Please suggest if I should continue investing in the ULIP I am currently investing?

I started investing in Birls Sunlife ULIP Flexi Save Plus in April2006. The fund name is Individual-Enhancer. The semi-annual premium is 8688 and I have paid 9 premiums till now. But recently I checked and found that my fund value is Rs.65598 only. I am in loss of more than Rs.13000.Now I am not sure if I should surrender this ULIP or should continue investing in this. Can you suggest on this, please?


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  1. A wise decision would have been never buying into a ULIP in the first place.

    We at Value Research have been crying ourselves hoarse that investments in Unit Linked Insurance Plans (ULIPs) are bad financial decisions.

    They are packaged as the most convenient products that combine investment, insurance and tax savings (under Section 80C). But investors must understand that insurance and investment are as different from each other as chalk from cheese. The purpose of investment is capital appreciation; to make your money grow. Insurance is a hedge against risk. The vehicle, in this case ULIP, which seeks to combine both, is not efficient. ULIPs are not cheap. They are not transparent.

    Now that you want out, you are concerned about it being the right time. There is no blanket answer for that one. You bought the ULIP simply to save taxes. If you sell it too soon you might lose more than you saved.

    Five Action Points

    — Look at the total premiums paid and the total fund value. You may have even lost money in the bargain. Generally, one needs to stay invested for at least 6-7 years to get back the original investment, or 10 years to get convincing returns. That’s because in the initial years, a large part of the premium paid goes towards agents’ commissions and other fees. This could go as high as 40 per cent in the first year, in some cases even higher. It starts to fall from the very next year to around 5 per cent and then drops to 3 per cent and 2 per cent in the subsequent years. Due to high upfront charges, the policy holder needs to hang on for a longer time since most of the investment growth takes place only after the first few years.

    — Dig out your policy document. Look out for Surrender Charges. These are fees levied on the investor if he exits before maturity. In some cases, these charges can exist even if the policy is held for five years.

    — What if you do the above calculations and realise that it is not worth exiting now? In that case, call the agent who probably sweet talked and cajoled you into buying this product. Ask him what would happen if you stopped paying fresh premiums but don’t want to surrender the policy. In certain instances, if you discontinue your premiums after a minimum of three years, your policy can continue to exist if the value of your investment is large enough to cover other fees which need to be incurred for the life of the policy.

    — Should you exit from the policy, you will lose your insurance cover. Buy a pure life insurance cover instead – a term plan which will provide for your dependants should something happen to you. But do go for a higher amount than just the current Rs 10 lakh. A 40-year old male, opting for a 15-year term insurance policy of Rs 10 lakh, should pay an annual premium of just around Rs 4,800, a far cry from what you are currently paying.

    — Again, if you exit, consider future investments in a diversified equity mutual fund. Since tax exemptions under Section 80C are a concern for you, opt for an Equity Linked

    Savings Scheme (ELSS). These are diversified equity funds with a tax benefit and a lock-in period of three years.