If an insurance company comes up with a low-cost product, they fear losing out on business.

It's not easy to choose the best Ulip. When a person needs to advise a client on which mutual fund to invest, he can check websites to know the best-performing schemes over three to five years.

But there is nothing like that available for Ulips.

Also, since the expense structure of each Ulip is different, any comparison between the performances of different Ulips is not possible.

So, why do people invest in Ulips? Last year more than Rs 31,000 crore came into Ulips, which now account for around 56% of the total new premia coming into insurance policies.

The idea of a packaged product that offers both equity returns and insurance it seems seduces investors.

The primary reason why people buy Ulips is because of mis-selling. Agents tell people they have the option of paying a premium for only three years, when the actual term of most Ulips is at least 10 years. It works as a good selling point.

Most Ulips have a cover continuation option, which essentially ensures that even if the individual is not able to continue paying premia anytime after the first three years, the policy continues.

The insurance agents, though, have turned this into a selling point, giving an impression to investors that they have an option to stop paying premia after three years, which is really not the case.

An investor who decides to stop paying premia after three years hardly benefits; after three years, the expenses are less and more of the premium gets invested.

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