Are ULIPs really bad? A detailed analysis

[Lobogris]

Thanks. This explains the whole thing.
I think the premium amount increases a bit if paid monthly. Not sure though!!

Only by about Rs100 to 200. Nothing major.

 

[Lobogris]

Never mix investment and insurance. 5 year lock in period + heavy loss after discontinuation of policy after free look out period. Holding it for 15+ years? Anyone can get triple the returns from MF as long term investment. Apart from tax free there isn't a logical reason to opt for it unless you want to make agents rich! You can get 2 Cr term cover for 2k per month. Why bother justifying it when inflation is 6% and better products with high return are available which can counter inflation.

That’s just parroting the cliches. Try getting that 2 crore term cover for 2k when you turn 40 or 50. There is no harm in having a product that combines different elements. Why is it bad? Just because you read somewhere that insurance and investment shouldn’t be mixed?

 

[Lobogris]

Aft

After covid all equity index was double/tripled...26% below industry average due to covid inflation. In 2015 midcap index was around 13000. today midcap index is around 57000 (Around 600%). Now calculate yourself how much return given to you against inflation.
Money is your.
In another example: Gold price in 2015 around 30000, today 100000 (330 %).
26 % returns is nothing against inflation. Actully you lose your money by investing in ulip.

So isn’t that true of ALL mutual funds? A ULIP is simply another mutual fund. By your logic, all the gains in the market are useless due to inflation. It’s great to invest in gold.I have fairly large holdings in gold. Here, we are talking about mutual funds.

 

[TripleAce]

Only by about Rs100 to 200. Nothing major.

Thank you 🙂

 

[Lobogris]

I was looking at the performance of Discovery fund and I found following:

• Fund is going to complete 7 years so not 10 years old.
• Alpha is not that much high if I look at trailing returns. Following is the screenshot:

View attachment 106995

• I calculated the CAGR of NIFTY MIDCAP 100 Index which is the benchmark of this fund then I found it has given around 15.38% CAGR from 31st July 2015 to 31st July 2025. I took closing of 31st July 2015 and closing of 31st July 2025 to calculate the CAGR.

View attachment 106996

• if I take 1% Alpha (historically I don't see more than 1% Alpha) of this fund then we can expect around 16.4% CAGR return in 10 years.

Can you please check if your returns are really around 26%?
Also as your whole 2L will not be invested as some part of mortality/insurance/GST, etc. will be deducted from the 2L so this will further reduce your return.

Just giving my views why I didn't go ahead with ULIPs as HDFC Midcap, which is renowned MFs since last few years, gave around 18% CAGR and if I reduce 12.5% will give you 15.75% return but you can do tax harvesting and can reduce tax further and also almost whole 2L will be invested.

If I don't consider the CC rewards which you receive then also ULIP is less lucrative than the MFs.

Good analysis. My returns aren’t what I had mentioned. MY ULIP is less than 2 years old and is obviously negative at the moment. I was talking about returns of the fund in the past. So as per your research, you can expect around 16.4% on the ULIP fund and 18% on a similar mutual fund. That sort of understates what I had stated. The returns will be close to other similar funds. Now, when you factor in the tax break, the return of all FMC charges and an insurance component, you are sort of ok with a ULIP as well as long as you can handle the long lock in period. Obviously, you might make 2% more or less but it is nowhere near as bad as people make it seem.

 

[Lobogris]

Thank you 🙂

Just to clarify. I meant it goes up by Rs 200 per year, not each month.

 

[Abhi1986476]

So isn’t that true of ALL mutual funds? A ULIP is simply another mutual fund. By your logic, all the gains in the market are useless due to inflation. It’s great to invest in gold.I have fairly large holdings in gold. Here, we are talking about mutual funds.

If we invest same amount
ULIP = low coverage insurance + investment (bond/equity) + high administration charges + Loke in period
Term insurance + investment (equity/bond) = high coverage insurance (5-10 times than ulip) + minimal administrative charges and no lock in period.
If your investment beat inflation = good
If your investment can’t beat inflation = worthless.
Don’t justify your own logic for ulip is superior product than pure term insurance+ investment (equity/bond).

 

[TripleAce]

Just to clarify. I meant it goes up by Rs 200 per year, not each month.

That is minuscule considering the reward rate of a card like BizBlack.
I have not yet used BizBlack for insurance payments although the thought has had crossed my mind.
That’s why your post got my attention. Thanks a ton.
Cheers 🍻

 

[shashank08]

Good analysis. My returns aren’t what I had mentioned. MY ULIP is less than 2 years old and is obviously negative at the moment. I was talking about returns of the fund in the past. So as per your research, you can expect around 16.4% on the ULIP fund and 18% on a similar mutual fund. That sort of understates what I had stated. The returns will be close to other similar funds. Now, when you factor in the tax break, the return of all FMC charges and an insurance component, you are sort of ok with a ULIP as well as long as you can handle the long lock in period. Obviously, you might make 2% more or less but it is nowhere near as bad as people make it seem.

You must have received a initial proposal where table of premium, deduction and investment amount with assumed return must have been provided.

Is it possible for you to share that table over DM for my further analysis?

 

[jack333]

Just to clarify. I meant it goes up by Rs 200 per year, not each month.

If we pay premium only for 10 years(accelerated pay) and premium gets above 2.5l then also we get tax benefit?
The main reason which discouraged me was that we don't get both benefits insurance or investment. If something were to happen to you say after 15 years and your corpus is only 49 lakhs your family will only get insurance benefit of 50l. The whole investment corpus will be taken by the bank unlike the case if you would have done these two separately your nominee would have got both. I think this drawback is big enough to consider the tax benefits

 

[m4b]

 

[m4b]

ULIP != Investment

 

[HumorSimpson]

ULIP != Investment

Don't post 🚬 pics. We have 🔞 members. If you get banned, how can ✈️ 🎟️ get sold?

 

[Thomas244]

I am paying premium monthly using apay from infinia

 

[Rcbian]

That’s just parroting the cliches. Try getting that 2 crore term cover for 2k when you turn 40 or 50. There is no harm in having a product that combines different elements. Why is it bad? Just because you read somewhere that insurance and investment shouldn’t be mixed?

See if Ulip is good after 15yrs then the 5 to 12% cashback can't be considered guaranteed. Cards scenario changes over night we never know.

Also how it fares to MF+Term insurance in 15 yrs window? What's your opinion on it

 

[Lobogris]

You must have received a initial proposal where table of premium, deduction and investment amount with assumed return must have been provided.

Is it possible for you to share that table over DM for my further analysis?

I have already shared all the details here. The figures are provided from the proposal in my initial post.

 

[Lobogris]

ULIP != Investment

That’s a misconception. Fund houses want you to invest with them.

 

[Lobogris]

See if Ulip is good after 15yrs then the 5 to 12% cashback can't be considered guaranteed. Cards scenario changes over night we never know.

Also how it fares to MF+Term insurance in 15 yrs window? What's your opinion on it

No one can predict the future. It might be slightly worse than direct mutual funds but my point was that it isn’t as bad as most people make it seem. People can read my initial post and decide for themselves. If all you have to invest is 2 lakhs or lesser per year, then I wouldn’t go for a ULIP. If you already have a reasonable amount of corpus invested in MFs, FDs etc and want diversification and 2 lakhs a year is a small part of what you in invest in a year, then it can be considered as another diversification. Especially, it some other benefits come along with it.

 

[m4b]

want diversification and

lol wtf is this diversification you are talking about!!

 

[m4b]

That’s a misconception. Fund houses want you to invest with them.

Not going to strart the repeated info again and again with you.