I bought Birla Sun Life Insurance Platinum Advantage Plan five years ago. The five-year lock-in period has been lapsed. Could you tell me whether I should continue to hold this policy as it offers the highest guaranteed NAV of the first seven years? Or should I completely get out of it? Also, when should I get out, looking at the current stock market volatility?
- Yogesh
Do not let the highest guaranteed NAV influence your decision. It is nothing but a marketing gimmick. It gives the impression that that you will be able to capture the highest NAV in an investment period of seven years. In other words, it gives the impression that you will get the maximum returns possible from the stock market from this product. But it is not true. The fund simply keep changing its asset allocation so that it can lock the particular highest NAV it has achieved. The disadvantage of this structure is that once the fund attains the high value and the markets fall down, then the fund becomes conservative. It then invests in fixed income so that it can hold onto those returns. So the fund won't be able to achieve a higher NAV once a previous high has been locked. In short, the plan strives to offer the highest NAV, not the highest return.
This is just another expensive ULIP product that offers very little life insurance cover. You can also get better returns if you invest in a mutual fund scheme.
You can surrender the policy and invest the proceeds in a product which will give you better returns with lover costs. Since the policy has completed the lock-in period, there will be no surrender penalty on this policy. Before surrendering the plan, you must buy an online term insurance plan to get an adequate life insurance cover. Consider investing in an equity mutual fund through a Systematic Investment Plan (SIP) to create wealth over a long period. You can also consider stop paying the premiums and withdraw the money at a later date.
This article was originally published on February 17, 2016.
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