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ULIP Strikes Again


Jago Investor, which has become an excellent site, has a post on misselling ULIPs.

The story: A family that had 10 L to invest, gave it to someone they knew in an investment bank, who considered all possible investments and chose the one that made him the maximum commission: the dreaded ULIP. It turned out the ULIP in question had 48% allocation in the 1st year, 24% in the second and 1% after that.

The advisor asked them to invest Rs. 3 lakh as premium. That’s 1.44 lakhs into his pocket in year 1, and another 72K in his pocket in year 2. In two years, that’s 2.2 lakhs gone, out of a given 6 lakhs.

Luckily this ULIP has a surrender value of 90% after year 1 and the family stopped further premiums, so they will get back 90% of whatever is left, after waiting for another two years. That still sucks – they will only see half their money while their investment advisor “friend” enjoys his share of the other half.

With entry loads banned, can you imagine any reason why ULIPs are useful? NEVER INVEST IN A ULIP, PERIOD. How can smart, intelligent people get suckered so easily? Buy term insurance and an equity or debt mutual fund, much much easier.


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