The other day, when I called customer care executive of HDFC Bank, seeking help on sweep-in facility, she suggested me to invest in some plan which gives tax benefits and can give more returns than FD. I asked "Is that ULIP"? She paused for a moment and then says "Yes". I refused to invest on account of high premium allocation charges, although I was not sure at that moment about charges.

So, after I disconnect the phone, I searched for the official brochure of HDFC Crest Plan and I was right.

I'm just explaining its charges for the 1st 5 years.



 

crest charges

Premium allocation charges for the 1st 5 years will be 4+4+3+2+2 = 15%

Policy Admin charges will be 0.31% per month.

Sounds normal? Not exactly. 

For 1 year, it will be 0.31 x 12 = 3.72% p.a. and for 5 years, it will be 18.6%

Then, there will be mortality charges, fund management charges (1.35% p.a.).

And, finally add service tax + cess on all these charges.

So, let's add all these charges for 5 years, it will be about 45% i.e. on an average of 9% p.a.

If we expect the equity returns from the fund to be about 12% p.a., the investor will get net return of 3% p.a.

And how much you're getting in savings account – at least 4% p.a.

So, which is better?

You decide.

I'll still recommend to opt for online term insurance plans to risk cover and equity mutual funds to create wealth.

You may download the official brochure of HDFC Crest Plan from here.

Why NOT to invest in HDFC SL Crest Life insurance plan?
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