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Should I continue with Kotak Super Advantage ULIP?

Even low cost ULIPs deduct mortality charges before investing your premium

I have taken Kotak Super advantage ULIP with 20 years maturity period. This is the 7th year running for my policy. After reading about other ULIPs in this forum I am confused. Should I surrender this ULIP or continue till the maturity? My first year premium has been used to give life cover. From second year onwards after deducting all the charges almost 96 percent of the premium is getting invested. If I continue till the maturity I was told I will get twice the premium paid in first year along with the fund value. Also 3 percent of the average fund value in the last three policy years will be added. Should I continue with this ULIP or take my money out and invest in some other fund. Under this ULIP I am investing only in Kotak Classic opportunity fund.
- Ankur

Kotak Super Advantage ULIP has a few advantages over other ULIPs. In this plan there are no premium allocation charges applicable from the 2nd year onwards. There are two guaranteed additions to this plan which are:

  1. Fixed advantage: A percentage of your first year's premium depending on your policy term. In your case, since the policy term is 20 years, then the fixed addition will be 200 percent of your first year's premium.
  2. Dynamic advantage: 3 percent of the average fund value of the last three policy years.

Even with these advantages, we would not recommend this product. As the plan does combine insurance and investments, mortality charges will be deducted every year by way of cancelling units. Though the plan is market linked, it is difficult to compare or benchmark ULIP products to competing products. ULIPs lack the transparency of open end funds, on NAVs, portfolios and fund manager strategies. Though mutual funds too have exit load these costs are lower than for unit linked plans.

It is not advisable to mix up insurance and investment. Term insurance is the best way to get a life cover and mutual funds are best suited to meet investments needs. And invest in equity mutual funds to achieve long-term financial goals of five years and above. If you are a newcomer to the stock market, choose a top-rated balanced scheme and start investing every month via a Systematic Investment Plan (SIP).

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