You can withdraw after year 1 without any cost, and the upfront costs are near nil. Ulips are just evil; they will steal all your money.

  • Giridharan says:

    >Hi deepak, thanks a ton.

  • Kadir says:

    >hi Deepak, Is there a Exit load for the CAPITAL UNIT GAIN SIZE ONE from bajaj Allianz, Which i have invested 3 years back.

  • says:

    >Hi Deepak, I Appreciate your job.

    I am Jk (Age – 25). Married and 2 kids. My Monthly income is 19000, and I am ready to invest 4K per month. I want to get back all the money (with higher Profits) after 10-15 years. Means I will not draw the money with in 10-15 years. At the same time I am Expecting more Risk coverage. Can you Please suggest me the Best way with example

  • Reinventing Myself says:

    >Hey Deepak,
    Its commendable that you have been handling queries for almost 6 years now 🙂

    I read your post and went through some 10-15 queries from others before looking for advantages of ULIPs (just for the sake of it)

    Here is a decent article that I found on Rediff, Its 4yrs Old.

    Can you please go through it and give your opinion on the same. 🙂

    I appreciate all your efforts.


  • Deepak Shenoy says:

    >Kadir: Don't know but you should check the offer document on their web site.

    Jitin: Take a term plan for say 25L risk cover, you will pay about 800 per month. Use Mutual Funds for the rest. After 10-15 years, you should see decent returns.

    Reinventing: It's a little old – and a lot of ulip rules have changed. He's wrong, in my opinion, because the MF investments now, after a down turn, have COMPLETELY beaten ULIP returns.

  • Reinventing Myself says:

    >Thanks 🙂

  • Pankaj says:

    I have my investments in Saral Jeevan Life Cvg – Term 20 Pay Reg (Birla Sunlife). May you plz suggest should I continue investing (31000 per year which I have paid for three years) or should I exit. The current fund value is 70K against an investment of 93k. Please suggest I am very desperate.