Page 38 - Life Insurance Today June 2015 SAMPLE
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points out: "One important negative is for a similar tenure and sum assured. market conditions. "The product is
the lock-in period. In case of mutual And online ones are even cheaper. For sensitive to the Sensex. As a result,
funds, one can exit the scheme if it is example: A 30-year-old paying a pre- when markets are bad people discon-
a non-performer over a few quarters. mium of Rs 12,000 annually for 10 tinue their renewals and redemptions
In this case, all the costs are front- years will get a sum assured of Rs 1.2 also go up when markets rise. This is
loaded and one really does not know lakh. not the way an insurance product
when returns will be good. And once should be looked at."
a policy has been bought, one has to In case he buys a term plan of Rs
stick around for years even if there is 11,463 annually for 10 years, the sum Investment-cum-insurance
no performance." assured will be a whopping Rs 1.5 doesn't work
crore. The difference: In case of Ulips,
From a tax perspective, there is no he will get some return which can be Financial planner Gaurav Mashruwala
difference as returns from equity mu- Rs 1.7 lakh calculated at the rate of 8 says his main reason for not advising
tual funds are tax free after one year. per cent. You will get back nothing as Ulips is because of the discomfort in
In case of Ulips, there are two ways in survival benefits, in case of a term recommending two-in-one products.
which payouts are possible. In the case plan. More importantly, there is no way one
of death of the policyholder, the can compare Ulips' performance.
amount received by the nominees is Wrong sales pitch While there are a number of third-
totally tax free in their hands. If the party agencies like Value Research,
policy matures, still there is no tax When the market is doing well, agents Morning Star and others who provide
under Section 10 (10D). push these products by showing imme- daily NAVs and details of products, in
diate historical performance of say, case of Ulips there aren't such agen-
Not a pure insurance product either one or two years. With the Sensex ris- cies, which provide comprehensive
From a pure insurance product per- ing by over 25 per cent the past year, data. I
spective, it still fails the test. There are the performance of many existing
enough term plans, which are cheaper Ulips would have improved substan- In the absence of such data, choosing
tially. Anup Rau, CEO, Reliance Life becomes more difficult. While insurers
do provide a lot of disclosures about
Insurance, says Ulips their portfolios and net asset values
have caught the atten- now, but reviewing a Ulip vis-à-vis an-
tion of people only be- other is a very difficult process.
cause the markets have
been performing well. Says Pandit: "My job is to de-clutter an
"There is a tendency to investment portfolio. If I see that a Ulip
sell short tenure Ulips is not performing as well as it should,
and that is detrimental I would like to exit it. By in the pro-
to the customer be- cess, I will also lose life insurance. So,
cause they would not having such a complicated product in
get optimum returns," the portfolio is not the best idea.
he says.
According to him, noth- Raising money through Ulips is also not
ing much has changed a great idea. According to Irda guide-
between 2010 when lines, the maximum amount that one
policyholders started can be sanctioned against a Ulip is 40
moving out of the prod- per cent of the net asset value in poli-
uct and 2014 except cies which have more than 60 per cent
Five thousand people every day lose their home because of a medical bankruptcy. Most of them had insurance.
34 June 2015 Life Insurance Today
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