In a blog post titled “Never Believe The Nice Man”, financial writer and chartered accountant Lavanya Mohan said she received multiple calls from her life insurance company after her existing ULIP completed its five-year lock-in period.
According to her account, the advisor told her that her returns were declining and suggested moving her money into better-performing funds over the next few years.
Mohan said she initially understood the conversation as a fund switch within her existing ULIP. However, during the eKYC process, she realised that she was being taken through the process of buying a new policy rather than modifying the existing one.
“Switching funds inside your existing ULIP is free and needs no new contract,” Mohan wrote, adding that signing a new proposal form or completing a fresh eKYC indicates a new policy.
ULIPs allow policyholders to switch between available investment funds within the same insurance contract, subject to product terms. A fresh ULIP, however, comes with a new policy term, charges and lock-in period.
Mohan said her existing ULIP had completed the mandatory five-year lock-in period, after which she could choose to continue the policy or withdraw the fund value, subject to applicable terms and conditions. She said that replacing it with a new ULIP would have restarted the lock-in period.
The episode renews discussions around the need for investors to carefully verify whether an advisor is suggesting a modification to an existing insurance product or selling a new one.
Financial planners often advise customers to check policy documents, understand charges and ask whether a transaction involves a fresh contract before signing.
ULIPs combine life insurance cover with market-linked investments. While they offer features such as fund-switching options and tax benefits subject to prevailing rules, they also involve costs, lock-in conditions and market risks.
Mohan said investors should ask questions such as whether the transaction involves a new policy, whether a new proposal form or eKYC is required, and what the lock-in period would be before agreeing to any changes.
