Every few months, I go through a phase of ‘financial heartburn’ when I become acutely conscious of the rather precarious state of my financial position. Over the years, I have subjected my balance sheet to many rounds of innovative financial re-engineering. To my dismay, results of such exercises have been patchy.

During one such recent episodes of heartburn, I realized that my life insurance cover is less than adequate to cover the future needs of my small family. I decided to take a term policy as I don’t generate enough surpluses to go for policies that double up as investments too – like ULIP

I visited the local office of a private insurer and was attended to by their sales manager, a smart lady. She listened quite attentively and promised me, in a somewhat patronizing tone, to send me the details of other insurance plans that are highly attractive. That same evening, I received the detailed illustration of a ULIP plan from a private life insurer she is quite fond of – I suspect they pay her the highest commission.

Then she started the sales pitch over the phone. Term insurance is a waste of money, she categorically stated, because I won’t get anything back. Therefore, I should not even think about it and instead should look at ULIP which offers a great investment opportunity and protection. If I can somehow manage to find some money to invest for just three years, I will get life cover for 30 years. And I will get a tidy sum at the end of 30 years to boot.

I was shown an illustration which mentioned that this particular scheme had returned an average of 25 per cent over the last three years. But that is below market returns and the charges are quite high, I tried to argue. Consistent returns are what matters, I was told, and the charges are not that high when you spread it over the life of the policy which is 30 years.

Then came the clincher. Look at the NAV, she said, it is just Rs7.5 – way below par value! The NAV was above par just a few months back, so I am getting it at a huge discount – she assured me. I was a bit dumbfounded by her NAV argument and quietly told her that I would still prefer the term insurance, as that is all that I can afford now.

When the markets were going up, I am sure she must have been asking prospective clients to invest because the NAV is rising. Now that the market has corrected, the NAV is still the selling point – this time because it is falling! And ULIP’s continue to sell briskly. There must be enough customers who are yet to realise that the NAV reflects the value of the underlying investments and there is no discount or premium attached to it!