In 2008, I had purchased the HDFC Young Star Champion ULIP. I've been paying an annual premium of Rs 50,000 in the five years since then. Now, some advisers have told me that I should continue as ULIPs are beneficial only in long-run. However, I have already suffered a loss of about Rs 20,000 and there's no exit load now that five years are over. Should I continue or pull out?
-Ankush
HDFC Young Star Champion is a ULIP that offers an insurance cover of five times the annualised premium. It offers only a 15 year policy term. This policy charges very high expenses during initial years which you have already borne. The advisors are right that now is the time to reap benefits. Generally, we do not recommend investing in ULIPs but, your situation is different where you have already paid the initial years' high expenses.
Thus taking your situation into account along with policy charges and benefits, we would recommend that you continue with this policy. Whenever you feel you have earned sufficient returns at any point during the remaining ten years, you may withdraw from it. Keep a relevant chunk of your investments into equities as you have long time to maturity. Start switching to debt as you near maturity.
Apart from the above, we recommend you to recalculate your insurance needs and buy a pure term insurance for a sum that would be sufficient for your family to remain financially independent in case of some mishap.
This article was originally published on January 23, 2014.
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