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SIP in a life insurance plan

You should check your records to verify whether you have purchased an insurance product or a mutual fund scheme

I am investing every month through a Systematic Investment Plan (SIP) of ₹2,000 in ICICI prudential Life Insurance since November 2009. Should I continue investing in this plan or should I stop the policy and opt for an Equity Linked Savings Scheme (ELSS) which has a lock-in period of only three years. Also, please let me know whether it is it better to withdraw or hold on to the policy?
-Raghu

It seems you are a victim of mis-selling. The salesperson might have sold you an insurance product instead of an investment product. ICICI Prudential Life Insurance is a life insurance company that sells insurance plans. You may be actually paying a monthly premium for an insurance product that might have an investment element in it. You can invest via a Systematic Investment Plan (SIP) only in a mutual fund scheme. You should check your records to verify whether you have purchased an insurance product or a mutual fund scheme.

You cannot compare an insurance product with a tax planning mutual fund scheme or ELSS. They serve totally different purposes. If you want a life insurance cover, buy a pure term insurance plan. Pure term insurance plans have lower premium and you can buy a very large cover by paying a small premium. If you want to invest for a period of at least five years, you can consider investing in equity mutual fund schemes like ELSS. Though ELSSs have a mandatory lock-in period of three years, invest in them only if you have an investment horizon of more than five years.

Discontinuing an insurance plan is problematic. It might have tax implications and you may also lose money. You have to consider these aspects before taking a final call on surrendering a plan.

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