Perhaps ULIPs Ought to Be Called Unit “Loss” Investment Plans? Or, How About “United Loss” Investment Plans?

by Vinaya HS on March 30, 2012

in Finance

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I seriously think ULIPs ought to be called Unit “Loss” Investment Plans.

I am yet to come across someone who has actually made money off a ULIP. A recent comment on one of the other posts reads — “My wife had taken a ULIP from Bajaj Allianz 5-years back and the first year charges were 90%! Would you believe it? We sold the policy after 4-years and just about managed to recover the investment amount.” There are countless other ULIP-horror stories that you can read when you have some leisure time.

But then, it’s very easy to be misled into buying a ULIP, especially when you see ads such as this:


You’d be forgiven for thinking that life insurance can solve all major problems in your life from [having children?, to] educating your children, to marrying them off, to saving/investing for your goals, to saving enough money to say no to work that you do just for the sake of doing it. Wow! So, is there something that life insurance can’t do?

But then remember these words: “One click is all it takes to lose your hard-earned money.” That should have been the ad’s tagline but then you really can’t publish that can you?

With ULIPs, Units Lose and United [We] Lose. Simply run away as fast as you can whenever someone (usually it’s a relative or a family friend isn’t it?) uses the words “unit” and “linked” in the same sentence. You’ll be financially much better off in life.

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{ 13 comments… read them below or add one }

Rakesh March 30, 2012 at 10:01 AM


Good one, liked the way you put it “Unit Loss Investment Plans”. Initially when these ULIP’s were launched their charges were way too high but with IRDA playing more active role most of the ULIP’s have brought down their charges. I think ULIP charges should be in par with that of MF or maximum 5%, not more than that.

Vinaya HS March 30, 2012 at 10:24 AM

@Rakesh –

I recently read about a ULIP where there was no premium allocation charge. I was happy until I find out that this charge had simply been shifted/disguised in the form of a higher policy administration charge. These insurance companies are quite smart! But we’re no fools right?

Rohit Garg March 30, 2012 at 1:41 PM

Well… I can be one of those few guys, who actually made some bucks from these ULIPs… I bought a ULIP from ICICI Pru in 2007, on monthly premium basis and deposited a total of 60K by Dec 2009. And, I surrendered the policy in April 2011 and got around 75K.

Another policy, was of Bajaj Allianz , Bought in Nov 2006, half yearly premium payment, and paid 75K by May 2009 and surrendered the policy in April 2011 and got around 85K.

Small profits, but I guess, much better than the losses!

Indian Thoughts March 30, 2012 at 3:45 PM

Nicely written. Liked most of your punch line :)
Well I also saw somw people make money out of ICICI Pru (my mom and sis) but I guess it was timeframe where equity markets were supposed to only go up and up and then some more up.

Rakesh March 30, 2012 at 3:51 PM

We too had invested in Bajaj Allianz in 2005, paid 10k premium per year for 4 years. At the end of the 4th year surrendered and got only Rs. 44k. If we had put it in FD we would have got much better returns.

Yes, these marketing guys are coming out with new ways to hide the charges but with investors becoming more smarter (thanks to bloggers like you). People should just ignore ULIPs and stick to term plans and SIP’s in MF.

Vinaya H S March 30, 2012 at 8:28 PM

@Rohit –

Good that you redeemed these during the previous bull run. Smart timing!

@Indian Thoughts –

I agree. When you’re surrendering you might as well do so during a bull-run. :-)

Vinaya H S March 30, 2012 at 8:31 PM

@Rakesh –

A regular savings account would have done better! What a scam right? Just imagine the sheer scale of operations…

And thanks for the encouragement. :-)

Vinaya HS March 31, 2012 at 6:56 AM

Here’s something hilarious that I stumbled upon in the comments archive:

“Every insurance company is cheating people who are living to compensate the losses incurred by those dead.”

Shinu March 31, 2012 at 1:46 PM


Nice name for the well known abbreviation of ULIP.

I too had 3 ULIP all bought to help the relatives as usual. In 2 i lost money (bajaj & kodak) but LUCKILY got enough profit in the 3rd (ICICI) in the last bull run and could LUCKILY redeem after its lockin period. The good thing now is those relatives does not come back to me for any more sales.. :). I just LUCKILY got much unhurt and stumbled upon few good bloggers.

If it is over regulation in MF it is clear under/ manipulated regulation in most of these “financial gimmicks”. May God help the public.

Vinaya HS March 31, 2012 at 3:53 PM

@Shinu –

Thanks. :-)

Worse are the ULHPs (Unit Linked Health Plans) that some insurers offer. I guess your health gets better or worse depending upon which direction the stock markets are headed.

Couple of articles from the archives –

Unit Linked Health Plans — When Your Health Mimics the Stock Market and Lame Finance: Unit Linked Health Plans — Just Ensure That You Don’t Get Hospitalized In A Bear Market.

Rakesh March 31, 2012 at 4:26 PM


Did hear about ULHP’s, i think another marketing gimmick to lure investors.

T S Ashok April 2, 2012 at 11:55 AM

I paid TATA MAHA lift for 6 Years around 1.65 lakhs and surrendered on 7the year and got 80K. When I opted that policy, i was not having any knowledge about finance and i did not know any blogs. But after knowing everything… i was shame that i was fooled..Anyway it was a 15 Years policy and escaped early..But will lakhs and lakhs of brothers and sisters are getting fooled on a daily basis….what will they do??

Vinaya H S April 2, 2012 at 4:07 PM

@T S Ashok –

Wow! The magnitude of financial loss that you’ve suffered is shocking indeed. But then again it’s no surprise given that the product is structured to guarantee such a loss (see my detailed analysis here).

And totally agree with your point on the magnitude of the scam. Perhaps a good starting point would be to start spreading knowledge and awareness within your circle of friends and hopefully that would lead to a viral effect.

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