Exit strategy for insurance products

At Value Research, we receive a large number of queries from investors asking for advice on their portfolios. On the insurance side, one of the most common problems we encounter is the widespread availability of ULIPs and traditional products (endowment and moneyback plans) that are meant to serve as two-in-one, investment-cum-insurance products. We on the other hand firmly believe that investors should keep insurance and investment apart, and that their interests would be best served through a combination of term plan and mutual funds. And so we strongly recommend that investors say no to endowment policies and ULIPs. Why go for a term plan-MF combo The term plan-mutual fund combination is financially the most efficient. ULIPs, on the other hand, levy a number of charges besides the fund management charge (that a mutual fund also charges) and mortality charge (that a term plan charges). They levy a premium allocation charge (PAC), an administrative charge, and so on. The cost structure of ULIPs is also complicated. While charges levied under endowment plans and money back policies are unknown, charges under linked policies are clearly mentioned in policy brochures and policy documents available on the company website. Investors are either unaware or t

This article was originally published on June 04, 2021.