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Dear Brawnym,
You have not mentioned your uncles age, but since he is retired I am assuming his age is 60. I am going to portray the charges your uncle will incur.
Met Smart Plus Charges
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Assumption 1 - Uncle`s age is 60
Assumption 2 - Sum Assured is 10 times premium = 10 Lakhs
Premium = Rs.1,00,000
Mortality Charges
Year 1 = 10436
Year 2 = 11544
Year 3 = 12821
Admin Charges
Year 1 = 2400
Year 2 = 900
Year 3 = 900
Premium Allocation Charge
Year 1 = 5000
Year 2 = 5000
Year 3 = 5000
Case 1: Your uncle decides to surrender after 3 years.
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Surrender Charge
Year 4 = 70000 (70% of first year premium)
So rougly, your uncle will incur Rs.1,24,000 in charges (including surrender charges, mortality charges, admin charges and premium allocation charge) if he decides to surrender after 3 years. This is 24% more than the first premium he has already paid. So he tends to loose more by surrendering after three years.
Case 2: Your uncle`s son decides to pay the premiums and keep the policy alive
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Please be aware that the mortality charges will keep increasing year after year.
Mortality Charges
Year 4 = 14273
Year 5 = 15904
Now if we add admin charges and premium allocation charges, every year 20%+ of the premium paid goes towards charges and this keeps increasing. It is not a good option to continue the policy either and keep paying premiums.
Conclusion
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Your uncle is in a loose - loose situation. He tends to loose even if he continues to pay his premiums or stops paying. I feel sad for him. I am suprised the agent said you can redeem the funds after 3 years especially with steep surrender charges. This is a classic case of mis-selling by insurance agents.
Though it is painful for a retired person like your uncle, my advise is to look at this investment as a bad investment. Do not pay any more premiums and increase your losses. Please forget about this investment and pray that the growth in fund value is able to pay for the charges. And let us keep little hope that some time in the future he gets something back (when surrender charges are not as high).
PS: Do not ever ever ever ever ever ever think of selling property to keep an insurance policy alive. This is a horrible option to think of especially when you know 20%+ of your yearly premium is disappearing in charges....
It depends on how comfortable your uncle is taking money from his son. If its ok, then no better deal
I don`t quite agree with ULIP advantages that Mr Sharmaji mentioned. The only advantage I can think of ULIPs in long run is, it helps u shuffle your portfolio (debt to equity and vice versa) easily. Other than that everything you say about ULIPs is common and other instruments in markets provide u similar (or better) advantages....
Hello Sharmaji,
But I guess one has to wait for 3 years to start partial withdrawl?
Regards,
Brawny M...
He can sell the Plot to come out of Mess.
2 ULIPS are GOOD Option to meet Regular Expences by way of Partial Withdrawl of Profits.
P.C.Sharma ...
Thanks Sushant,
Here is some more information
1) My uncle stays in amravati (place near Nagpur)
2) His home is worth 6 lacs all inclusive
3)There are about 6-7 room and he stays alone(not that there is any problems with his son but he has no company in Pune) so i though he can shift to a decent 1 BHK flat nearby and rent out his home which may generate some revenue for him and the value also appreciates.
4) His son is ready to pay for the ULIP, do you think it is advisable?
Thanks once again
Regards,
Brawny M
...
Dear brawnym,
Its again case to case basis. What was the intention of your uncle while buying the plot? Was it purely individual investment or was it kind of family property which he intends to pass on to his son? I will never advice him to sell the plot now or even to shift from current home. Again if your uncle intends to sell of his home finally, then he can look for doing a reverse mortgage. Its new in India but very famous in the US. You can do a google and see wat it means, its advantages and catch if any.
Regarding ULIPs, without even going to the scheme details and names, i believe that it can never be fruitful unless u stay invested (and pay premiums regularly) for more than 6years (for best performing schemes). It takes that 4-5yrs to just break even. So consider this your uncle has already paid 1.5lakh (1st year running) and will have to pay another 4.5 lakhs (consider 3 more years to break even) to just recover his initial investment of 6 lakhs. Now, its upto your uncle to decide if he really wants to put in that much over the next few years to get back his 1.5lakhs untrimmed and unexpanded or to discontinue (it will result in loss of 1.5 lakh) and invest the 4.5 lakh over the next 3 yrs in some balanced fund(or else) so as to target profit of 1.5 lakh. Again this decision is based on individual risk appetite. I know my frnd who was sold some stupid Bajaj Allianz ULIP (thru MLM model) and he discontinued after just one payment (his was quarterly payment mode so he virtually lost 1/4th annual charges). Also since he is in mid 20’s he has age at his disposal and enough time to make up the loss. Your uncle probably wud have to still continue as 1.5lakh is pretty big amount.
I always believe that for retirees its best to get to some kind of agreement with their children in a manner which satisfies all. Consider this: My neighbor, aunt (widower) who has 3 daughters and has a good home in prime location. All her daughters are married. Aunty got retired some 2yrs back and the thought of living alone scared her. So she came up with a novel idea. The property she owned was worth some 40lakhs. So she put an agreement in which it was decided that one daughter will be the owner of the property after her death and she will also be taking care of aunt for rest of her life from now in the same home. This person (who will eventually be owner after aunt passes away) will have to pay 12lakh each to other 2 daughters. Now you may that the daughter taking property is at loss as she is paying 6lakh more. But consider this- she is staying in rent free home for some duration. So it was an approximate balancing act. It keeps aunt relaxed as there is someone to take care of her till her death. The pension she receives is more that enough for the ongoing ULIPs.
May be you uncle can visit some lawyer and draft some agreement. Even if the present home is old and doesn’t look attractive, it has land value which is very high so never a good idea to sell and move to an apartment.
To conclude, I guess you/your uncle can look at reverse mortgage or this kind of agreement sharing with his son to lead a peaceful and relaxed life.
Plot he has to sell at some point but I don’t think it’s this time or need which demands him to sell it right now.
ULIPs is a big catch here. But since it was a mistake made by him (by choosing them), he has to pay some price for the mistake in way of either continuing for next 3-4 years to break even or discontinue(not an advisable option).
...
Hello,
I need your help again, I have come across a unique problem /situation and I need your help / guidance / advice.
Recently my uncle (Dad`d Friend) visited me and during the discussion a very interesting situation /problem came up. Last time you guys helped me a lot, I thought of sharing the problem with you in hope to get some feedback / advice.
- My uncle is retired (1 april 2008) he get Rs. 10,000 as pension.
- He received Rs 11, 00,000 as retirement corpus.
- He bought a plot of 3300 Sqft total cost 10, 00,000, good location but the appreciation in last 9 month is about Rs. 35-40 ( he bought because the broker told him that he woudl be able to make at least 1 lac in ayear)
- He also has 2 ULIPS (again the agent told him that he can sell it off in 3 years and earn good money, whcihis not entirely true)
1) 1,00,000 yearly Met smart Plus regular (1 yr old) NAV gone up from 15 to 21
2) 50,000 yearly Metlife smart gold (6 months old) NAV from 14 to 21
- He stays alone in his own house (cost about 6, 00,000), but it a old house and needs some repairs to continue to stay there.
- He has a medical insurance which is paid by his son (ICICI predential- hospital Care)
Given the income and outgoing, there is a clear imbalance, he can’t stop the ULIP as he tends to lose lot of money as penalty but He can’t afford it without selling off the property.
I suggested him to rent a small flat (1 BHK) and either sell or rent his old house. Use the money /cash generated from it for his expenses and wait for the right opportunity to sell the plot. I also asked him to reduce the ULIP payment after 3 years, if not stopping it completely.
Can you please suggest a way out? Whereby he doesn’t have to depend on anybody for his expenses and be able to grow his 10 lacs.
Thanking you all in advance.
...
I have a big amount which i want to invest. Would like to know how to invest it wisely.. I would like to have atleast 50% in a secured investment. Please advice.
Thanks
Apratim...
what is FMP...
Hi i am 26 yr old guy. I have not started a proper saving. currently i have two RD acc with SBI for 3500 and 3000 PM.Recently a executive from ICICI contacted me to start Life time gold. how good is this plan of icici ? should i invest in something else or start with this plan. i am planning to diversify the RD amount coz thats the amount i can save PM. kindly suggest....
Dear Swaroop,
As dear Sharmaji has pointed out that SIP is the way to go but if you want to invest more or less as you mentioned, then you will have to register yourself with the AMCs to get userID and pin to transact directly and you can select the fund houses from the list Sharmaji has given. Once you have the access to these fund houses, you can invest, redeem or switch at your convenience online. Go to their respective websites and download the pin agrreement. But before you do this you will have to go through the process of investing first time through AMC or a broker, to create a folio no.This means a visit to the AMC or broker with all relevant documents like PAN card cheque book etc.
Regards,
Wadia...
Dear swaroopindia2,
Please DONT INVEST in any Plan of LIC due to very POOR Returns. ULIPS of LIC are OK but not GREAT Returns should be Expected due to High CHARGES.
SBI ULIPS are OK but carry higher Charges.
Investment by SIP in 3-4 GOOD EQUITY/ Balance Mutual Funds is BEST Option.
- Birla Sunlife Frontline Equity Fund/
Birla-95 ( Balance ) Fund
- DSPBR EQUITY Fund/Balance Fund
- HDFC Top 100 Hund/ Prudence Fund
- IDFC Imperial Equity / Premier Equity
Fund
- Reliance/RSF Equity / Balance fund
- SBIMF MSFU CONTRA FUND
- UTI Wealth Builder Series ii Fund
P.C.Sharma
...
Dear sir/madam
I would like to know is there any financial saving plans, where i can save every month not the same amount, sometimes may be less or more which i can invest and get very good returns
And i was also thinking for going for sbi fund plans kind of like ULIPs but have doudt on their performance and charges, if i go for LIC its very long period and only double amount i get
please suggest the best one for a very good returns and with a short span of time, not very long as the LIC have and get only double amount, thank you...
iwant to have study return of min. 15% every year on my investment. How can I do that? ( i mean what is the type of investment?) & what is the min. amount required for the same (i.e single investment of SIP)...
definately yes... do you have any doubt in it.......
