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Should I continue or surrender my ULIP investment for my son's future?
Ramalingam Kalirajan |8292 Answers |Ask -Follow
Mutual Funds, Financial Planning Expert - Answered on Apr 11, 2025
Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
Question by Dinesh on Apr 10, 2025Hindi
Sir I investing in Bajaj invest protect goal plan ULIP in small cap month,per month 7000 Rs. Present fund is 52300 compared to invested value of 70000Rs. Can I continue or surrender this policy.I have started investing in this policy for my son future. He is 4 years old now.Kindly suggest.
Ans: Evaluation of Your Current ULIP Investment for Your Child’s Future
You have started a ULIP for your child’s future.
Your investment is Rs 7,000 per month.
The total invested value is Rs 70,000 till now.
The current fund value is only Rs 52,300.
You are investing in a small-cap fund under this ULIP.
Your son is 4 years old now.
Let us now assess this decision step by step.
Appreciating Your Intention
You have thought about your son’s future early.
You are trying to build wealth with discipline.
This is a very good habit.
Starting early always gives a good advantage.
Protecting your child’s future is always a wise move.
You are also investing monthly without fail.
This kind of consistency is rare.
Understanding the Nature of ULIPs
ULIP means Unit Linked Insurance Plan.
It mixes insurance and investment.
You pay premiums monthly or yearly.
A small part goes to life insurance cover.
The remaining is invested in the market.
Charges are very high in the first 5 years.
Fund management charge, allocation charge, mortality charge.
These charges reduce your investment value.
You also have lock-in for 5 years.
You can’t withdraw before that period.
Small-Cap Fund in ULIP – Risk Factor
You have selected small-cap fund.
Small-cap funds are very volatile.
They fall sharply in market correction.
They rise more during market rally.
It is not safe for child’s future goals.
Risk is high and return is not steady.
Also, in ULIP, the fund performance is not very transparent.
You can’t track fund managers or detailed strategy.
ULIP Performance – Present Situation
You invested Rs 70,000 in total.
Current value is only Rs 52,300.
That means you are in a loss now.
The loss is nearly 25%.
This is not acceptable in short time.
The charges have eaten the returns.
Market may also be volatile.
Small-cap correction affects your value badly.
Compare ULIP vs Mutual Fund for Child Goal
Mutual fund gives more flexibility.
You can choose from many categories.
Charges are lower in mutual funds.
You get full transparency in funds.
Mutual funds are better regulated.
You can track performance easily.
You can switch any time without high costs.
You get better returns for long-term.
Why You May Consider Surrender of ULIP
You have already seen negative growth.
Charges are high and will continue.
Fund selection is very limited.
Child’s future needs stable, reliable returns.
ULIPs don’t support goal-based investing properly.
After lock-in, no reason to continue.
Even if loss is there now, stopping further loss is wise.
Shift money to better product for long-term.
Where to Shift After Surrender – A Better Path
Start SIP in mutual funds through Certified Financial Planner.
Choose regular plans via qualified Mutual Fund Distributor.
Don’t go for direct plans – they lack expert guidance.
Avoid index funds – they just copy the market.
Use active funds – they aim to beat the market.
Let expert select best funds for you.
Create mix of large-cap, mid-cap, balanced funds.
Invest based on time frame and goal.
Review every year with your Certified Financial Planner.
Why Direct Mutual Funds Are Risky for You
No one to guide you in choosing funds.
You may select wrong fund unknowingly.
No one reviews your investments regularly.
You may react emotionally during market falls.
No discipline without expert support.
Regular plans through MFD and CFP give full service.
Why Index Funds Are Not Ideal for Child Planning
Index funds only match the market returns.
They don’t beat the market ever.
During market falls, they fall completely.
Fund manager has no control.
All stocks are included, good or bad.
No downside protection.
Not suitable for child’s long-term needs.
Active funds are better with risk management.
What to Do Now – Step-by-Step Guidance
Continue paying ULIP till lock-in completes (if under 5 years).
After lock-in, check surrender value.
Surrender policy and stop further payments.
Take the fund value even if at slight loss.
Reinvest that amount into mutual fund SIP.
Start SIP with regular fund through CFP support.
Invest monthly same Rs 7,000 amount.
Select diversified fund mix for stability and growth.
Set goal for your son’s education and milestones.
Use goal calculator to fix amount and duration.
Stay disciplined for next 14 to 16 years.
Don’t withdraw in between for other needs.
Monitor performance with expert every year.
Switch funds if any underperforms consistently.
Avoid high-risk sector funds.
Avoid guaranteed return insurance-cum-investment policies.
Additional Tips for Child Financial Planning
Buy pure term plan for yourself.
Term plan gives full life cover at low cost.
Use health insurance for family protection.
Create emergency fund of 6 months expenses.
Don’t depend only on child policies.
Build your own wealth systematically.
Children need money, not policies, for education.
Review portfolio every year.
Increase SIP with your income rise.
Don’t panic in market fall – stay invested.
Finally
You started early – that’s good.
But current product is not helping your goal.
ULIP has high charges and low flexibility.
Small-cap funds increase volatility.
You may consider surrendering it after lock-in.
Reinvest wisely in mutual funds.
Use Certified Financial Planner’s help for proper fund mix.
Active funds through MFD give better value.
Avoid index funds and direct plans.
Align investment to your son’s future education needs.
Stay focused, review regularly, and be patient.
This approach can build better wealth for your child.
Long-term vision with proper planning works best.
You deserve better returns with low risk for your family.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
You have started a ULIP for your child’s future.
Your investment is Rs 7,000 per month.
The total invested value is Rs 70,000 till now.
The current fund value is only Rs 52,300.
You are investing in a small-cap fund under this ULIP.
Your son is 4 years old now.
Let us now assess this decision step by step.
Appreciating Your Intention
You have thought about your son’s future early.
You are trying to build wealth with discipline.
This is a very good habit.
Starting early always gives a good advantage.
Protecting your child’s future is always a wise move.
You are also investing monthly without fail.
This kind of consistency is rare.
Understanding the Nature of ULIPs
ULIP means Unit Linked Insurance Plan.
It mixes insurance and investment.
You pay premiums monthly or yearly.
A small part goes to life insurance cover.
The remaining is invested in the market.
Charges are very high in the first 5 years.
Fund management charge, allocation charge, mortality charge.
These charges reduce your investment value.
You also have lock-in for 5 years.
You can’t withdraw before that period.
Small-Cap Fund in ULIP – Risk Factor
You have selected small-cap fund.
Small-cap funds are very volatile.
They fall sharply in market correction.
They rise more during market rally.
It is not safe for child’s future goals.
Risk is high and return is not steady.
Also, in ULIP, the fund performance is not very transparent.
You can’t track fund managers or detailed strategy.
ULIP Performance – Present Situation
You invested Rs 70,000 in total.
Current value is only Rs 52,300.
That means you are in a loss now.
The loss is nearly 25%.
This is not acceptable in short time.
The charges have eaten the returns.
Market may also be volatile.
Small-cap correction affects your value badly.
Compare ULIP vs Mutual Fund for Child Goal
Mutual fund gives more flexibility.
You can choose from many categories.
Charges are lower in mutual funds.
You get full transparency in funds.
Mutual funds are better regulated.
You can track performance easily.
You can switch any time without high costs.
You get better returns for long-term.
Why You May Consider Surrender of ULIP
You have already seen negative growth.
Charges are high and will continue.
Fund selection is very limited.
Child’s future needs stable, reliable returns.
ULIPs don’t support goal-based investing properly.
After lock-in, no reason to continue.
Even if loss is there now, stopping further loss is wise.
Shift money to better product for long-term.
Where to Shift After Surrender – A Better Path
Start SIP in mutual funds through Certified Financial Planner.
Choose regular plans via qualified Mutual Fund Distributor.
Don’t go for direct plans – they lack expert guidance.
Avoid index funds – they just copy the market.
Use active funds – they aim to beat the market.
Let expert select best funds for you.
Create mix of large-cap, mid-cap, balanced funds.
Invest based on time frame and goal.
Review every year with your Certified Financial Planner.
Why Direct Mutual Funds Are Risky for You
No one to guide you in choosing funds.
You may select wrong fund unknowingly.
No one reviews your investments regularly.
You may react emotionally during market falls.
No discipline without expert support.
Regular plans through MFD and CFP give full service.
Why Index Funds Are Not Ideal for Child Planning
Index funds only match the market returns.
They don’t beat the market ever.
During market falls, they fall completely.
Fund manager has no control.
All stocks are included, good or bad.
No downside protection.
Not suitable for child’s long-term needs.
Active funds are better with risk management.
What to Do Now – Step-by-Step Guidance
Continue paying ULIP till lock-in completes (if under 5 years).
After lock-in, check surrender value.
Surrender policy and stop further payments.
Take the fund value even if at slight loss.
Reinvest that amount into mutual fund SIP.
Start SIP with regular fund through CFP support.
Invest monthly same Rs 7,000 amount.
Select diversified fund mix for stability and growth.
Set goal for your son’s education and milestones.
Use goal calculator to fix amount and duration.
Stay disciplined for next 14 to 16 years.
Don’t withdraw in between for other needs.
Monitor performance with expert every year.
Switch funds if any underperforms consistently.
Avoid high-risk sector funds.
Avoid guaranteed return insurance-cum-investment policies.
Additional Tips for Child Financial Planning
Buy pure term plan for yourself.
Term plan gives full life cover at low cost.
Use health insurance for family protection.
Create emergency fund of 6 months expenses.
Don’t depend only on child policies.
Build your own wealth systematically.
Children need money, not policies, for education.
Review portfolio every year.
Increase SIP with your income rise.
Don’t panic in market fall – stay invested.
Finally
You started early – that’s good.
But current product is not helping your goal.
ULIP has high charges and low flexibility.
Small-cap funds increase volatility.
You may consider surrendering it after lock-in.
Reinvest wisely in mutual funds.
Use Certified Financial Planner’s help for proper fund mix.
Active funds through MFD give better value.
Avoid index funds and direct plans.
Align investment to your son’s future education needs.
Stay focused, review regularly, and be patient.
This approach can build better wealth for your child.
Long-term vision with proper planning works best.
You deserve better returns with low risk for your family.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
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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