Did you know? There are certain ULIPs where your first year premium allocation charges are 100%. They claim that they are investing your funds in a so called fixed deposit type fund wherein you will not have to take market risk on the first year investment, and the company guarantees some return on this corpus. Now here's the actual deal. If you go into the fineprint (very few of us actually do), you will realise that they are giving you a return of around 120-130% of your first year premium in the 10th year, in some cases around 200% in the 15th year, and in yet other policies around 250-300% in the 20th year. If you actually compound these returns you will be startled to see that the actual annual return is only around 3-5% p.a. much lesser than any deposit. This is nothing but a marketing gimmick to ensure a very high payout (almost 40%) to the advisor recommending this policy to you.
In almost all cases there are certainly other policies from the same insurer wherein neither do you have to pay such high charges, nor does the advisor earn such absurd fees. Please go through the fineprint before you make a buying decision.
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