Lesson 1 of 3 · 6 min
One job per product
Protection and growth are different jobs. A bundled policy asks one premium to do both, so the only honest question is what each rupee is doing.
Insurance moves risk. Investment grows money. A bundled policy — sold as 'protection plus savings plus tax benefit' — asks one premium to do every job at once.
The way to judge it is not the brochure but the split: of every ₹100 paid in, how much buys cover, how much disappears into charges, and how much is actually left to grow?
Put these in order
A ULIP premium arrives at the insurer. Put the stages in the order they happen — and notice what reaches the market at the end.
- At year end, the fund value is whatever is left growing
- Each month, administration and mortality charges are recovered by cancelling some of your units
- What remains buys units of the fund you picked
- The premium allocation charge comes off the top
- You pay the year's premium
Quick check
A bundled plan with a ₹50,000 yearly premium typically carries life cover of about 10 times the annual premium. How much cover is that?
Myth
“In a money-back policy nothing is lost — the premiums come back, so the cover is basically free.”
False
The money that 'comes back' is your own, returned years later after charges — and inflation has been shrinking it the whole time. Getting ₹10 lakh back after paying ₹50,000 a year for 20 years is ₹10 lakh against ₹10 lakh paid in: growth of roughly zero. 'Free' cover attached to money that grew at nothing is among the most expensive cover there is.
Check yourself
1 / 3
Kabir asks
In a ULIP, why are 'premium paid' and 'amount invested' different numbers?
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