I have edited this review. Some more news are on bottom of this review By the way, Thanks for your good response for this topic.
This is something To say about drawbacks of ULIPs and an alternative investment to it. There are many Insurance plans available but the agent will brief you only on ulip because he company pays him a lot for first 3 years(max 40% also) if he gets a ulip customer. So there are many miss-selling cases of ulip.
You dont get proper information from the agents at the time of purchasing policy. The agents are expert in painting a picture of heaven for the customers so they will play with words and show you the way towards this beautiful heaven(painted). But in reality such things does not happen.because all the ulips are market dependent
One example of ULIP. You have a policy which is paid for 3 years and for simplicity let us consider yearly mode premium. So 1 year - one premium paid is the equation. Now if you have to surrender and if you hope that all the units you are holding will be redeemed, Wait.
There the company officials will say that you will not get all the units redeemed because you have paid your last premium just now where as to redeem all the units, your last paid premium should be 3 years ago.so you have to pay premium for 6 years but again while surrendering, the same rule will apply so you cant surrender the policy till your full term.So you are trapped and anyhow forced to continue this policy to avoid loss
Because in this case you will get the minimum surrender value only.
A company offers premium holidays after 3 years of premium payment but for just 1 or 2 years and again it will charge you some admin charges etc at the time of next premium payment.
The company officials also say that this is the IRDA rule. The agent will not tell you all these things because after knowing the other side of ulips no one will be really interested to buy it. The other interesting option is getting a good term policy from LIC.It gives you major insurance cover in less money say 15 to 25 lacs insurance coverage in 6000 rupees yearly premium
So based on your requirements choose appropriate insurance cover in less money and invest the remaining huge amount in PPF, tax saving Mutual Funds.this will help you not immidiately but when you are around 40 years and you dont want to take high risks in investments at that age.
No agent will tell you about term policies and if you ask him about such kind of policies, he will tell you some costly figures(in case of icici prudential) and defer you from purchasing this policy because he gets very less comission on such policies.
Even the company is not interested in term policies.You dont get lapse notices from company for such policies.
In MF the entry load is minimum and in case of SIP, there is no entry load
In ulip there is huge admin charge for first 3 years and nominal for rest of the tenure
in PPF you can withdraw after 15 years and after 7 years of maintaining a ppf account, you are eligible for loans.PPF is a safest investment at a steady compound interest of 8%
*The key points in investment are as follows
1) Invest upto 25 to 30% on insurance(without ulips).One term policy offering good insurance coverage and some good policies like Jeevan Shree/Jeevan Anand etc from LIC
2) One mediclaim/health policy for family protection
3) Tax saving mutual funds ELSS 25% to 40%
4) The remaining amount for PPF which accounts upto 40%*
From the above key points you will have low risk, not very high but decent returns and good insurance coverage and family protection plus a stability in middle age
I am not a investment consultant or a marketing person of any investment firm. Because to tell the simplicity of the investment, they will charge you huge. All this I am telling based on my good and bad experiences in investments made by in the past. Rest the choice is yours.You have to decide how to use your hard earned money
Thank you very much for your patience and reading this huge and crazy content
Editing my review from here
There is some news about ULIPS from 1st Jan 2010
According to IRDA Rules, It is mandatory for insurance company to charge maximum upto 3% premium allocation charges for ULIPS.A insurance company cannot charge more than that.
Credit goes to IDBI Fortis Life Insurance company.Because of this company only ULIPS came under scanner.Because IDBI was charging 6% charge for first year on ulip and 3% thereon till policy maturity.Hence IRDA questioned other insurance companies about how they charge upto 50% and 30% for premium allocation.
I am saying this because now I am an insurance advisor working for IDBI Fortis.After working for around 15 years, I decided to quit my job and want to do something. I like to work with ethics and always look for customer benefit because I have experienced a lot of misselling practices, henceI decided to work as Insurance advisor so that I could help people in their investments and hence after lots of R&D for 3 months, I decided to join IDBI fortis.
Even though I am an insurance advisor, but still I dont tell people to go for ULIPS.I always suggest for term policies(Even though there is less commission on term policies as compared to ULIP.).Also I suggest Endowment plans where money is invested in Government securities only hence decent returns are guaranteed in 5 to 10 years span with some insurance cover.
Basically when I tell people about term policy wherein in case of policyholder's death a good amount is given to his/her family, but still 80-90% people tell me that why to go for term policy when I am not going to get benefits.The prospective customer tells that if nothing happens to me in that 10/20 years, then all my invested money is wasted.
But now you can get your invested money back after policy maturity in case of term policy.
Atleast IDBI and Metlife has got plans wherein if you go for term policy say around 10, 000 rupees a year and 15 lac coverage for 20 years.Other insurance companies are copying this and will implement the same plans very soon.
Now if nothing happens to policy holder till 20 years, then his 2 lacs are returned back.*
*But ask for your insurance advisor about money back plans in term policy.because for 15 lacs coverage there can be a premium of just 4000 a year but in this case, after policy maturity, your money is not returned back.
Actually term policy with return of premium after maturity is good but somewhat costly than a normal term policy but think in this way that you are investing for your family so that if anything worst happens to you, your family is covered and if nothing happens to you in say 20 years, then your total invested money is returned back to you.
And so far I think this is the best part of any insurance.An ideal insurance must be like this only.
Just pay for covering risk for a particular time and if nothing happens in that time, then the invested money till that time is yours.You should get it back.
