Page 37 - Life Insurance Today June 2015 SAMPLE

Ulips are
cheaper, yet
not useful

W ith the stock market going example, for a five-year policy, the cent annualised in the past five years,
up, unit-linked insurance maximum commission that can be a Ulip holder would have earned not
plans (Ulips) seem to be paid in the first year is 15 per cent and less than 7.45 per cent. But it would
making a comeback. In for a 10-year policy, it is 30 per cent. be lower than any fixed deposit. And
recent times, a number of top insur- In addition, five per cent can be paid we are not even considering the por-
ance companies - HDFC Life, Bajaj in the subsequent years for the entire tion that is being deducted due to
Allianz and others - have launched premium-paying term. mortality rates. It's important to look
online Ulips that are cheaper, as the at mortality rates because it is not in-
insurers are able to pass on the sav- But in the online version, this cost is cluded in the cost and can drag down
ings on agents' commission as lower down significantly. Deepak Yohannan, returns considerably - especially true
premium allocation charge and hence, CEO of MyInsuranceClub.com, a web for very high sum assured or when
the low-cost proposition. aggregator approved by the Insurance older people opt for Ulips.
Regulatory and Development Author-
Add to that, the surge in the stock ity (Irda), explains that the gap be- Besides the mortality, if one looks at
market, and suddenly, we have a tween mutual funds (MFs) and Ulips the product from a pure returns per-
heady cocktail of low cost, a good like- have come down, especially with the spective, things would look something
lihood of a high returns and, of course, entry of the online Ulips with charges like this. If the Sensex continues to give
tax benefits under Section 80C - a per- of 2-2.5 per cent. But there is a small the same percentage returns for over
fect investment product. Yet, it isn't question of mortality charges which go 10 years, the policyholder would earn
for a number of reasons. up as you grow older. not less than 8.45 per cent in the tenth
and 9.2 per cent from 15th year on-
Not a proper investment Though Irda has capped the difference wards. In other words, one will have
product in gross and net yield at four per cent to stay invested at least for 10 years
in the fifth year and three per cent in and above to start getting returns
For one, if you are looking at it as a the tenth year and 2.25 per cent from similar to mutual funds with expense
pure investment product, you will be 15th year onwards, the returns aren't ratio of two per cent (large schemes)
grossly disappointed simply because of substantial for a market-linked prod- to three per cent (smaller schemes).
the cost. For one, in the offline ver- uct. Taking the Sensex as a bench-
sion, the cost continues to be high. For mark, which has returned 11.45 per As Amar Pandit, financial planner,

Before, it was always, 'Oh, no, here comes Clancy, that insurance agent.' Now it's, 'Oh, here comes Tom Clancy, bestselling author.' But
I'm still the same basic middle-class slob.

Life Insurance Today June 2015 33

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