ULIPs are one of the most marketed investment products and highest selling too. Why? The only reason I see is, most of the ULIP investors are shown "heavens in future" by ULIP marketing agents and distributors. Why do they do so? For the sake of your better future ... is it? A BIG NO! It is for the sake of making their present better.
Commissions for ULIP marketing agents are in tune of 20-50% of your premium for first few years. (this changes company to company). Charges that ULIP company deducts from your initial investments would explain you this. Checkout your actually invested premium and charges deducted for any ULIP you might have invested in. I personally hate ULIPs for investments. The reason? Charges being charged by Insurance companies for ULIP investments are too high.
What is ULIP?
ULIP is nothing but Unit linked insurance plan. In simpler terms, ULIP provides you insurance PLUS investment. Investment in mutual fund like units. In a way it is mutual fund investment along with life insurance.
If you checkout the mutual fund charges, they are pretty less in comparison to ULIP charges. The best practice could be, buy term insurance if you want to have insurance cover and invest separately in mutual funds. This would save you the huge charges ULIP companies generally charge you. Combine the price of term insurance and mutual fund charges and you would see them at much lower levels than what insurance companies charge you for investing in ULIPs. New investors considering ULIPs for investment should consider this methodology before investing your hard earned money in ULIPs.
For existing ULIP investors
I found one very good informative article on ET website about SEBI ban on ULIPs and what existing investor's should do now? Check it out here.
