ULIP query - fund value reduced almost Rs.9000 less?

[bininishere]

I am 24 years old, single, working in a pvt bank with a 4 lacs annual package.

I am having one Bajaj Allianz "Family Assure" which was taken in August 2008. Now I have payed off all the premiums - a total of 30,000Rs. But the fund value now showing is 21,309 Rs only...Almost a 9000 Rs less.

I have taken this insurance after my friend's words and now I have realised that this plan is not suitable for an younster like me..This policy gives a coverage of 50,000Rs only for 10years along with some savings. I feel instead of this Family insurance plan, I should have taken any pension plans..

When I checked with the Bajaj Allianz, they told about the high intial charges applicable on this ULIP and suggested me to do the withdrawal once the policy completes 3 years (on August 2011) and invest in their other policy.

Considering an inflation rate of 5 or 6 %, is that be right to expect a rise in fund value in the next 1 or 2 years? What should I do to get back atleast my investment?. Should I do a surrender and invest in gold instead? or should I break down the 20000Rs and invest in any equity through SIP?

Please advice me.

[v.r.s.nathan]

Insurance is not for investment, buy another products like - MFs, shares etc. ULIP is a product that yields returns in the long-term. So you have to wait and don't do 'panic-selling' due to short-term fluctuations. If you have already planned to close this ULIP - please buy another term insurance first.

[Rahul]

You have lost money in the bargain. Generally, one needs to stay invested for at least 6-7 years to get back the original investment, or 10 years to get convincing returns.

[bininishere]

Thanks Nathan for the reply...

As of now am not planning to close this ULIP.
While am thinking about the SIP in Reliance Growth or HDFC Top 200 as a mode of investment.. Any words?

[bininishere]

Hi Rahul.. Thanks for the reply

We can't say I lost the bargain as I haven't close my ULIP. One thing I would like to ask - Is if we keep a vision of 6 or 10 years, how will we able to contain the inflation? Will or returns cover the inflation risk?

[Rahul]

Hi Rahul.. Thanks for the reply

We can't say I lost the bargain as I haven't close my ULIP. One thing I would like to ask - Is if we keep a vision of 6 or 10 years, how will we able to contain the inflation? Will or returns cover the inflation risk?If you take long term view that equity had outperformed all other asset class. If you check the past performance it will come around 15-20%, which is more than inflation (6-10%). Risk is there and you cannot predict future return but I would take risk and invest in MFs to keep my assets grow.

[GURU]

Please remember that ULIPs are structured such that it is beneficial only if invested for more than 8-10 years. If you have paid 3 years premium for ULIP, you can surrender the policy and the insurer will pay you the fund value. Post 3 years the charges are lesser and therefore you build up units at a lower cost. I would suggest, if possible (as per terms of the policy) stop paying premium after 3 years and use cover continuance option till 5th year or take premium holiday and then surrender the policy in 5th year.