It’s been close to 3-months now since I last wrote — it’s the usual “life just got busy” excuse and I pick-up all the blame for letting things slip. We’ve also just entered a brand-new financial year and I wish each of you a prosperous year ahead. Lot’s of stuff did happen in between including some new investments and having to let go of the Swift in lieu for what I personally think is its perfect replacement. More on that in the coming weeks — I promise!

But first, guess what nudged me over the edge and back here?

A “Unit Account Statement” for LIC’s Market Plus scheme that turned-up in the post box. Now this happens to be one of D’s legacy mis-investments and upon opening the statement we discovered to our horror that a secret [off-market?] Rs 20 was being happily deducted each month under the guise of “Admin Charges.” I guess this has been happening each month since the investment was first made quite a number of years back. Don’t even ask me about it’s Market Value — it’s deeper than the Titanic’s depth of sink!

There’s a whole bunch of other columns for various other off-market charges — which thankfully were zero in our statement.

Here’s a sample –

  • Allocation Charges

  • Mortality Exp/FY Renw(*) [WTH?]

  • Accident Charges [WTH? I hope I'm not charged for meeting with an accident!]

  • Switching Charges

  • Ser Tax Rsk Prm Chrgs [WTH?]

It’s time to cut the flab including another mis-investment — Money Plus!


I’ve simply lost track of the number of horror stories I’ve heard about totally junk life insurance being forcibly dumped on your head by relatives/friends-cum-insurance-agents. Everyone out there seems to have bought a life insurance policy from either a relative, or a friend, or a friend of a relative, or a relative of a friend, or a relative of a relative, or a friend of a friend, and similar relationship chains. It’s quite horrible.

I asked D, who also happens to be a victim of such a life insurance policy, to create an art of finance sketch on this concept. Here’s the result –

Image of an Art of Finance sketch on insurance agents.

I think all of her bottled-up vengeance came out in this sketch! And I think it’s true to every word. A junk life insurance policy is like a tight noose around your neck just waiting to snap it into two. The scenario is just like a guillotine and you can guess who the executioner is! So, if you currently happen to be in such a mess, make a plan to jump off the frame before the axe wields. And if you currently being led towards one, now’s probably a great time to run away. Think about it.

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As a follow-up to my recent post on Capital Advisor’s impact on the Indian life insurance industry, I thought it’d be a fun idea to figure out where all those download requests for my ULIP Surrender Request Letter template were coming from.

Here’s a chart of the Top-10 Countries along with the total number of download requests coming from each of them. Not much surprise over here given the rule of thumb distribution of the Indian diaspora.

What do you think?

Capital Advisor ULIP Download Statistics by Country

Data as on 03-Apr-2012


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.


2,150+ readers have downloaded my ULIP Surrender Request Letter template!


1,500+ readers have downloaded my LIC Jeevan Anand Surrender Request Letter template!


If even 50% of them have taken action, that’s a pretty good impact! Just think of all that hard-earned money readers are retaining in their pockets and the equivalent lost revenue for the insurance industry.


Tweets on 2012-02-26

by Vinaya HS on February 26, 2012

in Finance


The hidden message being –

  • We managed to fool you all these years under the guile of “Premium Allocation Charges.” No one in this industry knows why there has to be a special charge just to allocate your premium (premium = your hard-earned money). And no one in this industry even wants to know why that allocation charge is a function of time.

  • The best you can do now is to stick around with us because if you switch you’ll be an even bigger fool (remember, we’ve extracted all that we can out of you into our balance sheet) for paying that “Premium Allocation Charge” to someone else yet again.

I seriously hate this “holier than thou” attitude.

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Tweets on 2011-12-21

by Vinaya HS on December 21, 2011

in Finance

An excerpt from an interview published in a recent issue of Outlook Money:

The biggest challenge for my company [Star Union Dai-ichi] is how to sell Ulips and give good returns to our intermediaries who are our corporate agents. At present, big banks that are giving us distribution business includes Bank of India and seven regional banks with whom we have tie-ups in about 7,300 outlets to market life insurance products.

Banks have been very comfortable in selling Ulip products for the last 7-8 years. But, post the 1 September 2010 new Ulip guidelines, we had to revise the products and reduce the payouts to intermediaries. Since bankers are our distributors they are not in the mode of canvassing typical life insurance products to a person by talking to him about his family, family needs or his long-term requirements. They do not have time to sell life insurance products. So, they get in touch with some potential customers who have money in fixed deposits, savings bank accounts, or those who have taken a loan. From these customers it is easier to get a lump sum single-premium deposit under Ulips.

But, in the past one year, commissions have come down from 22 percent to 6 percent and that is a cause for concern for banks. Therefore, they are not interested in selling our products. This is the biggest challenge we are facing at this present…

My thoughts:

When you know that your insurance products are being sold the wrong way, why persist with that distribution/marketing channel? Then why lament when something good (reduced commissions and hence reduced mis-selling) actually happens?

There are better ways to get customers to actually buy ULIPs. Don’t nickel-and-dime them with all kinds of lame charges/expenses/fees/commissions and all kinds of lame investment options (slow growth fund, fast growth fund, super-fast growth fund, zero growth fund, etc.). We now know that “that growth” doesn’t actually apply to us.


This article was originally published as exclusive content for my facebook subscribers and is now being republished to reach a wider audience. Subscribe to my facebook feed and be the first to read more such exclusive content.

My interest in this ULIP stemmed from an ad I saw in the morning newspaper. 0% allocation charge. 100% premium invested. That too for a ULIP? Seriously, there’s got to be a real catch somewhere. And there are — quite a few of them.


First-up, a Policy Administration Charge that seems to be equal to 6% of the premium paid (i.e. 3,000 for a premium of 50,000; 6,000 for a premium of 100,000). Really, WTF? Why on Earth should the Policy Administration Charge have to vary with the premium paid? It’s not as if the administration work involved suddenly shoots up just because of a higher premium — in fact, I’d really expect it to stay fixed. That’s not the end of it. There’s a Risk Benefit Charge — whatever that means! There’s also a Fund Management Charge. To cap it all up, there’s also a Service Tax on All Charges.

Do you see the trick? There’s nothing called an “Allocation Charge” but its absence is more than made up for by all these other charges.

From the calculator on the site:


I tried hard but couldn’t figure out how this mumbo-jumbo is being generated. What’s more, there’s also a charge labeled “Commissions” (not seen in the figure above; it’s to the extreme right of the table generated by the calculator and it’s honestly easy to miss). Whose commissions? WTF?

Maybe, “Future Destruct” would be a better name for this policy.

My advise: “Stay away.” In fact, if someone tries to sell this policy to you, run away as fast as you can in the opposite direction. And don’t look back.


Consider these Risk Factors copied verbatim from a Unit Linked Health Insurance Policy ad that I happened to see on this blog itself (snarky comments mine):

  • The premiums paid in unit linked plans are subject to investment risks associated with capital markets. (Means we’re going to have fun gambling on your health with your own hard-earned money; means we’re also going to get our fat-fee no matter what happens to your health.)

  • The value of the units (and in direct proportion, your health) may go up or down based on the performance of the fund.

  • Other factors influencing the capital market affect the value of the units. Hence you, as the policyholder, are responsible for all your decisions. (Means we really have no idea why we’re in this business in the first place…wait…oh yes, we do, for the fat-fee.).

  • None of our funds offer a guaranteed or assured return. (Means you better pray to the Almighty that you fall sick when during a bull-run.)

  • The past performance of our other funds does not necessarily indicate the future performance of any of these funds. (Again, we really, seriously, have no clue why we’re in this business to begin with, except for that…umm…fat-fee.)

I doubt you’d want to fall for these [legalized] scams.


Asked and Answered: January, 2011

by Vinaya HS on January 28, 2011

in Finance

I sometimes receive queries over email from readers who are in a particular situation with respect to their personal finances and want to know what actions they ought to take in order to move ahead. Some of these queries are generic enough to apply for a broader audience. In the past, I’ve tried publishing these ad hoc in one way or the other, but would like to have a more organized approach moving forward. My plan is to collate these queries and my responses over a period of one month and publish them here.

Here’s what was asked and answered by Capital Advisor in January, 2011.

Query #1: Saving for higher education.

I want to save for the higher education of my 2 daughters aged 13 years and 11 years. I’m already investing Rs 5,000 per month in the Post Office Recurring Deposit since 1 year. I can set aside (at maximum) another 4,000 to 5,000 rupees per month. I am a single parent and cannot invest more that this. What should I do? Please advise.

Since you have started a Post Office RD for Rs 5,000 per month a year back and since the Post Office RD requires you to make monthly contributions for a period of 5 years, I’d suggest that you put the additional Rs 5,000 per month into what I’d call a buffer fund. Being a single parent, you could run into a financial situation (for whatever reason) where you’re unable to make the monthly contribution into the Post Office RD and that’s where the buffer fund would be quite handy.

First save up a 6 to 12-month buffer fund. This will cushion you against defaulting on the RD in the event of an economic hardship. Once you do that, you could consider investing the additional Rs 5,000 each month in a Moderate Allocation Fund with a great track record. I particularly like HDFC’s Prudence Fund (Growth option) — I have a SIP in D’s name.

Useful Reading: MorningStar Fund Investor — November, 2010.

Query #2: Building a contingency fund through high-returns investments.

I am looking for an investment scheme wherein I want to invest biweekly or monthly with a variable amount (say Rupees 2,000 or 5,000 or 10,000 — depends on the amount I have with me) and which gives higher returns (15%) and from which I’d be able to withdraw at any point in time.

Follow-up revealed that the reader wanted to do this for contingency planning (read emergency use).

I’m afraid that’s the wrong approach. Funds meant for contingency planning or emergency use shouldn’t be put in investments that seek to generate higher returns. Funds meant for contingency planning/emergency use need safety of capital (read as low a risk as possible) whereas investments that seek to generate higher returns promise exactly the opposite.

If you’re still willing to be adventurous, I’d recommend that you preferably stick to a Conservative Allocation Fund — you can begin your research here.

Query #3: Prepaying a housing loan.

I have a home loan of around 10.5 lacs. I have saved 5 lacs in the form of a fixed deposit and have earmarked this as an emergency fund. I’ve been thinking of using this for making part prepayments on the home loan but haven’t taken a decision yet. I also have a ULIP from ICICI Prudential with an annual premium of 1 lac. It completes 4 years next year and I want to close this and invest in a Post Office Monthly Income Scheme. What would you suggest?

Wouldn’t it be a better idea to close your ICICI Prudential insurance policy sooner? If you’ve already completed 3-years, you can surrender it right away. Think about the Rs 1 lac that would straightaway appear on your cash flow each year. You can use this to make part prepayment on your home loan (and make your home truly yours) instead of dumping it in that lame insurance policy for another year (and making ICICI richer!).

If your goal is to be debt-free, you could also use the surrender proceeds to make an immediate and huge prepayment on your home loan. But if your goal is to create a passive source of income, you could opt for the Post Office Monthly Income Scheme and do what I suggested earlier.

I’d continue to keep the Rs 5 lacs as a major-emergencies fund — probably split it into 5 fixed deposits of Rs 1 lac each.

Would you recommend anything different?


First of all: Wishing you and your family a financially prosperous 2011.

And what better a way to start 2011 than knowing how to get rid of your Unit Linked Life Insurance Policy (ULIP). I recently closed one, on D’s behalf, and luckily for us we emerged above water on that one.

It all started over three years ago (even before I met D) when an insurance agent sold LIC’s Money Plus ULIP as a tax-saving tool. The premium was Rs 30,000 per year for 20 years for a basic life insurance cover of Rs 300,000 with an additional accident cover of Rs 300,000! Since two premiums had already been paid and the policy was way under water, I advised her that there was no choice but to pay the third premium and wait for the third-year to get over before we could surrender the policy and hope to get something back.

Once the third-year was up (in June, 2010) and the policy became surrender-able, we tracked it’s surrender value (= NAV x Number of Units Allotted) quite frequently. Our Rs 90,000 invested was even down to Rs 70,000 at one point. Luckily, our capital markets went up and we managed to surrender the policy at a small profit.

Thought I’d share the procedure on how to surrender and close your LIC ULIP. Here’s what you need to do.

Procedure to surrender and close your LIC ULIP.

  • Get the documents listed below into one file:

    1. Original life insurance policy document.
    2. Original premium payment receipts.
    3. Latest unit balance statement (you get this by post after each premium payment).
    4. Download this surrender request letter, fill-in your specific details, and print a copy.
    5. Get a copy of the S.V. Application and Form No. 3510/5074 either from your agent or from a nearby LIC office and fill it up.
    6. Photocopies of #1, #2, and #3 above.

  • Staple together the filled-up surrender request letter, original life insurance policy document, photocopy of premium paid receipts, photocopy of latest units allotted statement, S.V. Application and Form No. 3510/5074 in that order. Let’s call this as our “Submission Packet.” This set of documents is what you’ll need to submit at the LIC Branch Office from where your policy was issued (you cannot submit them at any other branch office).

  • Staple together the photocopy of the policy document, original premium paid receipts, and original units allotted statement. Let’s call this as our “Reference Packet.”

  • Go to the branch office from where your policy was issued and handover the “Submission Packet” at the counter. Once your policy details are verified, the person at the counter will print and sign an acknowledgment receipt. Verify the details on this receipt and attach it to your “Reference Packet.”

  • Wait for the check to reach you by post.

  • Once the check arrives, verify your name and account number for correctness and take a photocopy. Attach this photocopy to your “Reference Packet.”

  • Deposit the check at your bank.

  • Once the check is credited to your account, tear-up your “Reference Packet” if you feel like doing so.

I did. Here’s pictorial evidence.



Take a shirt. Stitch a pant to it. Then stick a pair of shoes to the pant. You really wouldn’t want to be seen wearing such clothes. Similarly, you wouldn’t want to buy the LIC Endowment plus Unit Linked Plan which purportedly combines Savings, Investment, and Insurance — in short, a guaranteed recipe to make you poor.

Features and Benefits.

If you could call them that.

My recommendation: Run as fast as you can in the opposite direction.


When you hear the words “five, years, investment, product” all in the same sentence from whoever is pitching you a financial product your first instinct must be to get ready to run as fast as you can in the opposite direction.

Because it couldn’t be anything other than a ULIP.

Last weekend, I ran as fast as I could in the opposite direction. Someone who D’s dad knew at work tried to peddle a “great five-year investment product.”

Perhaps this is the only timeless financial advice: Don’t buy a ULIP.


Tweets on 2010-06-19

by Vinaya HS on June 19, 2010

in Finance

An SMS I received reads [verbatim]:

Guaranteed Bonus! Investment Profit! Insurance Cover! Tax Saving! Invest in Bajaj Allianz Assured Gain. NOW min term changes 3 to 5 yrs in July. SMS BAJ2 to 98401XXXXX.

My two words: AVOID ULIPS.


What Does Your ULIP Premium Do?

by Vinaya HS on May 13, 2010

in Finance

Makes you poor and your agent/insurer rich.

Look what I found in my email.

A job (commission-based) that allows you to be your own boss. Life insurance consultant with LIC of India (part-time or flexi-time). The job involves prospecting, understanding life insurance needs, advising on suitable options and closing the sale. It’s a freelance marketing job with attractive commissions not only at the time of sale but also so long as policy is in force.

For example, let’s assume that you bring in a total of 6,00,000 worth of premium in a year. On an average you will earn 2,00,000 in the first year, 60,000 in the second and third years and 40,000 every year till maturity of the policies. Fantastic earnings isn’t it. The renewal commissions will form a steady stream of income. This is self employment without investment.

In the most happening Bangalore City also named Wealth Bowl of India. Come be a part of this sunrise industry growing at more than 20%.

If this interests you,

Call xxxx xxxxx,
Development Officer, LIC of India

Now you know what that money you earnestly put in that ULIP all these years is doing. It’s making you poor and your agent/insurer stinking rich.

Avoid ULIPs. I can’t say this enough times.


Tweets on 2010-04-21

by Vinaya HS on April 21, 2010

in Finance

Here’s a timely article featured in The Economic Times on why you shouldn’t invest in a ULIP.

Between us, D & I have a ULIP that commands a ridiculously hefty premium, provides a really laughable amount as insurance coverage, and has actually tanked in value. Ouch! Thankfully, it’s about to complete three years of tenure and we can look forward to burying it.

ULIPs = Weapons of Mass Financial Destruction. Stay away from them.

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Tweets on 2009-06-15

by Vinaya HS on June 15, 2009

in Finance

Mutual funds are a grossly mis-sold, mis-positioned, and mis-communicated financial product in India — Dipen Seth, Money Today, June 25, 2009.

Add misunderstood to that list. Add Unit Linked Insurance Plans (ULIPs) to that list.

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A while back, reader Lakshmi wrote to me saying,

My mom is particularly concerned that my brother’s job is non-pensionable and recently she heard about the SBI Life Insurance Pension Fund. Please throw some light on this matter.

I couldn’t write back since I was held up with other work. But Lakshmi soon wrote back with this update:

About my previous questions on finance, I did some work myself. The SBI Life Insurance Plan is just a Unit-Linked Pension Plan and clearly states that the investor should bear the market risk. In short, they are saying that they’ll take our money only to lose it by investing in shares. I’ll go home and call up my aunt who suggested it in the first place.

Brilliant. I repeat my advise: Never ever invest in a financial instrument that you don’t understand. And to understand, all it takes is a little bit of research. That’s how you develop awareness.

Awareness Fridays is my new initiative to spread awareness on topics relevant to personal finance — every Friday. I urge you to take some time off and absorb this information — it’s pretty useful. And, as always, do spread the word if you find this useful.


Tweets on 2008-09-25

by Vinaya HS on September 25, 2008

in Finance

I’ve previously dissected Bharti AXA’s AspireLife Unit Linked Life Insurance Plan and found it to be a terrific example for bad financial jargon, lame financial products, and lame advertising — in short a toxic financial product (as most ULIPs are).

A recent issue of MoneyToday carried an ad for Bharti AXA’s Life AspireLife Unit Linked Insurance Plan (not sure if it’s the same plan as the dissected one — notice the extra word “life”) which declares that,

For the first time ever, your ULIP premiums will never disappear.

WTF mate? How is that possible? Read the fine-print and you’ll realize that it’s not. I think they actually wanted that to read (but could not publish),

For the first time ever, your ULIP premiums will never disappear [from our (i.e. Bharti AXA's) bank account]. ROTFLMAO.

What do you think?


It’s understandable to have an insurance cover for a liability. For example: It makes perfect sense to have an insurance cover for your home loan. If you were to get into an unfortunate situation where you wouldn’t be able to repay the loan, the insurance company picks up the tab. The premium you pay for the insurance cover is worth the freedom you get from having to incessantly worry.

But I’ve never understood the concept behind insurance companies combining insurance and investment and then marketing that fact as being beneficial to you. It certainly is beneficial, albeit to the insurance company.

On one hand, you have Unit Linked Insurance Policies (ULIPs) which charge astronomical fees under complex fee structures, gamble with your money in the equity market, and scare the shit out of you. Isn’t “freedom from worry” the whole point in having insurance? With a ULIP, you’re always worried about what’s happening to your money.

On the other hand, you now have mutual funds which give you an insurance cover of up to (a classic marketing phrase) 100 times the money you handover monthly into a Systematic Investment Plan (SIP). I don’t understand why you should put money in a mutual fund to get life insurance? In this case, the mutual fund and insurance company operate under the same banner. So, where is the premium for these policies coming from? The mutual fund’s annual management expenses? I’d run away if I were to be offered this scheme. Finally, all that you need to do to get insurance is sign a “Declaration of Good Health,” which I am sure is as vaguely worded as possible to your disadvantage.

What do you think?