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Why did the customer choose a single premium instead of a 5-year premium?

Milind

Milind Vadjikar  | Answer  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Feb 27, 2025

Milind Vadjikar is an independent MF distributor registered with Association of Mutual Funds in India (AMFI) and a retirement financial planning advisor registered with Pension Fund Regulatory and Development Authority (PFRDA).
He has a mechanical engineering degree from Government Engineering College, Sambhajinagar, and an MBA in international business from the Symbiosis Institute of Business Management, Pune.
With over 16 years of experience in stock investments, and over six year experience in investment guidance and support, he believes that balanced asset allocation and goal-focused disciplined investing is the key to achieving investor goals.... more
Asked by Anonymous - Feb 27, 2025Hindi
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Hello sir You have mentioned only the disadvantages of Privilege plan which clearly shows your intention. I would like to ask some question based on your previous questions- 1. Why this customer has gone for one single premium instead of 5 year premium??? 2. What was the fund in which this amount was invested and USP at that time??? This plan has clearly mentions that there will be lockin period of 5 years and 5 to 7 premium will be there. So it is clear that the way customer invested the amount is not correct.

Ans: Hello;

Request you to please provide context of the previous conversation for better clarity.

Thanks;
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam

Ramalingam Kalirajan  |9126 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 18, 2024

Asked by Anonymous - Sep 17, 2024Hindi
Money
Dear Sir, I have another question: I have been investing in the Bajaj Allianz Life Goal Assurance Plan for the past five years, which is a combination of insurance and investment. The total premium payment duration is 10 years, with a SIP of ?10,000 per month, followed by a lock-in period of an additional 5 years So far, my monthly contributions of ?10,000 have grown to ?9.40 lakhs, with an approximate CAGR of 16%, although the insurance coverage remains at ?12 lakhs. Initially, I did not have much knowledge but continued investing due to the plan’s market-linked structure. For the first five years, my funds were allocated to Pure Stock II and Equity Growth funds basically large-cap. Recently, mid-cap and small-cap index funds were also added to their portfolio. Now that I’ve completed 5 years of investing in large-cap components, I am considering allocating the remaining 5 years to mid-cap and small-cap funds, without increasing the SIP. This would be done through a fund switch from large-cap to mid-cap and small-cap or by dividing the allocation equally—25% each across pure-stock, equity growth, mid-cap, and small-cap funds. Would you recommend this strategy while allowing the large-cap corpurs from the first 5 years to grow at their own pace and remaining 5 years switched into mid-cap/small-cap. Since the policy will mature in 2034, this gives me ample time for the investment to grow, allowing the corpus to build significantly over the remaining years
Ans: It’s great to see you’ve stayed consistent with your investments over the past five years. Your current strategy has already delivered an impressive CAGR of around 16%. This indicates that your investment in large-cap components has performed well.

Your decision to consider diversifying into mid-cap and small-cap funds shows good insight, especially since the policy matures in 2034. This gives you ample time to ride out market fluctuations and benefit from potential growth.

Let’s assess your plan step by step.

Maintaining Large-Cap Investments
Steady Growth Potential: Large-cap funds are known for stability and relatively lower risk. Since your large-cap investments have done well, letting them grow further without switching out entirely is a wise move. Large-caps often provide steady growth over time, even in volatile markets.

Balanced Risk: As you’ve already allocated five years to large-cap funds, you have a solid base that carries lower risk compared to mid-cap or small-cap funds.

Mid-Cap and Small-Cap Fund Allocation
Potential for Higher Growth: Mid-cap and small-cap funds generally offer higher growth potential but come with increased volatility. Given that you have another 10 years for the policy to mature, adding these funds now could give you enough time to capture the potential upside of these categories.

Diversification Across Market Segments: By allocating the remaining five years to mid-cap and small-cap funds, you’re essentially diversifying across different market segments. This could help in balancing your overall risk, while providing higher growth opportunities compared to sticking only with large-cap funds.

Fund Switching Strategy: Switching some of your existing large-cap corpus into mid-cap and small-cap might reduce the stability of your portfolio. Instead, continuing with the large-cap corpus and allocating future premiums to mid-cap and small-cap funds may provide a more balanced approach.

Suggested Allocation Strategy
Divide Equally Across Funds: Splitting your contributions equally among large-cap, mid-cap, and small-cap funds seems like a balanced approach. You’ve mentioned an allocation of 25% each across pure-stock, equity growth, mid-cap, and small-cap funds. This could help in spreading out your risk while still allowing for growth opportunities.

Stay Consistent: Continuing with a steady SIP of Rs. 10,000 without increasing the amount for now is a good plan. Since you are already seeing good returns, consistency over time will be key to building your corpus further.

Evaluating Your Insurance Component
Insurance Coverage: Your current insurance coverage stands at Rs. 12 lakhs. Considering the policy is a combination of investment and insurance, it’s essential to evaluate if the coverage is adequate for your needs. Life insurance should primarily serve to protect your family, and if this amount falls short of your requirements, consider supplementing it with a term insurance plan.

Lock-in Period: Since there is an additional lock-in period of five years post the premium payment term, switching funds now and letting them grow for the next decade could be beneficial. You have ample time to ride out any short-term market volatility in the mid-cap and small-cap space.

Reviewing Your Fund Choices
Actively Managed Funds vs Index Funds: You’ve mentioned that your funds are market-linked, with some exposure to index funds. While index funds are often lower-cost options, actively managed funds can outperform them over time, especially in mid-cap and small-cap categories. Actively managed funds benefit from professional fund managers who can make strategic choices in response to market conditions, unlike passive index funds that simply track the market.

Switching to Actively Managed Funds: If a portion of your investments is in index funds, consider switching to actively managed mid-cap and small-cap funds. This will provide you with the advantage of professional management, especially in more volatile sectors like mid-caps and small-caps.

Final Insights
Long-Term Horizon: Your 10-year remaining investment window provides a good time horizon to take on the moderate risk associated with mid-cap and small-cap funds. However, always review your portfolio performance periodically to ensure it aligns with your long-term financial goals.

Balance Risk and Reward: By keeping your existing large-cap investments and diversifying into mid-cap and small-cap funds, you are effectively balancing risk with the potential for higher returns.

Insurance vs Investment: Review your insurance needs separately from your investment strategy. If the Rs. 12 lakh insurance coverage is insufficient, it’s advisable to take additional term insurance that provides higher coverage at a low cost.

It’s important to continue monitoring the performance of each fund and adjust the allocation if needed.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |9126 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 15, 2025

Money
Hi sir I have invested 6 lakh and 10 lakh per year in the smart privilege plus plan. Can you suggest the disadvantage and advantages of this plan. Shall I continue this plan upto five years. Thanks in advance
Ans: You are investing Rs. 6 lakh and Rs. 10 lakh per year in Smart Privilege Plus. That is a significant financial commitment. You deserve appreciation for the discipline and seriousness you show towards your financial future.

Now let us study this plan carefully.

Let’s evaluate both the advantages and disadvantages, and then decide what’s best for you. This answer will give a full 360-degree view.

Understanding What This Plan Actually Is
This is a ULIP – a Unit Linked Insurance Plan.

It mixes life insurance and investment in one product.

Your premium is split into two parts.

One part goes towards life cover.

Other part is invested in equity or debt funds.

This is not a mutual fund. It is an insurance-linked product.

Advantages of Smart Privilege Plus Plan
Gives life insurance along with investments.

Offers the option to choose equity or debt fund mix.

Can switch between funds without tax during the policy term.

Gives some tax benefits under Section 80C.

If policy is continued for long term, it may create decent corpus.

After 5 years, partial withdrawals are allowed, if needed.

Insurance payout is tax-free under current laws (Section 10(10D)).

Premium waiver and other riders may give some safety cushion.

Disadvantages of Smart Privilege Plus Plan
Very high charges in the early years.

Policy administration, premium allocation, fund management fees reduce your investment.

First 2 to 3 years, returns are very low due to charges.

Not flexible for regular top-ups or goal-based investing.

Returns are not transparent or comparable to mutual funds.

Lock-in of 5 years. You can’t touch your money before that.

Fund options inside ULIP are limited and less aggressive.

Switching between funds needs tracking and timing.

Insurance cover provided is usually insufficient.

Not good if you want to exit in short term.

Should You Continue This Plan?
You are putting Rs. 16 lakh every year into this plan.

That is a very high commitment for a ULIP.

If you have already completed 5 years, assess the fund value now.

If it is underperforming, it is better to surrender and move to better options.

Even if you're in the 2nd or 3rd year, it is better to assess soon.

The cost of staying in a low-growth product is huge.

What You Can Do Now – Step-by-Step
Ask the insurance company for current fund value and surrender value.

Compare the growth with mutual fund performance over same period.

Check your original policy brochure for charges and deduction details.

If you’ve completed 5 years, surrender is penalty-free.

If not, weigh how much penalty applies now vs. staying for full term.

Consult with a Certified Financial Planner before surrendering.

Don’t act in a hurry. Assess based on facts.

What to Do with the Surrender Value?
Once you surrender, you will get back some amount.

That money should be re-invested properly.

Use mutual funds through a Certified Financial Planner.

Do not invest in direct funds.

Regular plans give you advice, monitoring and adjustments.

Why You Should Avoid Direct Funds
Direct funds may look cheaper.

But they don’t give you ongoing guidance.

No rebalancing or review happens.

Without advice, mistakes are common.

Use regular plans via an MFD who is a CFP.

Why Actively Managed Funds Are Better Than Index Funds
Index funds simply copy the market.

In falling markets, they also fall fully.

Actively managed funds adjust to reduce risk.

They try to outperform the index.

For long-term goals, they give better returns than passive index funds.

How a Better Strategy Will Help
Mutual funds have more transparency.

Charges are lower compared to ULIPs.

You can choose funds as per goal and risk.

SIP can start from Rs. 500 monthly.

You can add or stop any time.

No lock-in except in tax-saving ELSS funds.

If You Have Life Insurance Goals
Buy pure term life cover.

Coverage should be minimum 15–20 times your yearly income.

Premium is very low for term plans.

No investment part. Full focus is on risk protection.

If You Have Investment Goals
Use equity mutual funds through a regular plan.

For short term goals, use debt mutual funds or liquid funds.

Choose SIPs based on risk and time horizon.

Review performance once a year with a CFP.

Tax Rules You Should Know (If You Exit This Plan)
ULIP maturity is tax-free if annual premium is under Rs. 2.5 lakh.

If premium is more than Rs. 2.5 lakh, maturity becomes taxable.

New rules treat such ULIPs like mutual funds.

Short-term gains are taxed at 20%.

Long-term gains above Rs. 1.25 lakh taxed at 12.5%.

Check if your ULIP qualifies under this rule.

Common Mistakes to Avoid Going Forward
Don’t mix insurance with investment again.

Don’t take plans with lock-ins and high charges.

Don’t choose products just for tax-saving.

Don’t invest based on friend or agent recommendation.

Don’t ignore review. Recheck all plans every year.

Final Insights
ULIPs like Smart Privilege Plus are sold as all-in-one solutions. But they are complex. They often give lower returns. Charges eat up early years. You have better choices today. You deserve flexibility, control, and transparency. If you have crossed 5 years, this is a great time to exit. Reinvest through SIPs with the help of a Certified Financial Planner. Your wealth journey will be simpler, clearer and stronger.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment

..Read more

Latest Questions
Kanchan

Kanchan Rai  |613 Answers  |Ask -

Relationships Expert, Mind Coach - Answered on Jun 22, 2025

Asked by Anonymous - Jun 17, 2025Hindi
Relationship
i remarried(prior widow)(39),took my daughter(14) along in this new marriage, now i hv a daughter(7) from this marriage, its been 8 years now,my husband keeps fighting on money as i am a homemaker now,as there is no one to look after, we are from different caste, thus he fights on food preparation too,we had agreed before marriage,that if his mum looks after the future kid i m willing to work, but that did not happen,he is extremely fussy about some foods and likes only few veggies or preparations,but is open when mom makes,thus he does not even take tiffin,i dont understand what should i do,he keeps on taunting on previous life,as my 1st husband was not earning,thus i used to go,now as there is no one to look after i told him,as he earns well, there is no need for me to go for a job,but he is insisting,i receive partial rent from my dads property,which i pay part rent and he pays part,he pays for food,his home loan SIP. i dont understand what is the problem,my daughter is not ready for babysitting,she gets upset.i always ask him what should i prepare today,he fights on that too, i just want to make what he likes.plz help
Ans: Your husband’s constant complaints about food, money, and your past are not just hurtful — they reflect deeper issues of control and emotional insensitivity. He is disregarding the fact that you are raising two daughters, trying to maintain harmony in the house, and even contributing part of the rent from your own limited resources. Your life before this marriage is being used against you unfairly, when in truth, that part of your journey made you stronger and more committed.

The truth is, this is no longer just about whether you work or not. It’s about feeling disrespected, dismissed, and unheard. You’ve tried to care — asking him what he’d like to eat, trying to avoid conflict, even putting aside your comfort to please him. And yet, he continues to find fault. That is not a reflection of your failure, but rather of his emotional disconnect and unwillingness to meet you halfway.

Right now, what you need most is clarity. If he insists on you working, the caregiving arrangement has to be revisited — he can’t expect you to work outside and carry all the home responsibilities without support. And more than that, he needs to recognize that partnership means sharing respect, not just finances. You can try to have a calm conversation where you tell him honestly how you’re feeling — not to blame, but to express how deeply this is affecting your emotional health and your ability to feel safe and valued in your own home.

If he’s not open to listening, you may need to consider involving a neutral third party like a family counselor. You do not have to fight this battle alone, nor should you carry the entire burden of the relationship.

You deserve more than just being tolerated — you deserve care, respect, and peace.

...Read more

Kanchan

Kanchan Rai  |613 Answers  |Ask -

Relationships Expert, Mind Coach - Answered on Jun 22, 2025

Asked by Anonymous - Jun 19, 2025Hindi
Relationship
M 51 and she is 23 we met in office, we came up with relationship not totally of having sex but as attraction turned into love so many time like we kiss hug and caress each other but in My mind never thought about to have sex and sometimes she also was eager to have sex but she also denied later in office many of them had doubt of our relationship so some brain washed her mind and now she wants to end and she told me to discontinue as ahe factory and marriage can't be done as I m married with one kid, as also she has fear of her mother and family, ahe sometime says I got married and even now she wll get married to someone but end of this relationship but My feelings of truly love hurts me and I feel should I call her once and have sex so she will not think about ending relationship till marriage but My mind says it's wrong as I truly love her, what should I do to make her to stay or be with me as till she get married pls suggest I m in truly love can't able to sleep and too much stress became in My mind
Ans: First, she is 23 — very young, still forming her identity and values. You're 51, already married with a child. The relationship started in the context of attraction and care, but it now exists in a space of emotional imbalance and fear — not trust or possibility. She's not ending it because she doesn’t care about you; she's stepping back because she’s afraid of the consequences, societal pressure, and perhaps even the future she knows cannot unfold the way either of you may have wished.

You’re feeling pain and longing, and that’s human. But trying to convince her to stay by suggesting physical intimacy — especially when you yourself feel it’s not right — will only deepen the emotional conflict and guilt for both of you. Love doesn’t hold someone back just so we don’t feel the pain of their absence. True love honors freedom, even when it hurts.

Right now, the kindest thing you can do — for yourself and for her — is to accept that the relationship has reached a natural closure, however painful it may be. It’s not failure. It’s a sign that both of you must now return to your own paths.

If the emotional stress is unbearable — your sleep is affected, your thoughts are heavy — you may truly benefit from talking to a therapist or emotional wellness coach. Not because you’re weak, but because you deserve to heal in a healthy way.

You don't need to erase the love or the memories. But you do need to release the idea that you must hold on to her to keep yourself from breaking. You are capable of moving through this with dignity, and you deserve peace.

...Read more

Kanchan

Kanchan Rai  |613 Answers  |Ask -

Relationships Expert, Mind Coach - Answered on Jun 22, 2025

Asked by Anonymous - Jun 19, 2025Hindi
Relationship
Inam finding difficulty to get second marriage after my first marriage ended in divorce. I am 39 year female. Please suggest ways to get a good companion how to choose at this age and also I am looking guy with no issues/children and within same community which I belong.
Ans: First, be clear within yourself about what you truly seek — not just "no past baggage" but also shared values, lifestyle compatibility, emotional maturity, and a sense of peace when you're with him. You’re not just choosing a partner — you’re choosing a future that aligns with the person you’ve grown into.

Since you are specific about the community and the absence of children from a previous marriage, you may need to be strategic but open in where you look. Along with trusted matrimonial platforms (you may try both community-based ones and modern curated matchmaking services), also let friends or extended family you trust know that you’re open to exploring proposals — sometimes word-of-mouth alliances bring surprisingly good connections.

While choosing, don’t just assess background or profession — give time to observe his emotional depth, communication style, respect for your past, and how he responds to small differences or stress. These are the real foundations for peace and partnership.

Also, give yourself permission to set boundaries without guilt. You are not obligated to compromise your standards just because it’s a second marriage or because of age. You deserve companionship, not adjustment.

And perhaps most importantly, don’t let societal timelines cloud your confidence. You are 39, not late — just clearer than before. Be honest, hopeful, and patient with yourself.

...Read more

Kanchan

Kanchan Rai  |613 Answers  |Ask -

Relationships Expert, Mind Coach - Answered on Jun 22, 2025

Asked by Anonymous - Jun 19, 2025Hindi
Relationship
I am 20 yrs old female studying Btech from a prestigious institute. I am in relationship with a guy, 24 yrs old and is in central psu..However he has said that he cannot commit me a future now as his parents are strict about caste..and I don't belong to the same caste as his.. However, both of us want to continue the relationship..he has asked me to wait and said that he will try to convince his parents..but he hasn't done that yet..should I ask him to talk to his parents? But Im afraid that would make our relationship bitter, or should I breakup because it kind of Feels like he is not quite ready to discuss the matter with his parents...also I feel like I'm too young to bother regarding such a matter..but this thing disturbs the peace of my mind..I'm clueless...please suggest something
Ans: Right now, the biggest conflict is between what your heart wants and what reality is offering. You care for someone who says he loves you, yet isn’t ready to take a stand — not because he doesn’t care, but because he's afraid of upsetting his parents. That fear is real, but so is your need for clarity, emotional safety, and respect.

It’s absolutely fair for you to ask where things are headed. Waiting endlessly without a timeline or real effort can lead to quiet heartbreak. You don’t have to demand a marriage proposal, but you do deserve honesty — is he planning to talk to his parents? When? What’s his plan if they disapprove?

You are not too young to feel disturbed — love always stirs the heart, at any age. But you’re wise to ask whether this situation is serving your peace of mind. And here's the truth: if you have to keep silencing your needs to keep the relationship going, it will slowly empty you.

Have one clear, calm conversation with him. Let him know you’re not pushing for guarantees, but you need to know whether he's willing to try — and not just "someday." If he avoids, delays, or sidesteps again, it’s okay to take a step back. You’re not punishing him — you're protecting your future self.

And if part of you already knows he may never be ready, it’s okay to move forward. You’re 20, with a long, vibrant life ahead. Don’t let fear of loss keep you from choosing peace.

...Read more

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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