ULIP Comparison

ULIP Comparison with Mutual Fund + Term Life Insurance

ULIPs are the combination of Insurance with Investment. We can not compare ULIPs alone with Term Life Insurance or with Mutual Funds. We have to compare ULIPs with Mutual Funds + Term Life Insurance.

When we invest in ULIPs or Mutual Funds, after deducting all the charges and expenses the final amount goes towards investing in the Capital Market (Stocks or Bond).

ULIP's usually have following charges built into it :
a) Up-front Charges
b) Mortality Charges ( Charges for providing the risk cover for life)
c) Administrative Charges
d) Fund Management Charges

Mutual Fund's have the following charges :
a) Up-front charges ( Marketing, Advertising, distributors fee etc.)
b) Fund Management Charges ( expenses for managing your fund)

Term Insurance have the following charges :
a) Yearly premium ( for risk cover)
b) Service charges

Thus it is clear that ULIPs are associated with extremely high level of charges and that’s why very less amount of money remains at the end towards investing.

I again iterate that I am not against ULIP but the way they are being sold in the market is quite worrisome. My advise is not to buy any insurance plan unless you fully understand the terms and why it is beneficial to you.

Points to remember when you are buying insurance specially ULIP's

a. Do you need it, if yes why ?
b. What is the life insurance cover you are getting for the premium you pay.
c. Can you get the same insurance cover with any other plan?
d. For how long will I have to pay the premium ?
e. What will happen if I stop the premium payments?
f. What are the charges if I discontinue the policy in between ( Expensive Option)?
g. Is the comparison given to you correct, does it factor into account the above charges for the sake of comparison.
h. If you receive an excel sheet please check the calculations on each cell.
i. Some companies charge expenses in the initial years and others at the end of the terms.
j. Illustrations with returns of 25% or 30% are quite common. Ask the representative to make a calculations on a 6% or 10% returns as per IRDA norms.
Our only advise is to be smart in buying financial products from the market , it is your hard earned money.