Khota Paisa

New Kid In The Town – Guaranteed NAV ULIP Plan

Posted in Reviews by khotapaisa on August 20, 2009

Welcome to the ULIP party. This is one area where products are increasingly becoming too complex for customers (even experts) to understand. Wasn’t ULIP already a complex product that we, the hard earning people, needed even more complex product like this? When I first read about this (in a newspaper), it sounded too good to be true. After all, why would someone offer me a product where I win all the times? I was sure that there was something more to it but it took me some time to figure it out. I don’t know if that’s the way the product is designed to work. In short, here is how I would do it if I were to offer this type of product to the world.
Say, at the end of every day, I would calculate the appreciation w.r.t the previous day. If there is any appreciation, I would move that into the debt bucket. I will keep it doing for next 7 years. So, what I end up doing is that I lock the gains in a debt fund (secure investment) and in turn reduce the equity exposure steadily over time. Anyways, based on this understanding, I did some number crunching and I came out with this –

“In the worst case, I will have to give <1% of the fund corpus (this is less than the fund management charge of 1.5% that I charge) out of my pocket”. – Based on my assumptions.

That means that in the worst case I, the insurer, will have to forgo fund management charge for just one year. That’s it!
So, what should you do? I suggest you follow the thumb rule –

Invest in the product which you understand.

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  1. […] Other Exotic Plans – Some of the exotic plans in market are guaranteed NAV plans, ULIP based health plans etc. These are some of the most complex insurance products out there. But […]

  2. […] Other Exotic Plans – Some of the exotic plans in market areĀ guaranteed NAV plans, ULIP based health plans etc. These are some of the most complex insurance products out there. But […]


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