Last Updated : May 04, 2012 12:44 PM IST | Source:

5 year ULIPs: What's the catch

Many customers are today being misled by their insurance agents. Thus it is always said to read before we sign any document.

Yashish Dahiya

An insurance agent recently came over to my friends place to sell him a much valued and hyped about Unit-Linked Investment Plan (ULIP). The product to him seemed like a normal ULIP which offered standard returns, option to pay in different modes and all the other common features. But, suddenly when he was about to end their not so interesting meeting, the agent threw him a bait.

The Spiel:

‘Sir, all you need to do is pay your premiums for 5 years and for the rest of the policy term, the insurance company will pay the rest and still give you a massive return.’

The Catch:

We all have heard this statement whenever we have an agent selling us a ULIP. But is this really true? Can a ULIP actually do this for a consumer? The answer to both the questions is NO.

When an agent tells you the same, be rest assured that he is cheating you. All ULIPs today come with a minimum lock in period of 5 years, i.e., you need to pay your premiums for 5 years regularly post which if you may wish you can make partial withdrawals or surrender the policy, but, in no case can you stop paying the premiums.

What you should do:

Many customers are today being misled this way by their insurance agents. Thus it is always said to read before we sign any document. In case a customer stops paying his premiums at the end of 5 years the insurance company will be forced to send a notice which will request the policyholder to, pay all due regular premiums and revive the policy or discontinue the policy without any risk cover.

If a customer opts to discontinue the policy or fails to respond in stipulated time frame, the insurance company can discontinue the policy and the customer will also end up losing his valuable life cover. All that the customer would get would be the Fund value as on date his policy was discontinued by the insurance company.

For such customers who do not wish to pay for the entire duration of the Policy term, company’s today offer ULIPs with Limited Premium Payment. Such ULIPs ensure that the customer has his valuable life cover for the entire duration of the plan and also enjoy continued benefit for invested funds. These ULIPs are also known as Limited Premium Payment plans and some of them offer customers with benefits like Highest NAV Guarantee, Capital Guarantee, etc.

Name of Plan

Limited Premium Term options

Bajaj Allianz Max Advantage

5 to 7 Yrs

ICICI Pru Life Stage Wealth II

5 Yrs, 7 Yrs & 10 Yrs

Kotak Secure Invest Insurance

5Yrs & 10 Yrs

SBI Life – Smart Elite

5, 8 or 10 Yrs

Reliance Life Insurance Pay Five Plan

5 Yrs










In Brief:

ULIPs are a long term investment product and offer good returns to policyholders over a longer duration of time, hence it is always advisable for a policyholder to take ULIPs with a long term view and pay premiums regularly too.

A customer needs to remember that all ULIPs are front-loaded with costs, any discontinuance or exit after the mandatory lock-in of 5 years would be costly. It is suggested to link savings in ULIPs with goals which are at least ten years away from maturity

Yashish Dahiya is the Co-Founder and CEO of

First Published on Apr 27, 2012 09:19 am