Know your ULIP class…101
http://www.subramoney.com/book-written-by-me/
I do not wish to call this class 1 or class 2 – that raises expectations! But here is a small story…
A friend called up to say “This person has come to me with a UL policy – she says pay Rs. 50,000 for 3 years, then you can even remove all the balance above Rs. 50,000 (which is the minimum to be kept in your account)…and you can get Rs. 20,00,000 life cover till your age of 100 years.” I was sadly not impressed. So I explained to him:
1. The fund value of your policy is a function of No. of Units x Nav per unit. If you think this is basic, well my HNI friend did not know it! Every year towards your risk cover some units will be reduced, so the value of the fund can fall. If the fund value falls below a threshold limit, your policy could be cancelled.
2. Policy servicing costs, fund switch costs, Premium redirection costs, will all be debited to your account.
3. With the continued recovery of mortality charges (on an increasing basis – with age), and other costs the value is likely to come down, not go up.
4. If the value went below the Minimum Paid up value, the policy WILL get canceled.
Here is a HNI customer who invests / saves at least 2-3 crores a year who did not know any of the above 4 TRUTHS. Neither had the girl who came to meet him tell him that. Simple she had not done her home work. In fact if she had done it she would have pitched him a Rs. 10,00,000 premium with a Rs. 1 crore sum assured, and collected the cheque. Her saying Rs. 50,ooo for a Rs. 20,00,000 cover exited him to call me. LOL.
http://www.subramoney.com/book-written-by-me/
param
i couldn’t agree more with the final observation. most sales folks do no homework on the client and are unprepared to change the course of discussion based on info shared. they run after small numbers and lose the big client instead. it is much easier to convince a rational HNI to commit to a decent premium for a mega bucks term policy, if they know the definition of insurance…
Janani Barath
Sir,
I have been reading articles on your blog for sometime now. I am trying to learn about good investing strategies by reading various articles on the web.
From your writings you come across as a person with high integrity and values. I particularly liked the letter you wrote to your grandson. I feel I can learn many positive lessons about finance and about life from you 🙂
I however have a very sincere request to make. Many of the articles on your blog cater to readers who already have a certain level of understanding about the stock markets and know much of the jargon. As a beginner I find several of the articles quiet challenging to understand.
I understand that your reader base must consist of a larger number of people who are well versed on this subject matter. But can you also consider writing for beginners? I am sure many other beginners woo would benefit from a series of articles that throw light on topics like fundamentals of good investing, about diversification, how to study a companies background before investing etc. These are just some topics that came to mind off hand.
I look forward to continued reading of your blog.
Regards