Jul 25, 2008 07:32 PM
8325 Views
I took a life insurance from ICICI-Prudential only to repent my decision and incur a huge loss because of my stupid decision. Well when I first approached the insurance agent he only mentioned about the good facts. He hid from me a number of hidden costs. And it turned out that the hidden cost was enormous enough for me to lose more than Rs. 30, 000/- over a period of 3 years.
When I decided to invest on a market based plan the sensex was hovering around 7000 in 2005. So it was a good decision on my part to take a market based policy given that the sensex has doubled now. Despite this I did not make a substantial profit based on equitity because the fund managers at ICICI were stupid. The sensex rose to 20K in jan 2008 before dipping to 14K level as of today.
To my surprise this dip in Sensex was immediately visible on my policy. My NAV dipped more than Sensex and my earnings began to diminish. After 3 years I did a close check on my policy details and was shocked to see that after investing 60K for 3 years, My policy at the end of 3 years was less than 150K. Taking into account the inflation my loss was even more. Enraged I asked for an explanation and then came a shocking reply.
I am pasting the reply below for all to read and know about the hidden charge.
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The following charges are applicable for your policy and the same are deducted via cancellation of units.
1) Premium Allocation Charges: The fund allocation is done after deduction of Premium Allocation charges from the premium paid.
The Premium Allocation charges are charged as:
a) 20% of the premiums paid for the first year
b) 7.5% of the premiums paid for the second year and
c) 4% of the premiums paid from the third year onwards.
2) Mortality charges: The mortality charges are risk charges that are levied on the life cover part to provide protection benefit to the policy holder. This is an annually renewable charge and is levied in every year of the policy depending upon the age of the individual in that year.
3) Service Charges: The relevant part of service tax law says that “service tax will be levied in respect of service provided to policyholder by a life insurer in relation to the risk cover in life insurance” [Section 65(105)(zx) of Finance Act, 1994, as amended by Finance Act (No 2) 2004].
Thus the service tax law considers the risk premiums as value of service provided by a life insurer to its policyholders.
Service tax is required to be charged at 12.36% (including education cess of 0.24%) on this value of risk premium.
We have deducted Rs.A/- towards mortality charges, Rs.B/- for service charges, and Rs.C/- for premium allocation charges.
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A+B+C for me was more than 30K. This charge followed by some bad investment of my money by ICICI has resulted in a huge loss for me. The Premium Allocation Charges goes to the pocket of the cheat who sold me the policy without telling me the hidden cost.
Now the choice is yours. I have provided enough information to make an informed decision to the readers.
