Recently when a friend asked me what are the risks in unit linked plans…I said Well Max New York Life has started a campaign saying “Our agents are different”..well I wish they say this to the client BEFORE the client signs up:

Sir the following risks exist in a Unit linked Plan:

1. Buying ULIP is a long term committment and you should look at a 15 year premium paying term at least.

2. Our charges favor the bigger premium payers, and there are some absolute charges, so please pay a premium of at least Rs. 20,000 per month.

3. As a long term product the surrender charges are very high for an early surrender. If you stop paying the premium within 5 years the chances are you will get NOTHING.

4. Our fund managers are, well, hmm at best average and historically all of them have underperformed the sensex and the nifty over 5 year rolling periods.

5. Irda has approved does not mean they have understood the product. It just means it meets their current norms.

6. The Insurer makes no comment nor does he recommend the underlying assets. Our sales people use words like asset allocation, switching, reallocation – this is proof that they are trained in using jargon. If you think they understand this, give me your boss’s phone number, you need to have your head examined.

7. You have to have the ability to choose the underlying assets and their combination. If you cannot, please get a PhD in finance, or hire a fund manager. If you have funds in excess of 5 Billion US $, Goldman Sachs will offer you fund management expertise. If you have less than that..hey muppet what are you doing here?

8. If the value of the fund falls below the point at which we lose interest (i.e. below Rs. 500,000) we reserve the right to close the policy and give back the money to you after deducting our closing charges of Rs. 489,000

9. None of what we have said hereinbefore in anyway means that there is any kind of a guarantee. Our asset management charges of 1.89% p.a. works out to Rs…….and is about 20% of the premium paid.

10. The policy is subject to the usual terms and conditions of risk…etc. these 9 risk factors were only with regard to the fund management.

PS: I have no clue where the top management of our company invests. To the best of my knowledge they do a SIP in a mutual fund.