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Should I discontinue my ULIP and bear the charges?

Due to the various costs, the residual investment of your ULIP is not sufficient to give considerable return even if the market does well

I paid ₹6 lakh for 2 SBI Life Smart Wealth Builder plans of ₹3 lakh each in July 2015. The manager suggested high growth and high risk however did not mention the humongous charges after which the investment was worth ₹2.7 lakhs each. Now the value has gone down as the market has tanked. As per the contract, I have to pay premiums for 5 years which I do not want to. I am going to gain nothing even if I switch funds. It was a mistake and feel cheated by SBI as they did not mention about these charges clearly. I am planning to discontinue the payments and bear a brunt of ₹12000 as penalty. The money will be locked for 5 years with a guaranteed return of 4 percent. Please advice.
- Sameer

Smart Wealth Builder is a traditional ULIP policy offered by SBI Life Insurance company. In these type of plans, from the premium you pay, the insurer deducts charges towards life insurance (mortality charges), administration expenses and fund management charges. So only the balance amount is invested. Due to these costs, the residual investment of your ULIP may give lower returns even if the market is doing well.

These type of policies are sold hard due to the attractive commission for the agent. To avoid being shortchanged you must always read the policy brochure/document carefully during the free look up period. We recommend that you surrender this plan now to minimize your future losses. There is a 5-year lock in period in this policy. If you surrender now, the fund value will be transferred to Discontinued Policy Fund after deducting the discontinuance charges (Lower of 1% of fund value up to a maximum of ₹6000). You will get this money after completion of five policy years.

Do not mix your insurance and investment needs in future. Always buy a pure term life insurance to buy an adequate life insurance cover. Term insurance products are ideal for insurance cover because they have very low premiums.

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