In a bygone era, Unit Linked Insurance Products or ULIPs had a bad name. They were associated with high costs, high charges and weren't advised by most of the independent financial advisors.
However, things have gone through a change and the new online ULIPs which are coming out seem to be offering at least some reasons why you might want to consider them. CNBC-TV18 spoke to Kshitij Mahajan Co-founder of Complete Circle Consultants to discuss the strengths, weaknesses, opportunities and threats that are still associated with ULIPs.
Mahajan said, "The new avatar of ULIPs which we call as 4th generation or 4G ULIPs, it has gone through a lot of churn in the best interest of the end-user also. At the same time tax efficiency is with insurance as a sector. So, as a product category, as a product basket of ULIPs, they have come up a long way where the charges or the annual fees are as low as mutual funds now. Good quality ULIPs are at 1.35 percent or 1.25 percent of charges where they promise you to return the mortality charge also. Now you will say 0.2-0.3 percent on a yearly basis will not make much of a difference but on a yield if you calculate for 10-15 years, it will make a difference of 2.5-3 percent, which is a big amount."
He further added, "The new age ULIPs are available with distributors as well but when you buy these products through distributors online or you buy in a physical way there is a difference of cost. Nowadays everybody is insisting to buy it online only. If you know the product very well yourself then you can go and buy directly from the manufacturer. So, it totally depends on how much knowledge you have for the product."