I don’t generally write about ULIPs but once in a while it’s useful to see how bad these products have been. We wrote a long post about HDFC Crest which was being missold by bankers as if it was a fixed deposit.
Now there are many reasons why the ULIP is a bad product.
Forget all the fees and all that. That’s highway robbery and terribly disgusting behaviour but what you can do, these are relationship managers with targets who don’t give a damn. One day, banks will be classified as brokers and we’ll get our day in court. Meanwhile, let’s see how bad the performance of a ULIP is.
If you take the same HDFC Crest for the last five years and compare it with a tax-saving fund from the same brand- HDFC – you will find the comparison simple. NAV or Net Asset Value Per Unit is simply how your corpus has multiplied over years.
Agents will tell you – but we give you insurance. Sure but the insurance is cut from your corpus (not the NAV) and you can get a way better deal by using a term plan instead. (The post has the calculations)
ULIP sellers tell you they have “lower management fees”. Guess what, the lower management fee is supposed to reflect in a better NAV performance (since management fees are the only fees to be deducted while calculating NAV). But when you look at the chart above, it’s obvious this is just a flimsy excuse.
If you were missold this policy the least the insurer could have done is at least make it up through performance. But No. Just do not buy ULIPs.