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ULIPs are Expensive

Pay the ULIP premium for the first 3 years so that your money is not forfeited. Don’t redeem before 5 years…

I am investing in SBI Life Smart Performer. It’s a ULIP that requires me to pay premium of Rs 50,000 annually for 5 years. After 2 years, the value of my investments in this ULIP is at around Rs 92,000. What should I do?
-Rakesh

Since you’ve been investing in this ULIP for 2 years, it will be subject to the older ULIP rules. Initially, ULIPs were very expensive. A substantial part of the money invested in older ULIPs used to be deducted as expenses. Furthermore, a part of your money is invested in the equity markets, which is why you see the decline in the value of your holdings.
However, you shouldn’t discontinue the ULIP at this point in time. It is very important for you to pay the premium for at least 3 years so that your money isn't forfeited. It is also important that you don’t pull your money out for at least 5 years, even if you stop paying the premium after the 3rd year, otherwise you’ll be subjected to heavy surrender charges. You can redeem your investments after the 5th year. And in the future, don’t mix investment with insurance.

ULIPs should be avoided because they don’t give you the best of either. You should buy adequate term insurance before you make any investments, especially if you have dependants.



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