We asked you to send in your experiences about the financial mistakes you made in 2007 and how you plan to make 2008 a financial success.
Here, a Get Ahead reader who wants to remain anonymous, shares his insurance woes.
I believe I have made one of the worst errors by investing in a whole life insurance product in 2007.
Being an NRI, currently working in Dubai, I was desperate to have a pension income at the earliest and also an insurance policy. This was essential for me as I didn't know how long I could hold on to my NRI status.
Hence I was approached by my insurance agent, who advised me to consider TATA-AIG's Mahalife policy where the insurance premium will be paid for 12 years and thereafter I will get a sum assured return of guaranteed 5 per cent for the rest of my life (whole life).
Besides, I will get a non-guaranteed bonus of few percentages depending on the company's performance from the 6th year onwards. Since it was initial days of private insurance, I jumped in and bought the policy, convincing myself that this was an ideal solution for me. Even though the annual premium is huge (Rs 1,58,000*2 = Rs 3,16,000).
But today as I am trying to get the courage to get out of the policy, I find there is a huge loss since the semi-annual premium being paid is Rs 1,58,000. And the returns the sum assured as well as guaranteed bonus and an annual dividend coupon were not commensurate with what I will be putting for 12 years.
After investing Rs 37,92,000 (Rs 3,16,000812), I was getting a sum assured of only Rs 46 lakhs. Any term insurance policy would have given me a higher sum assured than this insurance policy.
What I am really worried is that the 5 per cent annual return will not beat the inflation and the money will be meagre then (when I retire) as a pension, even though it seems huge today.
I approached the same insurance agent and requested if I could switch to some ULIP so that I could beat the inflation. Or start investing in an MF.
But he said it is not possible to switch. And also, there will be no guarantee of what will I be eligible in terms of insurance coverage if I closed the insurance policy.
Hence I am in a bigger mess now having a liability on one side, a huge premium which I could have used elsewhere to achieve my objectivity. Unfortunately I have not found any trustworthy financial advisor in Dubai. Hence, I have still not found the solution.
Meanwhile I am continuing with the policy and hoping to put the 5 per cent guaranteed bonus into an MF as and when it comes after 12 years.
Policy details:
Policy name: Mahalife from TATA-AIG
Policy start date: 26/11/2004
Premium to be paid for: 12 years
Sum assured: Rs 46 lakhs
Semi-annual premium: Rs 1,58,000
I have paid the premium for 3 years + 1 semi annual (totaling Rs 11,06,000). Still another 20 lakhs to go!
Other benefits:
~ 12th policy year onwards is a 5 per cent guaranteed coupon
~ 6th policy year onwards an annual dividend coupon will be declared based on company performance
Also read:
Disclaimer: This is a reader-driven feature. The views expressed by the readers are their own, and not that of Rediff.com. Rediff.com has not altered the material presented here and does not endorse it in any way.
Did you make any financial mistakes in 2007? What caused you to make these mistakes? How could you have avoided them? Would you like to inform people about such investment bloopers so that they make wiser investment decisions in 2008?
How are you planning investments in 2008 so that the year ends for you on a happy note?
We would love to hear from you -- email your experiences, advice and opinions in this regard to getahead@rediff.co.in with your name, profession, age and location. The best entries will be published right here on rediff.com.
