NRI With ULIP: Should I Cancel Policy for Apartment Down Payment?

Ans: And this policy was for what period. Best is you can put this query to your insurance agent or get it from your policy servicing branch

Ans: Understanding Your ULIP Situation
Congratulations on completing the five-year lock-in period for your ULIPs. You now have two matured ULIPs: one with Bajaj and another with HDFC. The Bajaj ULIP is currently valued at Rs 2.70 lakh, and the HDFC ULIP at Rs 3.02 lakh. It's time to evaluate whether to leave the investment or withdraw.

Assessing ULIP Performance
Evaluating the historical performance of both ULIPs is crucial. Consider the annual returns compared to other investments. ULIPs combine insurance with investment, which impacts returns. Typically, ULIPs have higher charges than mutual funds, affecting net returns.

Charges and Costs in ULIPs
ULIPs often have several charges: premium allocation, policy administration, fund management, and mortality charges. These charges can significantly reduce your overall returns. Comparing these charges with potential returns from other investment options is essential. Lower-cost alternatives might offer better net returns over time.

Evaluating Investment Needs
Assessing your current financial goals and needs is necessary. Are these ULIPs aligned with your long-term financial objectives? If not, it might be wise to reallocate these funds. Your investment should match your risk tolerance and time horizon.

Benefits of Staying Invested
Continuing with ULIPs can offer benefits such as loyalty additions and bonuses. Check the policy terms to see if staying invested provides additional benefits. If market conditions are favourable, the investment could grow further. Evaluate the performance potential of the underlying funds.

Withdraw and Reinvest Strategy
Given the charges and potentially better alternatives, it might be prudent to withdraw from your ULIPs. Reinvesting in more cost-effective options like actively managed equity mutual funds can offer higher returns with lower costs. Consult a certified financial planner to select suitable mutual funds. Ensure your new investments align with your financial goals and risk profile.

Advantages of Mutual Funds
Mutual funds, particularly actively managed ones, often outperform ULIPs due to lower costs and professional management. Direct funds might seem appealing but require active management and market knowledge. Regular funds through an MFD with CFP credential provide professional management and advice. This ensures optimal fund performance and alignment with your goals.

Tax Implications
Consider the tax implications of withdrawing from ULIPs. ULIPs held for over five years often enjoy tax benefits on maturity. Check if withdrawing and reinvesting impacts your tax liabilities. Consult a certified financial planner for detailed tax planning.

Liquidity Needs
Evaluate your liquidity needs before making a decision. ULIPs can be less liquid compared to other investments. If you need funds soon, withdrawing might be a better option. Ensure you have enough liquidity for emergencies and short-term goals.

Reviewing Financial Goals
Revisit your financial goals and retirement plans. Ensure your investments are geared towards achieving these goals. Regularly review and adjust your investment strategy with your certified financial planner. A well-planned strategy helps secure your financial future.

Risk Management
Diversify your investment portfolio to manage risk effectively. Consider a balanced mix of equities, fixed-income instruments, and other asset classes. Regularly rebalance your portfolio to maintain the desired asset allocation. Work with a certified financial planner to tailor a risk management strategy.

Importance of Professional Guidance
Certified financial planners provide valuable insights and personalized advice. They help in selecting the best investment options based on your needs. A professional can guide you through market fluctuations and economic changes. Rely on their expertise to make informed investment decisions.

Final Assessment
Assess the overall performance and charges of your ULIPs. Compare potential returns from alternative investments. Consider your financial goals, risk tolerance, and liquidity needs. Make a decision that aligns with your long-term financial strategy.

Conclusion
Given the high charges and the availability of better-performing, lower-cost alternatives, it is advisable to withdraw your investments from the ULIPs. Reinvesting these funds in actively managed mutual funds can provide you with better returns and professional management. Regular reviews and professional guidance are key to successful investing.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: To be specific
To get clear reply & tax calculation, I suggest you to please furnish the details : ULIP Policy & Company, Period of Premium paid in years & Annual Premium amount.
Thanks.

Ans: Partial Withdrawal Tax Implications
Partial Withdrawal - Tax Implication Now:

Since your ULIP was bought before 2010, the partial withdrawal is tax-free if the premium does not exceed 10% of the sum assured (Rs 5.2 lakhs in your case).
No TDS Deducted - Treatment for Tax Filing:

If no TDS is deducted, the withdrawal is still tax-free and does not need to be treated as taxable income.
Surrender Tax Implications
Surrender of Policy - Tax Implication Now:

If you surrender the ULIP, the maturity proceeds are tax-free, as your policy was purchased in 2008, provided the premium does not exceed 10% of the sum assured.
No TDS Deducted on Surrender - Treatment for Tax Filing:

If no TDS is deducted, the surrender value is still tax-free and does not need to be reported as taxable income.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Your LIC Jeevan Anand policy is a traditional endowment plan with a unique benefit structure. It combines both insurance and investment. The policy provides coverage during the premium-paying term and continues to offer life cover even after the term ends. This is one of the key features that differentiates Jeevan Anand from other endowment plans. You are paying premiums for 16 years, with the policy maturing in 2024, while the premium-paying term extends to 2029.

Maturity vs. Premium Paying Term

It's important to distinguish between maturity and premium-paying term. Maturity refers to the point when the policy reaches its end date, and you become eligible to receive the maturity benefits. In your case, this is set for 2024. The premium paying term is the period during which you need to pay premiums, which is until 2029.

Redeeming After Premium Paying Term

You mentioned that the maturity date is in 2024, while premiums are payable until 2029. If you choose to redeem the policy after the premium-paying term ends in 2029, you should receive the maturity benefits without any deductions. The full benefits include the sum assured, bonuses, and any loyalty additions applicable.

Waiting Until Maturity

Waiting until the policy matures in 2024 to redeem it might seem logical. However, since you are required to pay premiums until 2029, it’s advisable to continue with the policy. Redeeming after 2029 ensures you receive the maximum benefits. This approach also means you avoid any potential penalties or deductions that could apply if you redeem before the premium-paying term ends.

Impact of Early Redemption

If you consider redeeming the policy before the premium-paying term ends, there could be deductions or penalties. Early redemption might lead to a reduction in the final payout, and you could lose out on potential bonuses. Additionally, the policy's life cover will cease if you redeem early, which may not be advisable depending on your current insurance needs.

Assessing Your Current Financial Situation

Before deciding, assess your current financial situation. If you can comfortably continue paying the premiums until 2029, it is generally better to do so. This will allow you to maximize your benefits and avoid any unnecessary deductions. Also, consider your overall financial goals. If this policy fits into your long-term plan, continuing until the end of the premium-paying term is prudent.

Evaluating Alternative Investment Options

If you feel that this policy is not yielding the returns you desire, you may want to explore other investment options. However, surrendering the policy before the premium-paying term ends is usually not recommended due to potential financial losses. Consider alternative options only if you have thoroughly assessed the potential benefits versus the cost of early redemption.

Importance of Life Insurance Coverage

Jeevan Anand provides life coverage even after the policy matures. This is a crucial benefit to consider. If you redeem the policy early, you will lose this coverage. It’s important to ensure you have adequate life insurance coverage in place before making any decisions about early redemption.

Final Insights

Continuing with your LIC Jeevan Anand policy until the end of the premium-paying term in 2029 is advisable. This approach will maximize your benefits, including maturity value and life coverage. Redeeming the policy after 2029 ensures you receive the full sum assured, bonuses, and any loyalty additions without deductions. Assess your financial situation and insurance needs before making any decisions. Consider alternative investments only if they align better with your financial goals, but be mindful of potential losses from early redemption.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in