ULIP Sold As A Mutual Fund

There seems to be a fight going on among the insurance agents to sell their products. Some of theses agents cross their limits and thus misguide the investors. This is because of large commission for the agents in insurance related schemes which results in mis-selling of the products. One such case that I have came across few years back was selling of a ULIP as a mutual fund. One of my friend's cousin wanted to invest in mutual funds. His name was Amit. He wanted to invest 4 lacs but he did not have good knowledge about mutual funds. So he called the bank where his account was and asked them to send someone to his house for investment. After an hour one agent from the bank came to his house with blank application forms of various fund houses. The agent soon noticed that Amit was new to the field of investment. So he took Amit into confidence. He asked Amit to keep 1 lac in his bank account to deal with any unexpected need of cash. Then he asked Amit to diversify his investment and advised him to invest 1 lac each in three different funds. He told that all the proposed funds had been giving returns of around 50 % per annum and also promised that in bad market conditions too the returns would not be less than 30 %. Amit was very happy with the agent and decided to do exactly the way he was advised. After completing the formalities the agent told him that one of the proposed funds would also give him insurance cover of 5 lacs. This investment was in a ULIP but Amit had no idea about it. Amit was satisfied and thanked the agent for his advice. After one year he found that one of his investments had returns in negative. So he went to the bank for the redemption of the non performing investment. Over there he was told that the non performing investment was in a ULIP and he cannot redeem it before 3 years. He was also told that he has to invest 1 lac for every year for at least two more years. He asked the bank about consequences of early redemption. He was told that if redeemed he would get around 40000 rupees only. Amit felt cheated and tried to contact the agent. The agent was no longer working in the same bank. When Amit called on his mobile number the agent showed no interest in the argument and disconnected the call.


What to do ?
1. Research about top mutual funds before signing the papers. All good performing funds can easily be found on the internet.
2. Chose funds as per your risk appetite.                       
3. Have a knowledge about the FREE LOOK PERIOD of ULIPs.
4. Take advice from your elders. If getting advice is not possible then talk to other agents regarding investments. Ask their opinion about the funds proposed by other agents. Listen to what they have to say. A good mutual fund will receive good reviews from most of the agents.