ULIP to continue or not?

I have following two ULIPS: 1) TATA AIG Life Lakshya Supreme - Monthly premium Rs.2999/- (Fund Folio - Whole Life Mid Cap Equity Fund) 2) ICICI Prudential Life Stage Wealth II - Monthly premium Rs. 2000/- (Fund folio - Opportunities Fund). Both started from Jan 2011. At the time of investing I was looking for tax saving SIP's which will give me atleast 9 to 10% returns. The agent (www.bluechipindia.co.in) sold me above two schemes saying these are the best SIP for tax saving in which insurance is also covered & I will get 18% return. He also advised me to withdraw all money after lock-in period of 5 years. Now after paying 7 monthly premiums and checking the performance I understood that the above ULIPs are not performing well. Also the objective with which I wanted to invest was not fulfilled and I was misguided by agent. I request you to please let me know what should I do? I don't want to continue with this now. I am ready to take loss. Will I get my premium paid back? Also suggest me some good options for tax saving investments.

asked Aug 10 '11 at 11:02 by nilesh 6112

Unfortunately you have been duped by insurance agent. As these ULIP plans have huge upfront commissions, agents keep pushing them for immediate gains.

Common mistake most of the Indians do is that they treat insurance as investment. Whereas these two are altogether different products. Insurance is meant is all about risk coverage and security, whereas investment is done for gaining returns.

At this moment little can be done as you have are already bought these policies. If you surrender now, you will get very little amount back.

As market conditions are not good, your portfolio will show poor results.

As per your Tata AIG Life Lakshya Supreme (http://www.tata-aig-life.com/pdf/lakshyasupreme.pdf) and ICICI Pru LifeStage Wealth II policy (http://www.iciciprulife.com/public/Brochures/Brochure_LifeStage_Wealth_II.pdf), there is a five years lock-in. If the Policyholder does not pay premium during lock-in period, the Total Fund Value after deduction of the Discontinuance Charge on the expiry of the notice period shall be credited to the 'Discontinued Policy Fund' maintained by the Company. The proceeds of the 'Discontinued Policy Fund', including interest computed at minimum interest rate of 3.5% p.a, shall be refunded to you at the end of Lock-in period of five years from the inception of the policy. So you can only withdraw the amount only after 5 years.

If you discontinue TATA AIG or ICICI policy now, you will get current fund value - (lower of 6% of Annualised premium or 6% of Regular Premium Fund Value, subject to maximum of 6,000) and this amount will be locked for next 4.5 years and will be refunded to you with 3.5% pa interest rate. If you want to take a loss and withdraw this policy now, you can do that.

Also, in your TATA AIG policy, it has been chosen to invest in mid cap equities, which has the highest risk. Please switch that to Large cap or aggressive growth.

If you feel you are cheated, you can raise complaint with insurer’s Grievance Redressal Mechanism or IRDA Integrated Grievance Management System (IGMS)

For tax saving options checkout following answers:

answered Aug 10 '11 at 21:07 by Pankaj Batra 5.2k320

Thank you very much for your answer. As per your advice I will continue these policies till 3 years. But need some more advice: As I mentioned that lock in period for both the policies is 5 yrs. So if I surrender both policies after 3 yrs then would it add any penalties or additional surrender charges? And how it is effective to discontinue after 3 years than now? Sorry for asking lot of questions and thank you for going through my queries carefully.
(Aug 11 '11 at 10:07) nilesh
@nilesh Above answer has been updated with more insights.
(Aug 11 '11 at 10:43) Pankaj Batra

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Asked: Aug 10 '11 at 11:02

Seen: 3,888 times

Last updated: Aug 11 '11 at 10:43