Personal Finance Blog India –

Key Differences Between Mutual Funds And ULIPs:

If I have a need of mobile phone and a camera,what options may I have? Possibly two options

1.Buy branded mobile phone with built in camera.

2.Buy  mobile phone of better brand like Nokia and buy camera of Kodak or Nikon.

Though first option looks  comfortable,,peoples might be preferred to have second options where they want to keep both needs separate and consider quality of their expenses.

Similarly,prospective investor have similar questions in their mind.Which one to choose Unit Linked Insurance Plans or Mutual funds for their investment.We can’t generalise the answer but look at the key differences between these products.


1.ULIPs are offered by insurance companies while mutual funds are offered by asset management companies.

2.Asset allocation charges are considerably higher in ULIPs.While mutual funds do not carry any entry loads.This hole of charges gets bigger if considered for longer term.E.g. Consider an investor investing Rs.1Lakh in ULIPs and asset allocation charges are suppose 10%.It means that Rs.10,000 will be deducted from your premium and rest i.e.Rs.90,000 will invested in equity market.After 20 years,charges of Rs.10,000 will result in loss of nearly 68,000 if considered for rate of return of 10% CAGR.Most of the  ULIPs charge for at least first 3 years.Combined effect of allocation charges of 3 years causes a big hole in long term.

3.One of the advantage of ULIPs is that longer term (at least 5 years)commitment is required.. investors are keen about their investment due to fear of lapsation of policy.Also each year market conditions are different and helpful for investors.Mutual fund investment does not need any compulsion and some negligance is possible.

4.There is maximum expense ratio of 2.50% from mutual funds while ULIPs charges nearly same fund management charges mostly on monthly basis.Expense raio charged by mutual fund is inclusive in daily NAV declared while in ULIPs fund management charges are applied through cancellation of units.This diminishes the compounding effect in future.

5.Insurance covered in ULIPs is age dependent.Mortality charges increases with age while in term insurance premium is level premium and constant throughout the policy term and should be preferred as only it can satisfy the need of big insurance amount.

6.Tax benefits U/S. 80C will be available both in ULIPs as well in ELSS schemes of mutual funds.To avail tax benefits under ULIPs insurance cover should be at least 5 times that of premium paid.

Theoretical simulations do not work sometimes and its difficult to predict which option is the best.Only we can conclude that investors needs to be consistent with their chosen investment to get complete benefits out of it. 


Simple Steps Towards Right Insurance Policy:

Steps Toward Right Insuranace Policy:



Insurance Ombusmen offices are flooding with complaints of insurance mis-selling.Govt. of India allows private players to enter into insurance sector,competition become tough and tougher every year.Uptill there was monopoly of LIC India only.

With rise in numbers of insurance companies,product mis-selling is also on rise.But important question is that is it only insurance advisor to blame about it?Isn’t our ignorance is responsible for it?So before taking any insurance plan one should do sufficient homework.We have provided with some important things to look at before and after applying for insurance plan.

1.Assess your need of insurance:One should have a clear idea about its insurance requirement and term of insurance.Ideally,one should have cover of 10 times of annual income and term upto age og 60 Yrs.Here, we can assume that we will be free from our financial responsibilitieens at age of 60.

2.Take information about life insurance companies offering different kind of products,premiums,claim settlement ratio etc.One can easily get this information by surfing over net.

3.Choose a Company.Call advisor of said company.Each company offers different products like Term insurance,Endowment plans,Moneyback policies,Unit linked plans.If you are planning  your insurance for long term basis,better to take a term insurance.In such plans only risk is covered and you purchase a risk only.Premiums are low for high amount of cover. Premium is level premium and remains constant throughout policy term.

4.Fill the form yourself only.Don’t let advisor to fill it.Give true and complete information about your health to avoid problems in future.

5.IRDA has made it compulsory to provide benefit illustration to clients.If you are opting for Unit linked Insurance Plans or traditional plans,take proper views of charges related to policy.The returns shown 6% and 10% are indicative only.These are not real or guaranteed returns of future.

6.Do not give authority to anyone to collect policy document.Insurance companies send it via registered posts or courier.

7.Free look period is valid upto 15 days from receipt of policy.One can return policy within this period if you found something misleading.If you find serious issues ,don’t waste times calling customer care.Rather go to office of company,fill the form of Free look cancellation of policy with reasons.
Your premium will be refunded after some procedure after deduction of service charges and company expenses like medical check up,etc (if any).

so ascertain yourself of all the things and go for your much needed friend..Life Insurance.

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LICs Samridhi Plus:Nothing Benefecial

LIC of India recenly launched a new Plan SAMRIDHI PLUS.

Some key features of this plan are as follows:

1.Guaranteed Highest NAV of first 100 Months.

2.Policy term 10 Yrs.Premium payment term:5 Yrs.

3.Insurance protection.

Though this plan gives highest NAV guarantee,readers should not ignore the charges of this scheme.

Charges of this Plan are as follows:

Premium Allocation Charges:

For Single premium policies: 3.3%.

For regular Premium Policies:

First Year : 6%.

2nd Yr – 5th Yr : 4.5%

Other Charges:
Policy Administration charge: Rs. 30/- per month during the first policy year and Rs 30/- per month escalating at 3% p.a. thereafter, throughout the term of the policy.
Fund Management Charges (FMC): 0.90% p.a
Guarantee Charge: 0.40% p.a

so I do not think there is anything worth to write anytning more after view of the charges.

Even if fund offers 10% CAGR returns in future(which is highly unlikely),,then also investors will not get back more than 3-4% of returns.

so if anyone wants for safer investment,they can likely to go for Bank Fixed deposits.

Insurance cover may not be worth as policy term is only 10 Yrs.So readers are required to assess their basic need of insurance and should prefer risk cover for the same amount and term.

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