I am 28 years old. I have a unit-linked insurance plan (Ulip), which is a kind of a retirement plan. I pay 10,000 per month and it has a three-year lock-in period, ending October 2011. Should I continue my payments after the lock-in? If I discontinue, what will be the implications? Should I instead invest the amount in mutual funds? Although the insurance cover is for 30 lakh, my priority is growth.

—Uttam Kumar

With your query it seems that you have bought a unit-linked pension plan (ULPP). The prime objective of these plans is to offer regular pension after you retire.

I would recommend that you write down what your objectives for retirement are. If you have bought the above plan with that objective in mind, I would suggest you to continue with it. You need to understand that insurance/pension plans are long-term instruments intended to be continued for a long period.

I was persuaded by an agent to opt for a ULPP in March 2010. I have put in 3 lakh and was told that paying premiums further was optional. I found out later that the policy would lapse if I don’t pay premiums for three years. There is no surrender charge after five years and the fund value may be redeemed. It deducted 15% allocation charges last year. Though there are no allocation charges from the second year, I have been asked to pay a premium for the second year. Also, if I pay the premium for three years, a loyalty addition of 1.5% of the fund value will be made at the end of every fifth year. I am not sure if I should go ahead. Please advise.


You will lose substantially if you do not continue with your premium payments. I would advise you to stay invested for at least five years and then evaluate whether you want to continue it or exit. Insurance plans are meant for the long term as they provide a cover and cater to your savings needs. Depending on your age, look for a cover for 10-25 years.

I am 35 years old and want to take a term plan. Should I take a term plan for my wife as well because she has very few life insurance policies?


A term plan is a simple insurance cover in which you (policyholder) need to pay a low premium for a life cover. In case of death, your dependants would receive the life cover or sum assured. I would recommend each person to at least have one term insurance in order to protect his/her family in case of untimely death. If your wife is an earning member of the household, she should also have a term insurance.

Also, you do not necessarily need “too many policies" as you have mentioned. All you need is the right kind of policies.

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