2011 has arrived. Most of you would have chalked out some resolutions to would bring about some order in your life, Just as a regular exercise regime or healthy eating habits are important for good health, financial wisdom is equally important to keep your money intact and growing. As most of you must be drawing up plans for tax investments as well as regular savings, ET lists out some sales pitches that you should strictly avoid.

‘Invest in Ulips for only 5 years’

Beware of your insurance agent if he tries to sell you a Ulip as fiveyear policy. Often the agents use this as a sales pitch as it’s difficult to convince customers to lock in money for as long as 10-15 years.

“The logic is that it is always easier to tap a customer to get into a short-term contract. The concept of a lock in and annual/quarterly frequency in premium payments is not very popular with customers. Ulips are very popular among customers than a simple term plan,” says Rahul Aggarwal, CEO at Optima Insurance Brokers. Pranav Mishra, senior V-P & head, products, ICICI Prudential Life Insurance says, “If you anticipate some liquidity need in one to three years from now, Ulips is not meant for you. You should look at this investment product only if you leave your money untouched for be-yond five years. A good time horizon would be around five years to 30 years.”

For example, if you invest Rs 1,00,000 in a Ulip for 30 years, the first year return will be negative at around 80,000. This is because the investment amount itself shrinks to Rs 75,000 after accounting for charges such as mortality, policy, allocation and fund management.

However, the investor breaks even after the fourth year and doubles the investment in 30 years. Even if the investor locks in for 15 years, he earns Rs 20.5 lakh if he has invested Rs 15 lakh. Ulips are designed in a way that they attract maximum front loading in the first 3-4 years of the policy. So, stay long to reap maximum benefits.

‘Take home loan insurance’

The aspiration to own a house comes with a heavy price tag and a huge liability. Until you pay off the loan, it doesn’t become your house in the true sense. Hence, you have to cover the liability so that your family doesn’t have to shoulder the burden of EMIs if something happens to you during the tenure of the loan.

Although the home loan insurance policy works similar to a term life insurance policy, term cover is the cheapest option. The risk cover/ sum assured will be equally to the outstanding loan amount at any point of time. But home loan insurance works on a reducing balance principle. As the outstanding loan amount reduces, the size of the cover also decreases.