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ULIPs: Stay or get out?

PC asks:

I would like your opinion on the investment that i made this year. One of my colleagues suggested me to put in my money in ulip’s. I foolishly put in 25k’s each in sbi life unit plus 2 regular and icici life plus. Now after doing a bit of research on the net, i realised what a big mistake i made. Should i continue with my yearly premiums and wait out the mandatory 3 years? Should i change the asset allocation ( it is 100% equity in both)? Or should i call it quits and try and forget the 50k loss that I will be making in the process?

PC, the answer is going to be a little tricky. You have invested Rs. 50,000 (50K) in two ULIPs. Both these have zero surrender value upto three years. So you can:

1) Continue to pay the fixed premium (Rs. 25K each) on these policies, for the next three years and then withdraw.

2) “Ditch” the premium already paid, and invest the same amount in an ELSS mutual fund from the next year onwards.

I ran a quick calculation on both and put the values into an online spreadsheet for you to analyse.

You have already put in Rs. 50,000, and usually mutual funds gain at least 2% more than ULIPs, so I’ll use 10% gain on ULIPs and 12% on the mutual fund. I’ve considered exact values that SBI and ICICI prulife charge as commissions and monthly charges. I’ve NOT considered mortality charges because you’ll need insurance cover either ways and you’ll fund that with a term plan (I guess) if you choose 2).

You’ll notice that continuing the insurance premium is of little use in either SBI Life or PruICICI’s cases. You’re better off only after the 3rd year, and before the 7th year; and that is because the premium you’ve already paid is lost. After the 7th year, the mutual fund earns better returns.

But if you’re not looking long term (i.e. 7 years or more), then you can pay two more premiums. Exit after that – your total loss will only be around Rs. 10,000 (which is less than the Rs. 25,000 you will lose otherwise).

  • Anonymous says:

    >Hi ,

    Thanks for the insights and analysis.But I would like you to look at ULIPs with a different perspective.As financial planners suggest that one should allocate some percentage of their wealth to fixed deposit instruments depending upon their life stage and risk appetite.

    Now, forget tax benefits,forget insurance covers and compare ULIPs(with capital guaranteed plan) with Bank FDs and other debt instruments.

    Compare ULIPs with Bank FDs on just 2 parameters- returns and capital safety.

    I think ULIPs will score far ahead of any debt instruments if we compare returns keeping in mind India’s long term growth story even if we deduct expenses charged by the insurance company.

    Regards,
    Anshul

  • Deepak Shenoy says:

    >Hi Anshul,

    The best fixed deposit, undoubtedly, is the Public Provident Fund, which is the kind of thing that financial planners mean when they say fixed income instruments: they are long term, guaranteed by the government and they give you 8% tax free returns. They are also non-attachable, meaning that even if you declare bankruptcy no one can take that money from you.

    btw, You can’t NOT consider tax – it affects your net return 🙂

    Capital guaranteed plans: SBI and PruICICI guarantee only about 3% appreciation which is far lower than bank deposits nowadays. I can get 9% pre-tax on long term deposits with some big and secure banks.

    The problem with ULIPs is the amont of expenses they charge. They are taking what is rightfully your money. After they cut mortality charges (which is their payment for their risk) it’s 100% your capital and 100% your risk. So why pay them so much? Go for a mutual fund instead. If you don’t care about tax benefits (or are already done with the limit) invest directly.

    Also, I am not in favour of having a large percentage of assets in fixed income instruments, unless you need fixed income. Fixed and guaranteed income usually comes at very little gains over tax and inflation (exception being the PF). You should only use those for short term funds (less than 1 year).

    Regs,
    – Deepak

  • Anonymous says:

    >Hi Deepak,

    First of all I would like to thank you and appreciate your efforts in writing this blog.
    Today morning,somehow I got the link to your blog from google and since then I have read almost all articles from June.

    Now coming to the topic of our discussion,if we take the tax aspect into account and compare the two investment vehicles,I think finally it boils down to ULIP’s 3% return (with a chance of high returns assuming the market upway trends) Vs NSC/Bank Fds/other debt instruments.

    Returns in ULIP are completely tax free whereas you’ll be taxed in Bank Fds.And dont you think it’s worth to take a chance with ULIP for high returns in lieu of any other debt instrument.
    After all, only 4-5% of the capital is at stake.

    PPF,no doubt, has its own advantages but only thing which bothers me is liquidity.

    I may be wrong in my thinking but do let me know your views.I dont want to miss out on your analysis.

    Waiting eagerly for your reply.

    Thanks,
    Anshul

  • Deepak Shenoy says:

    >Hi Anshul,

    Thanks for your comments! Always glad to be of some help.

    ULIPs – the 3% guarantee is only for capital secured funds, which aren’t invested in equities. A better return is obtained from a balanced fund, or even debt funds which return 6-7%.

    Also, if you consider FDs at 8%, at the highest tax slab (30%) you still get a tax adjusted return of 5.6%, which is greater than ULIPs guaranteed return.

    As I’ve mentioned in another post, ELSS returns are also tax free, and so are equity mutual funds if you hold them for a year (you have to hold ULIPs for three years). ELSS offers tax rebates also under 80C (which is the same for ULIPs)

    Now if you compare the equity funds of ULIPs with ELSS mutual funds, the return of ULIPs is lower, and their charges are higher. The tax advantages are the same; so if you ask me, an ELSS fund is far better.

    If you compare the capital secured funds with FDs (of 8-9%) then ULIPs 3% is still lower post tax! After three years, an 8% FD returns a post tax (30%) return of 17.75% compounded yearly. A 3% ULIP compounded yearly gives you 9.3% only and if you subtract their charges, even lesser!

    PPF as you mentioned has a liquidity issue for 15 years, but I believe that’s the kind of fixed income investment that’s very useful (tax rebate on principal, high returns and tax free interest)

    Remember all equity funds including those of ULIPs have ZERO guarantee, in fact most people who bought in Feb/March are underwater today. I have compared ULIP returns with those of Mutual funds from the SAME company, and the mutual funds have done FAR better in the last one-two years! More than 10% better in fact!

    Cheers,
    Deepak

  • Anonymous says:

    >Agree with you that ULIP charges more and the fact that FDs adjusted rate of return is more than that.

    I have in my site (http://indiafinancialmarkets.blogspot.com) posted a few recommendations on stock investing – can you comment on the outlook of these names.

    Regards

    Visit my blog on India Financial Markets Watch

    http://indiafinancialmarkets.blogspot.com/

  • the_blue_quill says:

    >Thanks for your advice and your time. By what you said should i contnue with my mandatory 3 yearly premiums and then look to exit after 2 more years or so? Also can u explain how to go about asset allocation. At this bull run is it safe to go for a 100% equity allocation or take a safer 50-50 equity-debt approach

    PC

  • Deepak Shenoy says:

    >PC, Yes, it’s financially better to stay in for two more years in teh ULIP and then Exit. I hope the EET regime does not set in by then, so you wont get taxed on the earnings.

    Asset allocation: Go with your instinct. If you believe in the India story for two more years, then stick with equity – it will beat anything else hands down. You can’t time the market really; what you can do perhaps is to move 30% of your portfolio to debt.

  • Anonymous says:

    >can anyone guide me ragarding Reliance ULIP. Agents claim that it is having the lowest charges(Admin n all other) among all d ulips n higher returns.i m interested in investing 20000-30000 fo a span of 2-3 ys. Among ELSS, Mutual fund n ULIPs which is better. n if ELSS , in which Bank should i invest in ELSS.thanx

  • Deepak Shenoy says:

    >san: ULIPs aren’t very favourable, though Reliance costs are quite low in comparison.

    ELSS is a type of mutual fund (called “Tax Saving Mutual Funds”). I recommend HDFC TaxSaver and SBI Magnum TaxGain – you can get these from SBI site or HDFC MF Site. Or, go to your local bank or call a distributor.

  • Anonymous says:

    >which ELSS plan is best for investing for 2- 3 yr. term n is dere a possibilty of losing money in ELSS,

  • deepak patil says:

    >Anshul,

    The liquidity in PPF is low but still you can withdraw some of your PPF investment after 6 years. Not only that, you get a loan on your PPF investment 3 years onwards.

    Now such 3 / 6 years lockin is ok because all tax saving instruments require 3 min. years lockin.. and some like NSS requires 6 years.

  • aravamuthan says:

    >Deepak,
    In the excel sheet comparison that you have done, you are calculating the returns on ULIPs and MFs, fine. What about the insurance charges if you dump the ULIP and go for a separate tem insurance policy? I dont see that you have adjusted the calculations for this amount. This would be a minimum of Rs.5000/- p.a for a 5 lakh WROP policy, which is 50000/- for 10 years.
    Or did i miss that part in the calculation?

  • Deepak Shenoy says:

    >Aravamuthan,

    I havent reduced the mortality charges for the ULIP either or considered that for the mutual fund part. (If you consider mortality charges the ULIP will also show reduced returns).

    You should consider a term policy without return of premium (since you don’t get back the mortality charges in a ULIP). For such a policy the rate for a 30 year old is about Rs. 280 per lakh, which for five lakhs is about Rs. 1400 per year.

    The mortality charges in ULIP will cost you about the same amount per year averaged (since in ULIPs mortality charges increase every year, in term plans they stay the same).

  • Anonymous says:

    >Hi

    Can anyone suggest a better way to surrender my ULIP.It is not matured yet and i want to surrender this before the maturity period(It’s been only 3 months).The premium amount is 4200 and i am paying it through ECS.

    Thanks in advance for your time and advice.

  • Deepak Shenoy says:

    >Only way to go ahead is to forget the last three months’ premium and stop paying further premium. You’ll lose all your money but that is still less than your losses if you go ahead.

  • Ram says:

    >Hi,

    I have invested 10,000 in ICICI Prulife ULIP(20,000 per annum) and 40,000 in SBI Life ULIP(40,000 per annum).

    ICICI has charged 2000 for processing fees and SBI,Rs.10000.After reading your blog I fear that what I have invested is all in vain.Can you help me in taking the next step regarding this?

    -Ram

  • Anonymous says:

    >Hi Deepak,

    I am Deepak too.

    I am a Certified Finance Planner, AMFI Certified Mutual Fund Advisor & Chartered Wealth Manager.

    I went through alsmost all the posts in your blog & noticed a pattern in all your posts. All along, you have comments have indicated that ULIPs are nothing but waste of both money and time. I request you to kindly check this link “http://timesofindia.indiatimes.com/articleshow/2000498.cms”. This is a news item published in times business on September 18, 2006.

    The industry standard for ULIPs is an entry load of 40% as allocation charges but there are ULIPs available which charge only 12% as first year entry load. The fund management charges are also at 1.5%. The Mortality charge for a 35 year old male like me is at Rs. 144/- per lakh and this keeps on reducing with every passing year. The best part is there is no mortality charge after 4th year. The fund growth rate it has registered during the last two years (it was launched only two years back!!) is more than 39%. And, don’t forget that this two year period includes the market crash of May 2006. The growth rate is in spite of that crash.

    For two years I invested Rs. 60,000/- each and right now my fund value stands at Rs.1,71,082/- after deduction of all taxes.

    Ofcourse, the issue of liquidity remains, but, investing is such a good plan, I don’t mind my money to be stuck for 3 years.

    I have my investments in mutual fund, stock and real estate also. But, for a person, who doesn’t want to be bothered with aggressively monitoring the share market, ULIPs offer a reasonably good investment option without the headache of regular monitoring the market. Moreover, as the saying goes that “Don’t put all the eggs in the same basket”; As an Investment Advison, for and ideal investment portfolio, I suggest, proper diversification of funds with a mixture of risk, security & liquidity. The ratio varies from person to person.

    In one of your posts, you have mentioned about EET regime for an existing policy. As far as my knowledge goes, the draft proposal of EET mentions it’s applicability to the policies in a prospective manner and not in a retrospective manner.

    Please Comment

  • Deepak Shenoy says:

    >Deepak: Thanks for writing in. You’re right – I don’t like ULIPs one bit because of the charges.

    I think you’re wrong about mortality charges reducing – all ULIP plans have increasing charges for your age. I don’t even like the concept of giving the higher of sum assured or fund value – that’s not fair. But now there are funds which give you both – those might be interesting.

    Secondly, fund management charges in ELSS funds are also around 1.8% – in general they have given better returns (over a three year period) even after higher mgmt charges.

    Your 60K per year would have been worth a lot more had you taken a term plan plus ELSS. More like double – the markets have actually doubled in the last two years.

    ELSS + Term plan is simply better than ELSs because a) more money is deployed due to lower charges and b) insurance is kept separate from investment.

    EET: I have mentioned that the details are not known. Even now, it’s just a few rumours. I would love to see the final approved entry from the FM before I comment.

    I don’t think ULIPs are worth it for any one with an equity focus, it may make sense for debt focussed persons – I don’t know, because I haven’t analysed that end.

  • surendra says:

    >hi, i have taken metlife’s ULIP (multiplier) policy last year in March 2006. And my annual premium is 18,760 Rs. Is it worth?

  • Anonymous says:

    >I completely agree with one should never put their money in ULIPs. I have suffered it first hand. I put my money in Birla Sunlife, paid Rs. 30000 premiums for 3 years and after 4 th year the surrender value stands at Rs. 87000, so after withdrawing I made a loss of Rs. 3000 even after no accounting for inflation.

  • Deepak Shenoy says:

    >surendra: The short answer is no. Unfortunately if you stop now you will lose all your money. But if you pay two more years and attempt to exit you will lose 30% of that times fund value. Each premium is charged 6% as initial charges, and you pay Rs. 1200 a year as maintenance charges.

    I woudl recommend that you exit now. Forget the last paid premium. Yes, you lost Rs. 18,000 odd, but if you continue for two more years, you will put in rs. 36000 more, pay Rs. 4600 more as service tax (totally Rs. 40,600). Then you will pay over two years: Rs. 4800 as monthly fee, Rs. 2200 as charges and I’ve not yet considered mortality charges.

    I don’t think after two more years you’ll even have a fund value of more than 45,000. Even with that, you will get only 70% of it back if you withdraw after three years, meaning you will get Rs. 31000 back. So you have to pay Rs. 40,000 more to get back Rs. 31,000. Not worth it at all.

    My advise is to just stop paying premiums, and take a term plan instead.

  • Deepak Shenoy says:

    >anonymous: That’s quite sad. I guess you’ve learnt and won’t deal with ULIps again…

  • sahil says:

    >hi deepak..somewhr in the “comments part” u mentioned that mortality charges ar high in ulips..i beg to differ from you.
    the mortality charge in ulip is conditional in the sense that they wil b charging you mortality till the time your fund value is less than your cover(As with most of the ulips only the cover or fund value is payable,whichcevr is higher),so the mortality actually keeps on decreasing in most of the cases..so u may not even pay mortality charge after few years if your fund value exceeds..
    2nd: i ran a comparison of mutual fund verses ulip plans and i think think compariong “single payment Mutual fund”with “regular Payment ulip” is Wrong..If you want to compare ulip with mutual fund,thn only compare with SIP of mutual fund..Another thing,Single Premium Plans of Ulips,yields higher than mutual funds after deducting charges and if you want tax exemtions on ur returns part also,thn go for single premium ulip 500 or 625%..The best fund my research says is sbilife unit plus single plan which charges the least ( even lesser thn mutual funds,esp close ended) and the CAGR for 2 yrs is 54%..what else u want??? Outlook money has given recent comparison among ulip plans,i guess dated 28th feb..
    wats ur comment on this?

  • Deepak Shenoy says:

    >sahil: As your age increases, your mortality charges increase in ULIPs. They stay put in a term plan.

    Second, there’s is no point of a reducing mortality charge plan – after all you want to keep insurance and investment separate!

    Can you share your details of mutual funds vs. ulips? My data says that ULIP returns have been MUCH lower (as I’ve mentioned in my counterpoint)

    You get the same tax treatment with ULIPs as you do with ELSS funds. SBI Magnum Taxgain has done better than ALL ulips in the last three years, going purely by NAV (where your management charges are already deducted, so no comparison of that is needed)

    ULIPs are just a way to loot you.

  • Anonymous says:

    >How to get our of an ULIP?

    As a rookie investor I didn’t have any understanding of these plans 2 years ago. Hence I started investing 55k yearly on ULIPs. Now as I have already invested for 2 years, it will be stupidity to withdraw right now as I dont get anything back. Please tell me how to exit from ULIPs after 3 years. I do not need any insurance as I have a term plan as well. I am investing in SIP mode so I think I can only withdraw after the last SIP is invested for 3 years. Please suggest what should I do now? Thanks in advance!
    Vinay

  • Deepak Shenoy says:

    >Vinay: YOu already have the solution – exit three years after the last SIP. And stop the SIP, of course.

  • Anonymous says:

    >Thanks for the reply, really appreciate. Just one more thing, doesn’t every SIP need to be invested for 3 years as I am taking tax benefits. That means may last SIP whihc will be in 36th month of the start of the policy, should be invested for another 36 months. May be I am confused, please enlighten.

    Thanks in advance
    Vinay

  • Deepak Shenoy says:

    >Vinay: Yes, you are right; the last installment needs to be in for 3 years.

  • Anonymous says:

    >Thanks for the reply. That means I cannot get out of this until the end of the sixth year.
    DAMN!!
    But I think giving the long term investment horizon, the funds will accumulate somewhat. Although they will cancel some mortality charges and insurance charges, yet they will not affect the investment very badly. At least I hope so.
    Currently my funds are giving me better than wht I invested. Though I am not considering the charges they deduct in the first and second year, which are very high. If i not consider those charges than too my investment has crossed the net invested money. I know i would have got better returns in ELSS. But anyway there is no looking back now.
    Thanks once again
    Vinay

  • Anonymous says:

    >Hey Deepak,

    I just read your comments on mortality charges, but friend I am sorry but I beg to differ on this. I have a ICICI LifeTimeII policy. Now mortality charges according to them is on the Life Cover. Now according to them Life cover is difference between sum assured and the fund value at the time of the deduction. I agree mortality charges go up with age, but they go down as your fund value increases. So right now my fund value is 1.17 lacs and sum assured is 3lacs, so the mortality charges will be on 1.83 lacs. Now as my fund value will go up in coming time, coz of premium I pay and also as it is equity linked the mortality charges will reduce, while I will still be in my 20s.
    Any insights mate
    Thanks Vinay

  • Deepak Shenoy says:

    >Think about this Vinay: Is 3 lakhs in any way enough cover? It won’t even cover expenses for 10 months for your family if something were to happen to you! If you were to really take cover, then you will need significantly higher cover – around 30-50 lakhs. Assume similar premiums (after all your paying capacity does not change) and you will fidn that a) your fund value doesn’t grow anywhere close to the proportion needed to significantly reduce mortality charges and b) your mortality charges increase rapidly as you age.

    In this scenario it is much better to do a term plan + a mutual fund. In fact, a term plan taken in your 20s is much less expensive!

  • Anonymous says:

    >You are absolutely right! I was anyway not defending ULIP, but was just arguing on the mortality charges. me being the victim of ULIP understtod all the hidden facts after 2 years. Then i took a term plan as well.
    Vinay

  • Ravi says:

    >Hey Deepak,

    Very good analysis on ULIPs. Now I regret that I havent visited your blog earlier. I have a huge responsibility on me to complete all ur articles and I have already charted out a plan on this one.:)

    Thanks again,
    Ravi

  • Bhats says:

    >what an irony man..,

    everyone’s saying ULIP is not a good investment tool…
    one should go of mutual funds..

    Now.., the ULIP charges are like 8 to 10 % for 1st year.., and then 4% for the contunity of premium.., be it 3 or 5 years.

    when speaking of Mutual Funds.., you are primarily missing Risk Cover part..
    if.., as u say.., u wish to INVEST in mutual funds.., and take a RISK COVER from traditional policies of LIC..(to have secured investment).., the allocation of which is only 60 % of the total premium paid.., which is faar less than ULIPs..

    so people which is better.., investing directly into ULIPs or inversting in MF and seeking risk cover from costly traditional LIC policies ??

  • Deepak Shenoy says:

    >bhats: I suggest a TERM plan (not traditional investment plans). A term plan where you don’t get your money back, plus a mutual fund.

    Do the math – you lose less money with that option than you do with a ULIP. HIstorically you have lost much more with ULIPs because of their higher charges, allocation fees and poorer performance compared to mutual funds.

  • Bhats says:

    >deepak : yeah.., i was thinking about that.. that a term plan with mutual fund can prove a worth.

    but still dude, we’re missing the medical part.., or is their provision of family medical benefits we can derive from term plan?

    now.., the best provision for retirement aged people.., or the people who have large stock of money and need a systematic pension plan.., can go for Market Plus 1 or Profit Plus of LIC.

    Atleast ULIPs in any case gives a higheer return than PPF or FDs..
    and I’ve seen the documents supporting this fact …

    Balanced funds of ULIPs are actually giving good return .., atleast 15 %. i’ve seen people’s actual investment and the maturity they get.. and not 1 or 2 cases.., the whole file..

    please comment on this..

  • Deepak Shenoy says:

    >Bhats: Pension plans almost always lose money compared to keeping in even in an FD or a liquid plan; should always liquidate teh fund before retirement.

    ULIPs don’t usually come with medical. If they do, they will underperform even term insurance + medical insurance + mutual fund, going by history !

    ULIPs are market linked and if you bought one in Jan this year you would have lost some 30% by now. Plus even with balanced funds you have to compare similar investments made in Term+Balanced MF – but because the ULIP charges are so high, investors lose in comparison.

    Remember – a balanced fund like HDFC prudence has given 19% CAGR in three years which is what I assume you would have seen – most people seem to exit after three years. A term plan + that would have returned better, considering the cost isn’t quite as much as a ULIP (you have to consider similar insurance levels)

  • Bhats says:

    >hi deepak..

    well.., you say that ULIPs dont perform.. they do not grow money.

    you even say that to keep pace with inflation.., we’ll have to keep our investments grow atleast by 15%.

    but the documents.., of LIC.., which shows that a person who invested Rs.10000 for 3 years gets in the end of these 3 years Rs. 51480. If this ULIP was giving a 15% return, then at the end of 3 years, the fund should have given Rs. 46000. this means the return is obviously more than 15%.

    this document is not a hard copy of any Agent, but a printout on an LIC paper.. a maturity list in July 08.., and contains a list of more than 50 clients.

    how can i ignore this evidence..!

  • Bhats says:

    >About the pension plan.., yes sir.., I know that pension plan is not worth.., even the returns are taxable..

    But Market Plus and Profit Plus gives a non taxable return as per sec 10(10) D.

    The plan is like this (Market Plus)…
    Invest an amount.., say 10 lakhs in Market Plus. after 5 years, the amount is sure to become the double of that invested amount.., i.e., 20 lakhs (@ 15%). during these 5 years, LIC wont return you out of your investment. but after these 5 years.., LIC is paying you Rs. 16666 guranted.., untaxable.

    its not a pension plan.., but an alternative.., and better in terms of systematic pension return.

  • Deepak Shenoy says:

    >bhats: Printouts on LIC Paper! DId you know that IRDA took objection to that very fact? LIC people lied!!!! and it was a known fact, even they admitted they did. They tried to show potential results of 25%! IT’s all a sham mate.

    The document you are seeing is false – it is only a “projected” return based on some figures like 30%. Someone has fabricated the returns, put in some random clients names, and are trying to con you.

    Let me prove it to you. Market plus was launched in 2006. It cannot finish in 2008. If you look at the current NAVs even the BEST performer has done only 9.5% (secured fund) – which is equivalent to 4.5% per year. I can get a better return on an FD + Term insurance.

    I have written earlier too – Market Plus is simply a scam, because of misselling by agents. This was confirmed by IRDA also. Do NOT buy it.

  • Anonymous says:

    >Well I think the insurance companies are paying IRDA major kickbacks to keep ULIPs still a legal financial instrument. If it was for me I would have banned it long time ago.

    Make ULIPs illegal.

  • Sathiya says:

    >I'm a victim here too and need suggestion. I took two ULIPS 2 yrs back and now want to withdraw from it.
    1) Maxnewyork secure rturn builder(10k/annum – growth fund)
    2) ING vysya High life plus(60k/annum – growth fund).

    With my calculations ING vysya one probably i wil not lose much if i withdraw in 4th yr. But max newyork it is bit high. let's say if i add some top up of 50k in maxnewyork will i reduce my losses(considering withdrawl by 4th or 5th year).

    Please give me suggestion on how to proceed.

    thanks,
    sathiya

  • Anonymous says:

    >I have paid 50000 py for last three years in ICICI pru lifetime super with flexi growth & with life cover for my son.I have stopped paying premium & intended this money for my granddaughter when she attains the age of 21. do you think I shud wait. I am willing to wait for other 17 yrs if my grand daughter lands up with a nice big packet when she is 21..

  • Alagesan Chinnasamy says:

    >Hello need some help and advise, my wife had taken an LIC profit plus 188 policy, we been paying INR 25,000 quarterly since January 2008. We have to pay premium for another 2 years and our maturity date is 2018. We havnt seen any impressive NAV or returns till date. What would you suggest we do now

  • Sajit says:

    >Hi Deepak,

    I am a regular reader of your blog and this blog is helping me to improve my financial planning and awareness. This query is about ICICI Forever life pension policy. Recently I decided to surrender my ICICI Forever life pension policy as I figured out the the pension a the vesting time will be nowhere near the prmised illustration, So I have decided to get the surrender value from ICICI and the surrender value they quote is way below what I calculated. Could you check the mail send by me to ICICI and let me know if my cacluation is correct and also advise if it is wise to surrender this policy a this point of time.

    Thanks,

    -Sajit

    My mail to ICICI below illustratinf the calculation of surrender value
    ————————————————————————–
    Dear Santosh,

    I had a look at the insurance offer letter and surrender value according to the offer letter is

    35% of premiums paid excluding the first premiums and any extra premiums + guarenteed additions + accrued bonus. So as per the mail received from you and Madhavan Balakrishnan (Exec director ICICI LIC Co.Ltd) about the one time celebratory bonus. I have made excel sheet to calculate the surrender value which is Rs. 81516.79. Please see that attached and let me know your explanations.
    Date Premium Guaranteed additions Vested Bonus
    First Premium 30-Oct-03 10346
    Second 30-Oct-04 10346 8050
    third 30-Oct-05 10346 8331.75
    fourth 30-Oct-06 10346 8623.36
    fifth 30-Oct-07 10346 8925.17
    sixth 30-Oct-08 10346 7917.9
    seventh 30-Oct-09 10346 6796.2
    31-Mar-10 7662.76
    One time Celebratory bonus 3483.05
    Sum of premuims excluding first year premium 62076
    35% of premiums excluding first premium 21726.6
    Sum of guarenteed additions 33930.28
    Sum of accrued bomus 25859.91
    Surrender value 81516.79

    Thanks,
    -Sajit
    – Show quoted text –
    On Thu, Dec 2, 2010 at 1:20 PM, ICICI Prudential Life Insurance Co. Ltd wrote:

    Dear MR Sajit Varghese Zachariah,

    We refer to your email dated 1st December, 2010.

    The Surrender Value is equal to 35% of all premiums – Frist year premium + Cash value of all accrued bonuses.

    Hence the calculated surrender value as on 2nd December, 2010 is Rs. 38, 296.41/-.

    Please contact us for further clarifications, if any.

    Click here to give feedback

    Yours Sincerely,
    Santosh Kesari
    Customer Service Manager
    ICICI Prudential Life Insurance Co. Ltd.

    Dec 3, 2010 9:48:41 AM

  • Anonymous says:

    >Hey Deepak,
    I am invested in 2 ULIPS.
    1) Birla Sun Life SaralWealth : 35800 anually since Feb 2010 ( paid 1 premiums) current fund value is 25629.
    2) Birla sun life Dream Plan: 12000 anually since Jan 2009 ( paid 2 premiums) current value is 20762

    I also have aterm policy of Birla sunlife pemium of 7k annually and cover of 50 lakhs.

    I was totally shocked to see 11000 deducted as loading charges on SaralWealth.

    Please advice what would be the right time to get out of the policies and which policy should I retain.

    Thanks,
    Sukumar