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

dear sir, I am naive, still a

dear sir,

I am naive, still a query is a query. The return showed by your video is roughly 5% anually for Crest Highest NAV guaranteed. However you have not included the change in value brought by buying a unit at 10/11INR and selling it at 15INR (the promised value) at the end of 10 years.

(379299INR/10)*15 =568949INR. the gain comes to 12% roughly.

Ajay

It's not the per unit price -

It's not the per unit price - its the return on your investment that matters. If they keep deducting units for some premium charges and commissions, tehn you lose 100% on those units. Net of all that, the return is extremely low, as I've mentioned.

Hi deepak. Thanks a ton. I

Hi deepak. Thanks a ton. I just had a 1 hour discussion with one of agent and then finally decided to invest the amount tomorrow as 31st march is the last date. Your video has really helped me a lot. Once again thanks a ton. Deepak can you please suggest any good fund to me.

Thanks Deepak ! Very nice

Thanks Deepak ! Very nice approach and very helpful.

Superb explanation! Thanks a

Superb explanation! Thanks a lot for sharing the evaluation strategy.

Crest is the most safe Unit

Crest is the most safe Unit Linked Insurance Plan ?
Charges : IRDA says in any united linked plan where term is less then 10 years, Insurance company cannot take more then 2.95% of (Investment Amount + Returns on Investments)

Next ,They say Rs.15 Garanteed on every Unit you hold in account.

Year 1 Nav Rs.10
Year 2 Nav Rs.11
Year 3 Nav Rs.12
Year 4 Nav Rs.13
Year 5 Nav Rs.14

Above is as assumed NAV growth Year on Year.

Averge Cost of Unit (Sum of each years NAV which is Rs.60 divided by 5 years. Therefore each unit will Cost Rs.12 on an average.

Company gives Rs. 15 therefore a profit of Rs.3 on each unit one holds. Therefore bare minimum profit in terms of percentage will be
Rs.3 divided by Rs. 12 * 100 = 25% for 10 years. Further divide 25% /10 years = 2.5% as % return.

Which means your charges are almost recovered. When HDFC SLIC gives garantee of rs. 15 on every unit you hold.

Actual Profits will be only if, Markets Fall In first 5 years and you are able to buy more units and less price.Or When Unit Value touches at least Rs20. Which is realistic figure in 10 yrs time.

If one ends up buying units in positive market ie. above Rs. 10 but not over Rs.15. and Maturity Unit Value is 15. Then this investment will work like a capital protection garantee. But if NAV goes beyond 20 0r more you are sure to book profits.

If you end up buying units in negative market ie below rs.10 where your average would be lets say 8/7 or even 6 … you will surely book a profit.
.

I don't think you've seen the

I don't think you've seen the video :)

The point is this - you can make far better returns with a mutaul fund + term plan. This is a total waste of a policy.

If they use CPPI then you won't see the NAV going anywhere. Chances are that the NAV has gone down even now.

I bought the Policy on 22nd

I bought the Policy on 22nd November 2011. I was told that I can get the amount related to Highest NAV after the completion of 7 years but now another representative from HDFC gave me a welcome call and told me that, no the maturity period is 10 years to get benefits of highest NAV. When I said that I was told this as 7years She told 'I apologize' for what our representative has told you.. What the fish... now what should I do...?

Question: I have got the receipt but not the policy document. Does the look Up period starts from the day when I get the receipt or the policy document?

I think the lookup period

I think the lookup period starts immediately after you receive you policy documents. You have 30 days time to return the policy.

Thanks for that excellent

Thanks for that excellent explanation Deepak..
i was always skeptical about this Crest plan but when chased by these HDFC guys consistently with all the masala dialogues i didn't have a logical explanation why i didn't want it..
now i have some data points to counter them instead of a simple "sorry, i'm not interested"

Very nice video. I'd look

Very nice video. I'd look forward to see more videos/articles from you.

Great presentation. Could you

Great presentation. Could you please post the spreadsheet showing how you calculated the costs. I tried but was not able to reproduce your numbers.
thanks.

Thanks for the review. It was

Thanks for the review. It was very crisp and succint. It helped answer a lot of questions on this particular plan. It would bring more credibility if the HDFC sales/marketing folks provided both the the pros and cons of the plan upfront.

Thanks for the review. It was

Thanks for the review. It was very crisp and succint. It helped answer a lot of questions on this particular plan. It would bring more credibility if the HDFC sales/marketing folks provided both the the pros and cons of the plan upfront.

Excellent review by

Excellent review by expert...what a data interpretation! It was an eye opener for me. Saved me from getting thugged by HDFC.

Hello Sir, Thanks to ur

Hello Sir,

Thanks to ur presentation, surrendered my policy within the 1 month period, I wanted to know how u have calculated the returns 2nd month onward. Can you share the excel file for my future reference. or maybe the formula.

HDFC CREST BDM visted me.

HDFC CREST BDM visted me. Tried hard to convince me the first day. Asked him to provide illustration considering the actual charges ( 4% + 1.85% + 3.72% + mortality charges + service & edu. cess) as I found the charges are extremely high around 10%/yr. This will simply offset any growth in NAV by way of cancellation of units. That's why HDFC Crest plan guarantees only the NAV & not the absolute return on investment.
Next day the BDM came with his colleague who had prepared the illustration. But there were so many follies that even he could not answer when I identified the same. Subsequent to that I prepared the illustration on my own considering the various charges provided in the brochure and am pleased to see your presentation where I found my figures are very close to what you have illustrated ( I too had considered 10% return). And this I prepared for myself to compare when BDM returns again with illustration based on my previous comments. I have few more observations:
1. Even if the NAV goes down year after year ( like in prolonged bear phase) where one accumulates more units, it is eaten away by the yearly fund charges as one is forced to remain invested for 10 yrs for the greed of guaranteed NAV@ 15. Then also the returns are not worth the investment.
2. Even RD of Rs.50,000/- @8% interest per annum for 5 years shall give 86% absolute return at the end of 10 years. (definitely suitable for persons in nil tax bracket or lower income group)

Thanks for your ananlysis, Deepak.

must say amazing explanatory

must say amazing explanatory video- only wih I had seen it 5 years back am saddled with 8 ulips worth 16L approx and some having no payment holiday am really foxed and with my wrong knowledge i have a current value of around 30-50 % loss and stilll counting as i said aviva says to pay of 15 & 20 yrs each in their policies. would love some specific advice on hoiw to go about them. thanking you sanmir

Thank you. I was about to buy

Thank you. I was about to buy this plan. Thank god i saw this.

Excellent analysis!! It

Excellent analysis!!

It could'nt be better. I was trying to understand this policy and was almost about to buy it. This video is a saviour and opened my eyes.

It presents a systematic analysis with no doubts as its based on facts.

Will definitely keep visiting the site marketvision and thanks once again!!

Hello Sir, I have taken HDFC

Hello Sir,

I have taken HDFC SL Crest policy last year (in March 2011). However I am willing to surrender the policy & want my money back as I am not willing to continue. Can you please mail me the details regarding the same.

Hi Deepak Very good

Hi Deepak

Very good explanation.Thanks.I was also about to buy this policy.But
now I changed my mind.

I want to invest rs. 50000 a year.Can you tell me please which MF and term plan i should go for.I am not a finance guy.It would be a great help if you suggest.

Thanks

Pardeep

Very structured analysis.

Very structured analysis. Great job.

Dear Deepak; Thanks for

Dear Deepak;
Thanks for uploading the video. It looks very good.

I am an NRI and I had invested 5 lakhs in HDFC CREST last year when I visited India. Now looking at your calculations I feel like discontinuing this policy. I was making my own excel sheet for return and it is coming different than yours. Could you please share your excel sheet with me so that I would be able to compare mine with yours? Yours looks right to me and I have some questions in mine that I can clarify one I have your excel sheet. I am on the verge of 2nd installment next week and I am confused whether to keep it or discontinue.

Please send me your sheet at my email address and I would be very very thankful to you.

Thanks
Sri

Hi Deepak, Thanks for the

Hi Deepak,
Thanks for the lovely presentation, But the thing is i am beginner for investment, don't have much knowledge for the same. Could you please suggest me where should i start with ? the various options available for youngsters and the factors we need to consider while looking for investment plans?

HI, actully i was looking for

HI,

actully i was looking for Saftey locker in HDFC and HDFC guys offered me if you go for HDFC Crest plan then only we will give you Locker facility in HDFC bank (JP Nagar Bangalore), then i have taken this plan yestrday(20/03/2012) , after going with all the review can you please tell me whom i have to contact to cancel the my plan and if i cancel the CREST plan what will happen to my saftey locker.

Please sugest me ASAP.

This is an eye opener. The

This is an eye opener. The numbers speak it all... Thanks

Bad to hear even this policy

Bad to hear even this policy is not worth . .. . already purchased with premiuim of 1Lakh P.A.
Its hard to understand and decide . . . guess GOLD is best deal

I am naive, still a query is

I am naive, still a query is a query. The return showed by your video is roughly 5% anually for Crest Highest NAV guaranteed. However you have not included the change in value brought by buying a unit at 10/11INR and selling it at 15INR (the promised value) at the end of 10 years.

I have invested in HDFC SL

I have invested in HDFC SL Crest.But after watching your video I found that I need to withdraw that money.I have received policy papers just 15 days before.So would it be wise decision to surrender it...pls help me
Thanks!!!

Hi Deepak, Thanks for the

Hi Deepak,

Thanks for the update. HDFC Fund manager is after my life to sell this product to me. I almost bought it this past sat when i did the paperwork and wrote a cheque. But on sunday, i decided to do a google to feel good about the product, but happened otherwise. I immediately stopped the payment of the earlier written cheque and have requested the fund manager to call back the documents. Will stopping the cheque payment be sufficient or i need to do something else??

also, which researching, i came to know that online, this policy has the minimum tie up of Rs 25000 (for information).

Thanks once again.

Prem

Hi, Thanks for the wonderful

Hi,

Thanks for the wonderful presentation. I got fooled into investing in this policy by an agent of HDFC. Anyway, I have paid one premium but should I continue with the policy or surrender it? Of course, my first premium of Rs50,000 will remain invested with them for five years. But may I expect to get at least those 50,000 back, forget about any return or do I stand to lose some money from my principal on account of their hefty policy charges?
Kindly advise.
Thanks
Nandini

Hello everybody, I am stuck

Hello everybody,

I am stuck with 1,20,000 pa and 2nd payment will be due...tell me guys , shall I stop? or I can continue? Pleas calculate the best time and way to move out of the plan.

My God..our hard earned money..all going waste ..

Thanks in advance

Hi, I am investing on this

Hi,
I am investing on this HDFC crest for 5 Year 2LK/Year.
I don't want much profit after 5 year... will continues with this... Is there any chance losing my 10LK after 5 year?

HDFC guy told me that they have the profit atleat 15/unit and its 50% so 15LK after 5Year and there are around a maximum at any cot 2LK chnarge u paid in these 5 year time span so the total will be around 13LK... Is this true?

is there any chance of decrease the amount paid by 5Year? its 2lk*5=19LK

I want a small profit after 5year only...

Thank You

Hello Deepak Sir, Thank you

Hello Deepak Sir,

Thank you for the wonderful video explanation. I am seeing a no U-turn point till on my current HDFC Unit linked endowment Plus II. Please advice..if you have time..

I have already paid three years premium and now the fourth is due !. I got my policy statement few days back and my fund value is 105000.
I know that I am loosing money and i got tricked by an agent..I am feeling very stupid...

If i now surrender..i am loosing around 80 K ..including the surrender charge! 15% !!!) I am going nuts!!

should i surrender now or keep on paying another 50k for two years..then surrender to get my total investment of 250000..is it possible or i have to wait till maturity? is there a possibility that after my 5th premium, the fund value could be less than 25000

Can the current policy be changed to Mutual fund ? with the same premium..would the bank agree?

Does it mean that if i pay another two premiums, the bank will return 250000 after 5 yrs completion on surrender or would it be less?

thank you for your kind time..I will be visiting this page on regular basis to read your reply..

my regards to your and your family..

Mani

Very Insight full. Thanks for

Very Insight full. Thanks for this. However, could you help me understand how is the fund value (at end of year) has been determined in your calculation. What has been the assumption there. Thanks

Everybody is invited to share

Everybody is invited to share their views on my previous querry..
many thanks in advance..
Mani

Hello sir , thank you very

Hello sir ,

thank you very much for the useful information.
but i m stuck with the hdfc sl crest. i did nt want to take it but one of bank employ whom i trust and respect kept on forcing me to take this policy by saying that its very good investment and insurance plan.

so i ended up taking it with 50k/year.
i ve already paid 2 premiums i.e. 1 lakh

and then again i did the stupid thing. took the policy again this year in june , paid 50k.

but i ve read and heard that hdfc sl crest got closed in march 2011, then how can they sell me the policy in june 2012, or it is still active.

Now i want to know that should i continue with my 1st policy and close the 2nd one. or should i close both of them.

please suggest.

U know we dont want to get our hard earned money go like this.

thank you so much
please advice.

Hi Sir, i taken this policy

Hi Sir,

i taken this policy on Nov, 2011 as premium of 50,000. Next month needs to pay the second premium.

i have a query here, please. i m not find the calculation with the unit price as 15rs minimum as they promised.

Im not aware much about the market. Please suggest me can i hold this plan or need to drop.