Should I continue my Aegon Religare Maximize plan or shift to mutual funds

Good financial advisors ask investors to keep investment and insurance separate. Our view in Advisorkhoj is also the same. When you mix insurance and investment objectives, evaluation of investment performance becomes difficult. When you invest in ULIPs, one portion of your premium goes towards giving you life cover, one portion goes towards charges and the balance goes towards investments in form of units of funds that you have selected. You have not mentioned which fund(s) you have selected in your ULIP, so we will not be able to comment on the returns.

The first question that, you need to ask yourself is this investment, purely for the purpose of retirement planning or for life insurance also? Since Aegon Religare I-Maximizer is an online ULIP, it does not deduct premium allocation charges from your premium, but policy administration charges are deducted. Look at your latest policy account statement (you can ask the life insurance company to send you an account statement), to see how much fund value you have accumulated? Compare your returns with how much returns you could have got from SIP in top performing mutual funds by going to Top Performing SIP in our MF Research Centre. Then you can decide, whether you want to continue with your policy.

Aegon Religare I-Maximizer has a 5 year lock in period. So you can withdraw your premium after 5 years. You can discontinue your policy before 5 years of the policy life by stopping premiums payments. If you stop your premium payments in the 3^rd year of the policy, a discontinuation charge Rs 1500 will be applied on your accumulated fund value. If you stop your premium payments in the 4^th year of the policy, a discontinuation charge Rs 1000 will be applied on your accumulated fund value. When you stop paying premiums the accumulated fund value will be transferred to discontinued fund, after deduction of discontinuation charges. The accumulated fund value will be paid to you in the fifth year of your policy.

For the purposes of retirement planning and son’s education, you can opt for SIPs in top performing diversified equity funds (please read our article, Top 10 Best Mutual Funds to invest in 2016: Diversified Equity Funds). However, when your son nears his education goal (e.g. 3 years prior to his goal), you should switch from equity funds to low risk debt funds, so that you are not exposed to market volatility at the time when you need the money for your son’s education.