If you were mis-sold Ulips, exit when surrender cost is zero (1)

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ULIP
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If you were mis-sold Ulips, exit when surrender
cost is zero
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• Unfortunately the plan you bought is a high cost
  unit-linked insurance plan (Ulip). These have now
  been phased out. There is a rational as well as
  an emotional response to your predicament. First,
  the rational view Pull together three bits of
  informationcurrent surrender charge, the year
  when surrender charges get to zero and future
  annual charges.
• If future annual charges work out to less than 2
  of the fund value per annum, then you are
  probably better off continuing it until maturity.
  Alternate investments you make may not be
  significantly cheaper or have the tax advantages
  of this policy.
• If the charges are over 2, then you should close
  the plan and invest elsewhere. The important
  question, however, is when? If surrender charges
  are zero, exit immediately otherwise stop paying
  premiums and exit as soon as policy surrender
  charges become minimal.

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• Now for the emotional response I would not want
  to continue with a product that has destroyed so
  much value and would exit the policy when
  surrender costs are zero, even if the annual
  charges or returns are comparable to other
  investment opportunities.
• I took a Ulip plan in September 2006 for which
  the lock-in period is 10 years. Till now, I have
  paid Rs.2.39 lakh and the fund value is Rs.2.32
  lakh after 7 years. Surrender value is Rs.1.98
  lakh. The company charges around 18 as charges
  in various forms. Should I surrender the plan and
  buy a term plan?
• You have already lost considerable value in this
  Ulip and will lose an additional Rs.34,000, or
  about 15, of the fund value if you surrender
  your policy now. Do not throw good money after
  bad. I suggest that you stop paying future
  premiums and let the policy deduct charges from
  the existing fund. Surrender the policy in the
  year the surrender charges reduce to zero or a
  minimal value.
• You must definitely buy a Ulip. This is the most
  cost-effective way of purchasing life insurance
  and securing your familys financial future.

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