I am 20 years old. An agent misguided me into buying a TATA AIA ULIP for a long term in September 2015. The amount invested was ₹1 lakh and its NAV was ₹93,000. As the market is down, the current value is ₹84,000. Should I surrender the policy now or should I wait till bull market?
- Shub
ULIPs generally have a lock-in period of five years. If you surrender them before the completion of 5 years, there will be a heavy penalty. Also, if you surrender ULIP before completion of 5 years, all tax deductions claimed earlier will be added back to your income and taxed as per your Income Tax slab. However, there is no point in continuing with an expensive investment for four more years. So you can stop paying the premiums and stop further losses. For detailed information about paid up option, you should check with your insurance company.
Since you are a young investor starting your journey, you should always remember an important rule: you must never mix insurance with investments. Always go for a pure term insurance policy to buy an adequate life insurance cover and invest in equity mutual funds to achieve your long-term financial goals. For short-term goals that need to be met before five years, you should stick to safer investment avenues like bank deposits and debt mutual funds.
To read more about how to start your investments, read: First things...
This article was originally published on February 17, 2016.
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