We have always asked our readers to stay away from complicated unit linked plans. Here's why
09-Sep-2015 •Research Desk
I have HDFC standard life Unit Linked Pension Plus since May 2010. I have opted for 100% equities, and it was in great loss earlier, but the recovered last year. With so many options available for saving for retirement, I am thinking of discontinuing this policy. Will I be at a loss if I invest the proceeds in a diversified Mutual fund?
My other investments are:
LIC jeevan anand: annual premium ₹20,000
Reliance Tax Saver MF: monthly SIP ₹1,500
Religare Invesco Tax Plan - Direct Plan - Growth: monthly SIP ₹3,000
Axis Long Term Equity Fund - Direct Growth: monthly SIP ₹4,000
PPF: annually ₹10,000
- Abhinav Kumar
Insurance should take priority over investment if you have financial dependents. And term plans help you get meaningful risk cover with a modest premium. You should look at insurance as an expense to financially secure your dependents. Investments, on the other, should be goal-based and investment options should picked according to the investment horizon. Any long-term investment must be diversified, accumulated regularly, low cost, transparent and simple to understand, tax efficient and liquid.
You should not mix insurance with investments because you would end up buying insurance plans with investment element in them. They are costly, provide limited cover for the premium you pay, and a substantial part of the premium goes towards investment. That is why insurance-cum-investment plans do not have most of the essential variables of a good investment.
But such plans are aggressively sold because of high incentive paid to sell them. Resisting the aggressive sales pitch is your responsibility.
ULIPs are complicated products. That is why we have always asked our readers to stay away from them. Higher charges under these policies result in lower returns from them. You can discontinue to the policy. If you surrender now, there will be no surrender penalty, but surrender value will be taxable and you will have to pay back the tax exemptions you availed on the premiums paid until now.
Investing in diversified mutual funds via monthly systematic investment plan is the best way to save for long term goals like retirement. Continue with your ELSS investments.
LIC Jeevan Anand is another bad product in your portfolio. You have not provided enough details for us to comment. But, the returns are very low and they don't beat annual inflation. You can read more about it here. Costly Life Insurance Policy