Sunday, October 29, 2006

Why it is important to examine all products offered by an insurance company before buying one

In todays market, you have different products offered by the same company. Some of these products are designed with the investor in mind and to provide maximum benefit to the Investor whereas some of products are designed to rob the Investor for the benefit of the insurance agent and the insurance company. I have used a strong word ROB because that is what some of the products actually do. To explain the relevance of my earlier statement, I would like to compare two different ULIPS offered by Bajaj Allianz

Policy NamePolicy Admin ChargeInitial Loading Charge
New Unit GainRs.600 per annum71.5% first year
New Unit Gain PlusRs.240 per annum24% first year

Clearly, the charges in "New Unit Gain" are significantly higher than "New Unit Gain Plus". I checked to see if New Unit Gain offers any additional benefits to justify the higher charges. You will be suprised that "New Unit Gain" does not offer any additional benefit to justify these additional charges over "New Unit Gain Plus".

Very recently my co-worker was asked to take "New Unit Gain" policy by his insurance agent. He was not even told about "New Unit Gain Plus". The incentive for the agent to sell "New Unit Gain" is because he gets higher commision. I had a similar experience in the past with ICICI. The agent kept offering me "Lifetime" while "Lifetime II" was a much better product.

It is sad when insurance companies resort to such tactics to exploit the ignorance of thier customers for their own benefit. They should be more proactive in "stopping sale off" older products(like LIC) once they have launched newer/better products.

Donot leave it to the insurance agent to identify the product that best suits your needs. I have come across many insurance agents who are more interested in thier commission than your interests. So do your home work before buying a policy. Visit the website of the insurance company and download the brochures of the different products they offer and spend some time reading them. If you can't seem to understand the brochures, you might want to visit forums/blogsites (like to get the opinion of others.


Anonymous said...

dear pal,
u said correctly.
most agents are ripoffs.
interested in maximising commission

Rohit Sharma said...

hi sir
I'm Rohit want to invest 30,000 to 50,000 early.
I'm confused which ULIP policy is better. I'm going for Allianz Unitgain plus.

Will you guide me where i have to invest.

investment mode is: I want to invest for 3-5 yrs. and want high returns after 10-15 yrs.

Plz mail me at :

Unknown said...

Good Blog.

Imtiaz CS

Raj Gopal Vuppala said...

Dear Rohit,
For investment purposes, I would advise investing in Mutual Funds.

Thank You,

Anonymous said...

I am Govt. employeewith 35000/per month. i would like to go for pension plan for 3000/ month for next 25 yesrs. Wolud u plz help me to which plan should I choose?
Earlier in yuor bloc u have recoomended HDFC plan.I wolud like to be litle safer with medium risk and no insurance.
would u also provide me the detailed chat for planning
my email "".

I like your replies to innocenrt people.

Raj Gopal Vuppala said...

Dear Dushyant,
The old pension plans from HDFC which were attractive have been removed from the market so I would not advise it for purpose of pension.

I would advise you to invest in mutual funds for the purpose of pension. Start an SIP in the following fund towards your retirement savings - Franklin Templeton India Dynamic PE Ratio Fund of Funds.


Anonymous said...

dear sir,

I'm meena want to invest 30,000 to 50,000 yearly.
I'm confused which ULIP policy is better.
I'm interested in buying sbi smart ulip plan(50,000 minimum premium) which gurantees of 5 times the annual premium. is it true?
Will you guide me where i have to invest.

investment mode is: I want to invest for 3-5 yrs. and want high returns after 10-15 yrs. please mail to

meena singh

Kam said...

good post

Kam said...

good one

Saurabh said...

Dear Mr. Raj,
Ultimate blog, thanks for all the info.Request answer to the few queries please. First, principles I am working on for my investment,1. Medium liquidity (lowst lock-ins) 2. Maximum investment for 3-5 yrs and minimum 1 year. I have started with plan, 1. Insurance (ULIP) 2. Tax saving plan 3. high risk high return investment. Decisions taken and invested as of now in 1. ULIP by HDFC Young Star Supreme Suvidha (25,000 p.a.), Need your opinion of policies on my next two steps plz. Age- 26, Liability: No dependents, Edu Loan 25% remaining, rest paid off already. Investments started from Jan 2010
Thanks and Regards, SAURABH