ULIP LIC

ULIP LIC: Beware of LIC ULIP Plans

ULIPs also known as Unit Linked Insurance Plans are very complex financial product. They are the combination of Insurance & Investment. And agents are taking the advantage of the financial unawareness of people.

when you are being sold a complex product, unit-linked insurance policies (ULIPs), you will be told that you will pay charges under different heads like 'premium allocation', 'fund management', 'mortality charges' and so on.

It seems that LIC advisors have been distributing pamphlets saying that a plan named LIC Money Plus, a ULIP, demonstrating how you can invest only Rs. 10,000 annually for three years and get back Rs. 16 lakhs after 20 years. This is absolutely fraudulent advise because ULIPs cannot guaranteed results (they are market linked). Plus, this assumes an annual return of 25% which is WAYYY beyond anything that has occured in the last twenty years.

To give you an indication - no LIC endowment policy has made even more than 8% annualised in the last twenty years. 25% is (splutter, gasp) ridiculous!

IRDA has cautioned investors against this practice. Please do not go by such impressions. Please throw your advisor out on the street if he brings you such a pamphlet.

Read:
Original IRDA Press Release, articles from Outlook Money, DNA, Domain-B.

So the next time a life insurance agent hard sells and promises you "attractive returns" on a unit-linked plan (Ulip), don't get carried away. Use your discretion and take an informed decision on the basis of proper disclosures. That's what the insurance industry regulator has cautioned investors.

The Insurance Regulatory and Development Authority (IRDA) has come down heavily on life insurance companies, including the Life Insurance Corporation (LIC), for misleading consumers on returns on unit-linked plans.

According to IRDA, some of the leaflets assure a maturity value of Rs 3.38 crore at the end of 20 years on an annual investment of Rs 1 lakh over a period of three years, thereby projecting a growth of 25% per annum. Agents of a few other insurers have also made similar claims.

Taking strong exception to such false promises, IRDA has said that "such projections are misleading, inflated and also do not have the approval of the insurance regulator".

According to the guidelines of the Life Insurance Council, insurers are required to project their returns at a rate ranging between 6%-10% only. The insurers are also expected to state that these returns are not guaranteed.

Irda further noted that the returns under the unit-linked products are dependent on the performance of the chosen fund, which is in turn affected by the performance of the stock markets.