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Suckered: ULIPs Stealing Money, Yet Again


Khushal Devera at Moneycontrol:

Sachin’s family want to get their daughter married after she completes her graduation – that is another three years away. They did some calculation and decided they will require Rs 2.5 lakh for the marriage.

Sachin works in shifts. So, he hardly has any time to plan his finances, and that is the reason he invest his money into tax saving instruments without realising whether he needs the product or not. Sachin visited his bank to make a Fixed Deposit of Rs 70,000 to save for his sister’s marriage. However, the bank was aggressively promoting bank assurance products. So, when Sachin met the investment advisors of the bank for a fixed deposit, they convinced him to go for Unit Linked Insurance Policies (ULIPs) instead. They told him if he invests Rs 70,000 for next 3 years, he’ll get returns as high as 20 per cent for a year. Sachin went ahead and invested his money, but after the completion of 3 years of the ULIP policy, he received less than his original investment of Rs 210,000.

The surrender value of Sachin’s ULIP investment was Rs 168,688. This amount is insufficient for the marriage of Sachin’s sister.

The figure’s an illustration of how ULIPs sucker you. Sachin paid Rs. 210,000 and gets back 169,000; and the equivalent in a mutual fund is 250K+. Sure, he’s taken a product that takes 80% commissions in year 1, but even with 20-30% commisions you will see people get a lot lesser than they invest!

The worst of it: Banks are getting so aggressive on these ULIP products that they will even sucker you saying it’s “just like a fixed deposit”.

Do not trust bankers.

Do not trust anyone.

Look at what you’re signing. Understand it. Don’t have the time? Don’t do it. But otherwise, you are going to have to be responsible for the trouble it causes.

And if you have already been suckered (i.e. sold a ULIP when you really wanted an FD) do this:

  • Write to the bank (email will work if it’s an official complaint/grievance email). Demand your money back because you were suckered. Because they violated the “in good faith” behaviour they should have performed.
  • Wait 30 days – they may reply with some “we can’t take responsibility but we understand” etc. Or stall or delay things.
  • At the end of 30 days write to the RBI Ombudsman (there’s an Online form), specifying your complaint that you were conned. Tell them that you were not told of the risks, and that the bankers behaved in bad faith. That’s Subject no. 27 on the form. Enter the full amounts etc.
  • You should get an acknowledgement code (even by return email)
  • You can check the status of this complaint by calling them or writing to them.
  • If you’re not satisfied, you have the option of going higher – consumer courts or civil courts. Forget the fact that you were supposed to know – the point is that you trusted the banker and they cheated you. Such cases have been ruled in the customer’s favour earlier, AFAIK.

And if you haven’t been suckered, and are speaking to a banker about fixed deposits, specifically mention NO ULIPs. If the money goes to something named “…Insurance..” it’s a bad idea.


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