But now I think through that 5 years is a very short permanent status for ULIP policies. Shall I discontinue & wait for doesn`t matter what I get after 3 policy years , or verbs ? Can I extend the term of policy ?
Answers: Palash,
I might nouns like a broken story! But investing in ULIPs is not a biddable idea -whether it is from LIC or Birla Sunlife or anyone else! ULIP is the uppermost selling financial product in the country. But sadly it is also the most mis-sold product. No agent will ever tell you that the upfront costs are as much as 30% within the intial years. So out of say Rs.10,000 that you invest, Rs.3000 would move about towards agent comission, fund management charges, admin charges, etc. etc. That imply only Rs. 7000 is getting invested contained by the market! If you take to mean the compounding effect of money (if not read this article Power of Compounding at
http://www.valueresearchonline.com/story...
you will realise how big a financial cost is thus hidden from you.
Next anything insurance life cover you are getting can be have at approx. 1/10th the cost thru a separate Term Plan cover. Read why Insurance and Investment should not be mixed here at
Investments? Insurance? Or both?
http://www.personalfn.com/detail.asp?dat...
Insurance vs Mutual Funds
http://www.valueresearchonline.com/story...
Now that you are more educated on how at hand are far better financial instruments to multiply your money (and separate Term Plan covers to take fastidiousness of Insurance needs), you know that ULIP is not what you want to go next to, certainly not for subsequent 15 years. By extending a 5 year term you will solely be compounding the folly, because the 30% charges are not restricted to the first 5 years, but atleast for the 7-8 years, and the charges become comparable to MFs only by the lat 2-3 yeasr of a 15 year possession.
What is the best way to infer the implications. Simply ask for a chart from the agent of how much is invested respectively year of the 15 year term. When you compare that near teh Rs.90,000 that you pay every year, you will be shocked into your senses! Then you hold to do the next bit, put into a spreadsheet how Rs. 90000 compounds at a rate of 15% for 15 years and compare what the ULIP actual-invested amounts compound! The impact of that will newly throw you! I can guarantee. If you need any support with these calculation, send me a entry from your mail ID and I will dispatch you a spreadsheet fro the same. Armed beside that, confront your LIC Agent and see how he runs away from you!
So, Congratulations! You have taken the right but tough but right long-term verdict. It is evident that surrendering a ULIP Policy after have paid the premiums for the first 3 years may be considered by lots an unwise odds, as you stand to lose some money. But then, continuing beside high premiums merely at the behest of your agent is even more unwise and over the long-term this could hurt your finances profoundly more.
There is a surrender value applicable, if you hold paid premiums regularly for atleast 3 years. So you will not lose adjectives your money or premiums paid. There are interesting option offered by LIC too. Read on more...the following excerpt from an article at personalfn.com
The trouble begins when you prefer to discontinue the policy like plentiful ULIP & Insurance investors have done surrounded by the recent past, after realising that the policy doesn’t reasonably fit into their scheme of things.
In such a scenario, the policy is considered to enjoy lapsed and all the premiums salaried are forfeited. More importantly, the insurer doesn’t entertain any claims once the policy lapse. However, it should be understood that the policy is not necessarily forfeited i.e. the policy’s appeal doesn’t become nil. The Insurance Act does not allow for forfeiture as every policy acquires a reserve base on the premiums already paid.
The Insurance Act provides for a return to the policy holder of an amount explicitly representative of the reserve and this is referred to as the ‘Surrender Value’ or the ‘Cash Value’. The Insurance Act stipulates that every insurance policy shall have a guaranteed Surrender Value, if at lowest 3 years’ premiums have be paid. This reserve arises due to the following:
1. Premiums surrounded by the early years of the policy human being more than what is justified.
2. Savings component in the premium.
Apart from the picking of surrendering your policy, insurers like LIC also provide other option like making a policy ‘paid-up’, whereby the policy remains surrounded by force with a reduced sum assured, depending upon the number of premiums remunerated. Another option is to hold on to the policy in force by deduct future premiums, from the Surrender Value. A third route is to provide term insurance subject to the condition that the Surrender Value is more than the sum assured.
Surrender Value is usually calculated as a percentage of the portfolio returns. Portfolio returns are calculated assuming a nominal something close to 15% annual growth of the invested amounts (Premiums minus expenses, which as you now know are fairly high surrounded by the initial years)
Read the complete article at
http://www.personalfn.com/detail.asp?dat...
Hope this has adequate information for you to take a considered verdict. And if convinced, please spread the knowledge roughly speaking ULIP product and how it is mis-sold in this country. Cheers!
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Answers: Palash,
I might nouns like a broken story! But investing in ULIPs is not a biddable idea -whether it is from LIC or Birla Sunlife or anyone else! ULIP is the uppermost selling financial product in the country. But sadly it is also the most mis-sold product. No agent will ever tell you that the upfront costs are as much as 30% within the intial years. So out of say Rs.10,000 that you invest, Rs.3000 would move about towards agent comission, fund management charges, admin charges, etc. etc. That imply only Rs. 7000 is getting invested contained by the market! If you take to mean the compounding effect of money (if not read this article Power of Compounding at
http://www.valueresearchonline.com/story...
you will realise how big a financial cost is thus hidden from you.
Next anything insurance life cover you are getting can be have at approx. 1/10th the cost thru a separate Term Plan cover. Read why Insurance and Investment should not be mixed here at
Investments? Insurance? Or both?
http://www.personalfn.com/detail.asp?dat...
Insurance vs Mutual Funds
http://www.valueresearchonline.com/story...
Now that you are more educated on how at hand are far better financial instruments to multiply your money (and separate Term Plan covers to take fastidiousness of Insurance needs), you know that ULIP is not what you want to go next to, certainly not for subsequent 15 years. By extending a 5 year term you will solely be compounding the folly, because the 30% charges are not restricted to the first 5 years, but atleast for the 7-8 years, and the charges become comparable to MFs only by the lat 2-3 yeasr of a 15 year possession.
What is the best way to infer the implications. Simply ask for a chart from the agent of how much is invested respectively year of the 15 year term. When you compare that near teh Rs.90,000 that you pay every year, you will be shocked into your senses! Then you hold to do the next bit, put into a spreadsheet how Rs. 90000 compounds at a rate of 15% for 15 years and compare what the ULIP actual-invested amounts compound! The impact of that will newly throw you! I can guarantee. If you need any support with these calculation, send me a entry from your mail ID and I will dispatch you a spreadsheet fro the same. Armed beside that, confront your LIC Agent and see how he runs away from you!
So, Congratulations! You have taken the right but tough but right long-term verdict. It is evident that surrendering a ULIP Policy after have paid the premiums for the first 3 years may be considered by lots an unwise odds, as you stand to lose some money. But then, continuing beside high premiums merely at the behest of your agent is even more unwise and over the long-term this could hurt your finances profoundly more.
There is a surrender value applicable, if you hold paid premiums regularly for atleast 3 years. So you will not lose adjectives your money or premiums paid. There are interesting option offered by LIC too. Read on more...the following excerpt from an article at personalfn.com
The trouble begins when you prefer to discontinue the policy like plentiful ULIP & Insurance investors have done surrounded by the recent past, after realising that the policy doesn’t reasonably fit into their scheme of things.
In such a scenario, the policy is considered to enjoy lapsed and all the premiums salaried are forfeited. More importantly, the insurer doesn’t entertain any claims once the policy lapse. However, it should be understood that the policy is not necessarily forfeited i.e. the policy’s appeal doesn’t become nil. The Insurance Act does not allow for forfeiture as every policy acquires a reserve base on the premiums already paid.
The Insurance Act provides for a return to the policy holder of an amount explicitly representative of the reserve and this is referred to as the ‘Surrender Value’ or the ‘Cash Value’. The Insurance Act stipulates that every insurance policy shall have a guaranteed Surrender Value, if at lowest 3 years’ premiums have be paid. This reserve arises due to the following:
1. Premiums surrounded by the early years of the policy human being more than what is justified.
2. Savings component in the premium.
Apart from the picking of surrendering your policy, insurers like LIC also provide other option like making a policy ‘paid-up’, whereby the policy remains surrounded by force with a reduced sum assured, depending upon the number of premiums remunerated. Another option is to hold on to the policy in force by deduct future premiums, from the Surrender Value. A third route is to provide term insurance subject to the condition that the Surrender Value is more than the sum assured.
Surrender Value is usually calculated as a percentage of the portfolio returns. Portfolio returns are calculated assuming a nominal something close to 15% annual growth of the invested amounts (Premiums minus expenses, which as you now know are fairly high surrounded by the initial years)
Read the complete article at
http://www.personalfn.com/detail.asp?dat...
Hope this has adequate information for you to take a considered verdict. And if convinced, please spread the knowledge roughly speaking ULIP product and how it is mis-sold in this country. Cheers!
Resolved Questions: