Reviewing a ULIP: HDFC Crest

Learn about how to understand a ULIP from Deepak Shenoy as he reviews HDFC Crest, a Unit Linked Insurance Policy.

1.      Understanding premiums and tenures

2.      The Guaranteed NAV, how it works and why it's not as good as it sounds

3.      A comparison with a Term Plan+MF combination - which is way better!

4.      Even performance of the ULIP has been sub-optimal compared to a mutual fund from HDFC (the promoter!)

5.      Costs and how they hurt your returns

(10 min)

Comments

In the Opportunities Fund,

In the Opportunities Fund, you mentioned that the NAV has gone down in the last one year or so. In such a case, how do they guarantee the minimum returns? Is there an escape clause or do they have to dig in somewhere else to make up for the money?

n the Opportunities Fund, you

n the Opportunities Fund, you mentioned that the NAV has gone down in the last one year or so. In such a case, how do they guarantee the minimum returns? Is there an escape clause or do they have to dig in somewhere else to make up for the money?

They are making their profit

They are making their profit any way as fund management fee + other % fees
you invest 100000=you get 10000 if unit price is 10
each month they will deduct the units for the equivalent value of their fee , so if NAV is less u loose more units for paying their fees .. infact they have to pay less wile paying guranteed return of 15 since the return wil be given only for the remaning units.Read the insurence doc (which u will get only after taking so refer someone else doc before proceding to make a decession ) if u put fixed deposit u ll get more if it is ashort term

In the Opportunities Fund,

In the Opportunities Fund, you mentioned that the NAV has gone down in the last one year or so. In such a case, how do they guarantee the minimum returns? Is there an escape clause or do they have to dig in somewhere else to make up for the money?

Vinayak: You can't exit

Vinayak: You can't exit before 10 years, and if you try, then there is no guarantee. The guarantee applies for a 10 year holding period - and at the end of 10 years, the debt portion of their portfolio will add up to the guaranteed amount.

What I showed was the opportunities fund (which isn't guaranteed). Only the "NAV Guaranteed fund" is guaranteed.

They make it more complex than it should be!

Do you any thing about

Do you any thing about constant proportion portfolio insurance . can you explain me that. Crest is based on same logic...

Thanks deepak -

Thanks deepak -

Thanks Deepak - really

Thanks Deepak - really fantastic explanation.

another good one there..

another good one there..

Time to go back and look at the two ulips that i took almost 4 years back...

Hi deepak, very nice video

Hi deepak,
very nice video and i really liked the part of comparing the ULIP with their in-house term plan and their mutual fund NAV.
But i would like to know about one thing: In ULIP we are paying 2.5 lacs in total. but in term plan and MF we may end up paying around 2.6 lacs. Would it be appropiate to subtract 28000 from 2.5 lacs of investment amount and divide the remaining amount by 5 which will come around 44400 rupees as yearly investment amount in MF instead of considering 47k?
I understand highest NAV guarantee product is of no use for wealth building. just curious to know the final amount....

Thanks for all your good work at marketvision.
Regards
Jagadees

Hi Jagadeesh, I forgot to

Hi Jagadeesh, I forgot to mention: What I do from years 6 to 10 is that I take out the term plan premuim (plus taxes) out as "charges". This is equivalent to your redeeming part of the fund to pay for the term plan.

That way you invest only 2.5 lakhs in total, in all cases. Makes it easier to compare.

The other way to do it is to take out Rs. 25,000 plus ST as a one-time premium for a 10-lakh, 10 year plan (prepaid). Then invest only 25K in year 1, then 50K in years 2 to 5. That gives you even higher returns with the MF (4.46 lakhs versus only 4.4 in the approach I took)

See if you can record the

See if you can record the video with higher audio volume when you post the next time.

Hi Deepak, Thanks for the

Hi Deepak,

Thanks for the insightful presentation. I had their sales guy chasing me to buy their guaranteed NAV plan. I was very skeptical that there was a trick or two in how they manage the guarantee part. Your elaboration certainly helps.

Do you review any previous policies? For e.g. HDFC SL Youngstar Champion I had opted for last year. Makes me uneasy if that was the right choice for the goal of my kid's higher education.

Thanks,
Ratnakar

Ratnakar, Thanks! Sure - will

Ratnakar, Thanks! Sure - will review it, but I don't have the link to the policy brochure.

But if you don't mind I can do a review with your own policy (the way the NAV has moved in a year, versus what the "calculator" had said, etc)

I really loved the analysis

I really loved the analysis by Deepak Shenoy about the HDFC Crest. Thanks so much for it. Just wanted to know one more thing. In the video you recommended Mutual Fund and Term Plan over the HDFC Crest. Can you please let me know what you mean by term plan and what are your suggested term plans. Is SIP is what you are referring to?

Hi, deepak, nice

Hi, deepak,
nice explanation....

i am new in this investment so i don't know much about it.
but want to invest my money(i didn't invest my money before).
so can you suggest me some good investment plans?
i was thinking for this HDFC crest plan, but after watching ur video i am in confusion that which is best..
i want guaranteed outcome with no risk.
else you can mail at cmj_jadhav@yahoo.com

Thanks,
Chetan

Thank u so much for the

Thank u so much for the video. It makes a lot of things regarding ULIPS clearer.Could you pls share the excel sheet that you have shown in the illustration above?

You have compare the wrong

You have compare the wrong funds.

Dear Deepak, Could you please

Dear Deepak,

Could you please throw some light on the Pro-Growth Flexi Plan offered by HDFC Life?

Hema

Thanks Deepak..excellent

Thanks Deepak..excellent analysis...that's what i wanted...guys were chasing me to opt this..i will send them link ..:)

Thanks Deepak... This is the

Thanks Deepak... This is the perfect eye opener for people who want to understand the difference between ULIP and MF+Term. Can you share the excel you have shown ? It would be quite helpful to do similar analysis.

Regards
Vijay

Hi Deepak, Loved the video. I

Hi Deepak,

Loved the video. I was getting influenced by HDFC guys in to getting CRESTfallen in the future :)... thanks to your video now I will not.

Many thanks for your objective assessment and sharing this analysis.

Thanks again.
PR

Another catch in highest NAV

Another catch in highest NAV schemes which does not get attention too often is this. While they guarantee highest NAV they do not guarantee highest UNITS!!!

Hi Deepak, I have already

Hi Deepak,

I have already invested in sl crest plan this Jan 2011.
What do I do Know?

Also if you help with some good investment options over a long term into pension plans, would be great.

thanks!
Dipti

I was thinking to invest in

I was thinking to invest in HDFC crest plan, so was searching for reviews on internet.
Thanks, for the real picture. Much appreciated.

Thanks Deepak for the video.

Thanks Deepak for the video. Its really helpful. HDFC guy was after me to go ahead with this policy and I was getting tempted. But now with you comments I am pretty sure I will not go ahead with the investment.

This is a very good analysis,

This is a very good analysis, you have provided very good platform for disscution on new investment and insurance products.I also feel that one should keep insurance and investment part seprate, for insurance purpose, take a online term plan & for investment take SIP route to invest in some star rated mutual fund schemes according to your risk apetite and time horizon

Wonderful analysis

Wonderful analysis Deepak....a real eye-opener!!

Excellent analysis, I must

Excellent analysis, I must say. One Questions- What is Risk Charge in your excel?

WOw! Blown away with your

WOw! Blown away with your excellent detailed presentation!

I was going to put some money, but now I would prefer
an FD that is giving ~10%, which I think will grow
as good as CREST's minimum without all the hoopla,
commissions and paper work !!

Great job!

i have compared my FD and

i have compared my FD and HDFC CREST for a 5,00,000 permium per annum. HDFC gives 44 lakhs after 5 years as compared to FD of 5,00,00 invested in each year for 5 years 36,00,000/-. This is calculated at NAV of Rs 15 and today's NAV is 9.70 per unit. I think HDFC crest is the best option. If you assume this NAV goes to 30 at the end of 5th year your return is Rs 75,00,000.

Excellent video sir. I want

Excellent video sir.
I want to invest around 30000 PA. I want to go for mutual funds but in the past i have suffered a lot. I thought of going for HDFC Crest but now i see that this doesnt give me good returns. Please suggest me a single plan where i would get good returns.

Hi Mr. Deepak Shenoy, I

Hi Mr. Deepak Shenoy,

I strongly commend your comparision and deny your statement that crest is not recommended product becoz u have nt considered following points:

1. Term plan is suitable for ppl b/w 22-35 bt target investors for crest is around 30-40, who always invest safe and where as mutual funds donot even guarentee the above return.

2. Term plan gives retun only upon the happending of risk where as crest atleast gives back ur investment amnt.

3. past 6montha return of opportunities fund has been only 5% and hw can u expect consistnt 10% return.

I feel its only a wague comparision.

1. There is no such thing as

1. There is no such thing as "term plan is only suitable for people between 22 and 35". Term plan can be used by anyone. People between 30 and 40 can take high risks as well, believe me.

2. This "return of investment amount" is a sin in insurance. We must learn to keep investment different from insurance. The Term Plan + MF option makes it far easier to do.

3. I'm comparing the same period returns with the returns of a mutual fund of the same parent. The ULIP has horribly underperformed.

Brilliantly answered Shenoy!

Brilliantly answered Shenoy! People must understand that the financial companies out there are running businesses to make money. If they are guaranteeing something , surely they must have chalked out other ways to cover their ass. A lot of mis-selling is happening for these kind of guarenteed products by playing along the typical Indian psyche of risk averseness.

Thanks for the advice. It was

Thanks for the advice. It was very helpful. I was about to invest a lakh as annual premium. Now I will look at other options.

Hello Sir, I have just bought

Hello Sir,

I have just bought this policy HDFC SL CREST.I want to get rid of this please tell me what to do.How much will i loose if i go for cancel the policy can i take back my 50k now from them.Please help!!

Thanks and Regards,
Ajith

If it's less than 15 days

If it's less than 15 days since you bought it you can give it back and get a refund.

Is it 15 days or 30 days. It

Is it 15 days or 30 days.

It is mentioned 30 days as free-look period after recipt of the policy.

Actually I want to cancel this policy after seeing your review but yet to receive the policy which I have already paid by credit card.

what is the procedure to cancel it

IRDA has a min 15 day period

IRDA has a min 15 day period but if the policy says 30 days then it's 30 days. Call them up, send them email and if possible physical letter mentioning date of transaction/credit card number and say you want a refund and the policy cancelled. Please do it immediately (send written letter immediately)

sir, it is in proposal stage

sir, it is in proposal stage .they are unable to find any details based on my client id.should I wait for the policy to receive.

No, send them email and

No, send them email and physical letter anyhow. the written letter is VERY IMPORTANT. Do it immediately regardless of the stage of the process.

Submit a request by phone also saying you absolutely need to cancel the policy, even if it is not approved, and that you need a refund.

Hi Deepak, I also bought this

Hi Deepak,

I also bought this policy yesterday only.Today someone also told me that from next year there will be no tax benefit on ULIP plans.Can you tell me to whom do I need to send the letter to surrender the policy and get a full refund? Will there be any deduction or do I get a full refund?

Vijay

why dont you call the person

why dont you call the person - if they have not processed it maybe you can stop it there itself.
I am trying to do the same. i got it just today :-)

Hi Deepak, I opted for HDFC

Hi Deepak,

I opted for HDFC SL Crest last year on November.Basically I was looking for some insurance + investment,which is anyway a big mistake.After watching this analysis I can understand what mistake I have done.

Will it be wise to stop this policy now.I don't mind on whatever I have lost as of now.But I would love not to loose further on it without any hope of getting a decent return.

Also can you suggest me some MFs that I can buy and manage online.Due to my job I roam around the whole world so keeping the paper work as well as investment is very difficult for me.

Thanks
Ani

Hi Deepak, Thanks a lot for

Hi Deepak,

Thanks a lot for your detail Analysis on this Product.
I also Planned to take this as they shown Guaranteed NAV return.
But it's really a eye Opener.

I want to know which is the best investment to Save Tax right now.
Which give us nice and safe return.

If you give comparison of NSC and FD for 5 years it's helpful.

Thanks in Advance.
Pratyuish.

Deepak, you are doing an

Deepak, you are doing an excellent job. Your articles are both very useful and the yahoo ones are hilarious. keep up the good work and wish u the best

Thanks for the guidance...i

Thanks for the guidance...i was planning for the plan now it has made me rethink my investment strategy.

Thanks for the detailed

Thanks for the detailed comparision. Really helpful.

I had fixed an appointment

I had fixed an appointment for 31st Oct to buy HDFC Crest. Luckily saw this page today and canceling the appointment.

Thanks Deepak for the analysis.