Switch with 100 % flexibility. Review on Reliance Nippon Life Insurance

There are a million ways on how to loose your colored money (whether black or white). Why not into your future? If u have noticed, banks have learnt a new meaning to saving accounts. Legally it’s their money, but let you think otherwise for a small interest of 6%. You are also charged a processing fee and other hidden charges way above the interest rates.

I was quite bugged with one of the insurance companies, since the value for the past few years has never gone above my investment value. One did offer me better returns while not being exceptional.  Mind you, in both cases, my investment decisions have been prudent. Not the returns.

Qs u can ask - How can they expect you not to switch your plan between maximizing returns while protecting your investment during a downturn? The standard 4 switches offered by most appears crummy. With current volatility levels in the market, it makes sense to switch as much as possible.

While I strictly say No to ULIPs due to lower returns, there is one which has me offset. So while I await to exit one of my ULIP plans due to poor returns, I still had the tax saving requirement and looked at some new ULIPs. Currently, only one policy appears to have the punch due to lack of any serious contenders.

Charges of standard ULIP plans –

First year – 25 % (LIC is the least at 15 % on some policies)

Subsequent years – 2 – 6 %

Mortality rates are fixed by the IRDA. Taxes @ 12.36 and admin charges @ 2 % are predetermined by the government while offering slight flexibility.

Key features of most ULIPs –

Money Guarantee for fixed value

Upto 4 free switches. Any additional switch costs 100 bucks.

If  u r scratching your head about switching, let me explain. This option helps you to switch to equity based structure allowing you to maximize when the markets are up while allowing you to safer instruments such as GILT funds or money markets during downturns. However, 4 switches is too less in volatile markets to protect your money. Any additional switch is charged 100 bucks.

The Reliance AIP plan

There are two plans offered with AIP –

The ready made plan - usual plan as offered with other ULIPs.

The tailor made plan - The one with the punch - You get 52 switches free.

With nearly 48 switches more, I save nearly 5000 while offering me better flexibility in my investment options depending on the market conditions. The options as with all other ULIPS are debt, money market, GILT and equity. In addition, you can invest 100 % of your portfolio into any one option. I can go 100 % on equity on upside and 100 % on GILT on downside.

Scenario 1 – Suppose my invested value is 50k and I were to switch 50 times a year in a normal ULIP, I pay nearly 4800 in addition (which is knocked of my portfolio meaning a 10 % loss even if the portfolio has appreciated well)

Scenario 2 - If I prefer to make do with the 4 free switches, my gains are not maximized. If you take the current year, you have already lost 40 % of your portfolio. There is at least a 10 % less appreciation to your insurance portfolio even if you invested only in GILT funds throughout. (Remember that most do not offer the 100 % choice of your invested portfolio)

Grapevine - Bajaj Allianz previously distributed this along with other insurance majors, but has withdrawn offering this policy after a recent tiff with the Reliance management over commissions.

Call at 30338181 for info about plans