I was reviewing my friends Ulip policy and i was amazed so see he how had been made to misunderstand simple facts. Unfortunately he is not the only one. Many of us might have undergone a similar experience. So in this article i will try to bust some common myths propagated by scrupulous agents.
Sum Assured is the sum that you get once your term period gets over (might be 10 yrs or more), or in case of (God Forbid) an accident leading to permanent disability or in case of death. Its not an amount that you would get after 3 yrs of paying your premium.
Also while ULIPs require you to pay premium for only 3 yrs, u would actually end up in a loss if you do so.
Consider this--
Your allocation charges for 1st year are 30% and for 2nd and 3year is 20%. So if you pay 10000 Rs every year, the amount that is actually invested is 7000 Rs in 1st year and 8000 Rs each in 2nd and 3rd year. So even though you pay 30,000 Rs over three years, your fund value (considering 10% returns) is still 28,500 (even lesser than what you have paid). Now if you stop paying premium at this point, you will lose you life cover, plus you amount will never grow much. Also it might be that during the period you paid premiums market was on a high, and after 3 yrs, they are in a turmoil. In that case you would never be able to take advantage of averaging out.
So the crux is that invest in a ULIP only when you have an appetite to pay its premium for atleast 5 yrs
Sum Assured is the sum that you get once your term period gets over (might be 10 yrs or more), or in case of (God Forbid) an accident leading to permanent disability or in case of death. Its not an amount that you would get after 3 yrs of paying your premium.
Also while ULIPs require you to pay premium for only 3 yrs, u would actually end up in a loss if you do so.
Consider this--
Your allocation charges for 1st year are 30% and for 2nd and 3year is 20%. So if you pay 10000 Rs every year, the amount that is actually invested is 7000 Rs in 1st year and 8000 Rs each in 2nd and 3rd year. So even though you pay 30,000 Rs over three years, your fund value (considering 10% returns) is still 28,500 (even lesser than what you have paid). Now if you stop paying premium at this point, you will lose you life cover, plus you amount will never grow much. Also it might be that during the period you paid premiums market was on a high, and after 3 yrs, they are in a turmoil. In that case you would never be able to take advantage of averaging out.
So the crux is that invest in a ULIP only when you have an appetite to pay its premium for atleast 5 yrs
