March 18, 2013
5:22 PM By udaya chandran Equity, Income Tax, Insurance, Investments, Tax Saving, Taxation, ULIP No comments
Are you paying Insurance premium bought through a relative, friend or friend’s friend who told you that you can get lakhs of rupees if you buy the Insurance Policy?
Then you most probably bought ULIP that is Unit Linked Insurance Policy. Usually people rush to buy these insurance policies when they need to save tax as Section 80C under Income Tax Act allows up to Rs.1 lakh deduction from the Gross Total Income. Others may buy because it is just another policy that gives good returns as told by your agent. They impose you to buy ULIPs to for higher commissions. When you hesitate to buy this higher premium policy, they tell you to pay only for first five years and stop paying the premium. Right?
Reason for Agents to push ULIPs
I know a person who had bought ULIP unknowingly as it is linked with Equity Market. After some years he wanted to surrender the policy and when enquired and found the money available for redemption is less than what he actually paid. Earlier he was told to pay premium for first 5 years because the premium you pay for the first 5 years mostly allocated to charges and agents get maximum commission. So he paid the premium for the first 5 years and stopped paying. Since his policy is linked to Stock Market returns he couldn’t get better returns (you have to stay invested for long-term to get better returns from Stock Markets).
What to do now?
If you’re one like him who lost your money in ULIPs, do the following:
- Pay your premium regularly till the term ends
- ULIPs gives you the freedom of choosing among various plans that your premium is invested according you your risk appetite. You can decide to where your money to be invested. Basically you can choose the option that invests your money in Equity more in earlier years and move to balanced option when you are nearing retirement.
- Since it covers the life, you need not to have a separate Life Insurance Policy.
- And finally don’t worry about your money you will get better returns at the end of the term as Equity has been a good investment for years and it can beat the inflation. You can retire rich while your life is covered well.