This year April, there was a presentation in our company and the person showed us an excel sheet where in, if we invest 60K per year, after 15 years, the net amount was 20Lakhs. And also this came with an insurance cover of 15lakhs for first 10 years.
It was very interesting and the presentation really made me think that ULIP was a great way of investment. I even regretted that i didn't take one few years back.
But few of my friends mentioned that charges might be quite high in few ULIPs. Hence one need to be wary of the same while investing in one.
So decided to get details of all the ULIP schemes from different companies and compare the same. There was Metlife, Tata AIG, Aviva, ICICI and then SBI Life. In all the brochures and the explanations given by the agents, Charges were mentioned as only 2% or less than 5%.
Even got one excel sheet from Metlife which explained the amount to be invested per year and the returns expected after every year.
Also it seems as per IRDA Rules, any insurance company can show only return of 6% or 10%, nothing greater than this.
Once i got this excel sheet, thought as why don't i backtrack with the return value and identify the charges deducted every year.
Below image is the result of the same. (not sure how to add excel attachment..so took a screenshot of the same and pasted here)
Sheet1 is the one which i got. (0% return is hidden as it doesn't fit in one view)
Sheet 2 is the calculation done by me.
Column C - Total amount invested at the end of the year.
Column D - Amount invested every year.
Column E - Account value as mentioned in the Sheet1 for that year.
Column F - Calculated by me (Column E /1.1)
Column F gives the real amount invested by the company that year after deducting the charges from our payment.
Column G - Charges (Column D - Column F)
As per the calculations, at the end of 10 years, if an amount of 6 lakhs is invested, Charges paid will be slightly higher than 1 lakhs, if the return is around 10%.
So i decided not to go for an ULIP.
Learnt the below 2 Lessons as a result of this activity :)
1. Only when any charge is added up in an excel sheet for over a period, the real impact is seen. In general, 2% charge might sound very simple... but 2% of 60000 over a period of 10 years is almost 12000.
2. It might be a prudent decision to go for a Term insurance which gives a guarantee of money on one's death and invest all the remaining money in Mutual funds, instead of paying too much of money as charges for ULIP.
3 comments:
Maggi, thats a excellent write-up... Thanks for sharing the findings.. There is a mad rush in TN with many agents (for the commission they get) pushing people to invest in ULIP after promising unrealistic returns.. I got a call from few agents as well.. Told them that I would decide only after evaluations.. and you have already done it. :-)
Can you please send in the excel sheets in a mail for my reference ?. Thanks !
good job people! this is suresh here..
btw, does anyone shed some light on what benefits indian gov give for NRI investments? and in case you have any data on that, could you please share it with me on this blog?
btw, did you guys try to get IPO anytime?
Post a Comment