Skip to main content

Insurance: Should I invest in ULIPs?

 

 

UNIT Linked Insurance Plans (ULIPs) are policies that club insurance with investment.

Besides getting your basic insurance cover, ULIPs offer between four and six options when it comes to choosing the investment mix.

These range from funds, which invest in 100 per cent equity to those that invest in 100 per cent debt securities.

wealth offers pointers on ULIPs to help you make a well-informed decision before investing in this product.

 

Higher charges:

ULIPs have something called the 'premium allocation charge'. This means, the company charges a percentage of the premium towards the premium received. For instance, if you are paying a premium of Rs 45,000 per annum, you are charged a premium allocation charge of approximately 15 to 71 per cent on this amount. The net premium, after deducting this charge, gets invested.

This charge, usually, depends on the ULIP chosen. And remember: your per annum return is calculated on the money invested and not on the premium paid.

A significant proportion of this charge is passed onto an insurance agent as commission. From the third year onwards, most ULIPs have a premium allocation charge anywhere from two to five per cent.

 

Choosing the best ULIP:

When it comes to mutual funds, you can find the best performing schemes through research.

But this is not possible with ULIPs because each plan will differ in terms of the expenses you need to pay upfront. This means that you have to go with what an agent tells you.

Unlike mutual funds or other investment instruments, generally an insurance agent cannot sell products from different insurance companies. He has to sell only those products that are issued by the insurance company he represents. In this scenario, unbiased advice is rare.

 

Compare 'n' contrast before you invest:

Though most insurance sellers tend to make tall claims about the return-generating potential of the product, the Insurance Regulatory and Development Authority (IRDA) has specified that a rate of 6 per cent per annum and a rate of 10 per cent per annum, are the only two rates that can be used to forecast the return potential. So, before committing to any particular ULIP, check what else is on the menu.

What products are being offered by competing insurance companies? Keep it conservative by directing the advisor concerned to use a return of 6 per cent per annum over the entire tenure of the policy, to ascertain the maturity value of the policy. This way, all expenses will have to be necessarily factored in.

At the end of the exercise, you will have a much better picture in terms of the strengths and weaknesses of competing offers.

 

The bottom-line:

ULIPs are not a bad investment, per se. But they are products, which help you break even after six to eight years. So, think long-term.

If used as short-term investments, your financial health will suffer.

Thumb rule: Get all the information before you invest


Popular posts from this blog

SBI Magnum Tax Gain Scheme 1993 Applcation Form

    https://sites.google.com/site/mutualfundapplications/tax-saving-mutual-funds-elss     Investment Details Basics Min Investment (Rs) 500 Subsequent Investment (Rs) 500 Min Withdrawal (Rs) -- Min Balance -- Pricing Method Forward Purchase Cut-off Time (hrs) 15 Redemption Cut-off Time (hrs) 15 Redemption Time (days) -- Lock-in 1095 days Cheque Writing -- Systematic Investment Plan SIP Yes Initial Investment (Rs) -- Additional Investment (Rs) 500 No of Cheques 12 Note Monthly investment of Rs 1000 for 6 months and quarterly investment of Rs 1500 for 4 quarters.

Birla Sun Life Tax Plan Online

Invest Birla Sun Life Tax Plan Online   An Open-ended Equity Linked Savings Scheme (ELSS) with the objective to achieve long-term growth of capital along with income tax relief for investment.   After a bad patch from 2008 to 2010, Birla Sun Life Tax Plan has made a big comeback in the last five years, with a particularly good run since 2014. The fund's rankings, which had slipped to two stars in 2011-12, recovered sharply to three-four stars in the last three years. The fund has delivered a particularly large outperformance over its benchmark and peers in the last couple of years. The fund's investment strategy focuses on a diversified and high-quality portfolio, with parameters such as capital ratios and balance-sheet strength used to judge quality. It uses a combination of top-down and bottom-up approaches to take sector/stock positions. The fund avoids highly leveraged plays. Staying more or less fully invested at all times, the fund parks roughly half of its portfoli

Should you Roll Over 1 year Fixed Maturity Plans?

The period between January and March typically sees an uptick in the launch of fixed maturity plans, or FMPs. Not this year. Instead, fund houses are busy rolling over or extending the tenure of their one- year FMPs launched last year to three years. Investors in one- year FMPs have a choice. Either redeem units or roll over to three years. If you exit now, your gains will be added to your income and taxed in line with your individual slab rate of 10, 20 or 30 per cent. If you stay invested for two more years, you pay 20 per cent tax with indexation benefit. Yields have softened in the past few months on expectations of a rate cut. If the central bank continues its soft monetary stance, yields are likely to fall further. In such a scenario, it makes sense for investors, particularly those in the 30 per cent tax bracket, to roll over their investments and lock in at a higher yield now. In a surprise move, the Reserve Bank of India cut repo rate by 25 basis

Mutual Fund Review: IDFC Premier Equity Fund

  IDFC Premier Equity Fund, which falls under the presumed high risk group of mid- and small-cap schemes, can rely on astute and timely equity picks. These make it less vulnerable to fluctuations compared with others in the category   IDFC Premier Equity Fund is designed to invest in upcoming, but promising businesses available at cheap valuations, and hold on to these businesses until they reap desired returns. The experiment has been successful so far, and IDFC Premier Equity has emerged as one of the top performing mutual fund schemes in the mid- and smallcap category of equity schemes.    While the scheme is an open-ended equity fund, i.e. open for subscriptions throughout the year, it has a unique philosophy to limit fresh inflows. Thus, while an investor can always take the systematic investment plan ( SIP ) route to invest in the scheme throughout the year, inflows through a lumpsum investment have been restricted. Since inception, IDFC Premier Equity has been opened for l

IDFC Premier Equity Fund dividend

  IDFC Mutual Fund   has announced dividend under the dividend option of   IDFC Premier Equity Fund Direct-D . The quantum of dividend shall be   R 4.3464 per unit.   The record date has been fixed as May 06, 2015. Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. ICICI Prudential Tax Plan 2. Reliance Tax Saver (ELSS) Fund 3. HDFC TaxSaver 4. DSP BlackRock Tax Saver Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. Canara Robeco Equity Tax Saver 8. IDFC Tax Advantage (ELSS) Fund 9. Axis Tax Saver Fund 10. BNP Paribas Long Term Equity Fund You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds Invest in Tax Saver Mutual Funds Online - Invest Online Download Application Forms For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call --------------------------------------------- Leave your comment with mail ID and we will answer them OR You can write to us at PrajnaCapital [at] Gmail [dot]
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now