Be cautious while buying a child insurance plan

I joined my current organisation in March 2008 amid thick of action and my life (professional) changed forever. My world which revolved around fashion, brands, celebrities, designers and retail took a 180 degree spin in favour of loans, credit cards, life insurance, health insurance, estate planning, mutual funds, banking etc. This was the time when money took a different perspective for me. I started viewing money from a different angle, dabbling in various financial products for loans, insurance and investments not only as part of research for our website, but also for my personal financial well being. After insuring myself, my first concern was arranging funds for higher education of my then 11 year-old daughter Tanya. I was part of several meetings which discussed child plans and I understood one thing that there are certain plans which are exclusively for children's education. Laden with attractive names and some heavy duty advertising with celebrities endorsing them, these caught my attention too and I made up my mind to invest in one such plan. Unfortunately, on one of my rare trips to a bank's branch with my younger one in tow, gauging my vulnerability, an agent of the bank's insurance arm showed me some 'so called' good plans for my daughter's higher education in future. Endowed with good personality, communication skills and sound knowledge, the agent made inroads with his agenda. I was convinced that if I invest in this plan, I will be able to fulfill my dream of sending my daughter to a prestigious design school. I promised him to come back the next day and left my mobile number with him. Next morning 10 am sharp, my mobile rang. Meanwhile, I had near forgotten about the discussion. And then began the series of phone calls till I promised to visit him again. As promised, I made a trip to the bank branch and agent extended me a warm welcome with nice hot coffee. He made me fill some forms and explained me the plan where I was to pay `15,000 every year which will be invested in equity and debt markets (balanced funds) and based on the returns I will get paid after completion of 10 years tenure. Not only this, it had an insurance cover of `3 lakh payable in the event of my death during policy term, more so premiums will also be continued. What else I could have asked for? A small price for my daughter's future! I went ahead and bought not one but two plans. These were the Ulip policies. I was very relaxed with my decision. Every now and then I received some sheets from the insurer from which I figured out that I was earning some money on my investment. Imagine, me showing financial chivalry amidst so many stalwarts. I did not bother to drop even a word about my plan to buy a child plan. Time elapsed, however, my husband coaxed me many times to check how my plans were performing but like all wives, I gave deaf ear to it. Coming back to office meetings, once again I heard that Ulips are long-term products and these perform best if continued for the entire tenure, so I was relaxed and kept on giving premiums for 3 more years. In May 2011, in one such meeting, my senior colleague mentioned, "Don't keep putting your good money after bad money." This was in reference to Ulips which have been facing ire of Sebi, media and customers. I realised it was high time that I reviewed my child plans and my colleague Kinnari was very forthcoming in the matter. She started pestering me for details. After dilly dallying for few days I got her the details. I was hoping against hope that my plans were performing, but that was not to be. To my horror the returns were in negative of near -12%. I called my agent to know the reason. His reply was same, "it will give returns in the long run". I sternly asked him, "When share market was doing so well, your insurance company is in profits, and even it has won accolades for its performance, how come my plans are giving negative returns?" To this he had no reply. Roongta was right. I was putting my good money after bad money. There was a strong consensus that I should surrender these policies. A day and date was finalised. I went ahead with the surrender plan. After quite a struggle to locate the office of the insurance company, I reached the window where a young chap welcomed me and popped the expected question: "Why do you want to surrender?" As an irritated customer I replied, "Returns are very poor and I will not change my decision." He unwillingly took my policies, did some calculations and giving another blow to my hard-earned money, he reduced the amount further stating that you have not completed the lock-in period. Another revelation. Plan performance For four years, I invested `60,000 in one plan and earned a return of `48,300. In the second plan, after investing `60,000, I got `49,445. After deducting the surrender charges of `2,415 and `2,422, respectively, my net surrender value stood at `91,908 against the investment of `1,20,000. Thus, getting -15.58% returns. With a heavy heart, I returned to office next day. My colleague Kinnari added salt to my wound by telling me that if I had invested `1,20,000 in mutual fund arm of the same insurance company, I would have earned `1,71,120 instead of `91,908, thus totaling my loss to `79,212. "The reasons of this big loss were high policy administration charges and premium allocation charges, besides poor performance of the fund," said Kinnari. I was further surprised as all these years equity market was doing well. My hard earned money had evaporated which I had kept diligently investing for my daughter's future. As a mother, I felt cheated. Are these plans playing with the emotions of young mothers by capitalising on them? But some thoughts constantly linger on. Will the young working mothers like me who have invested in such child plans dreaming big for their children end up feeling cheated like me? Or there will be some recourse to this loss? Where should we go? Where do we invest to get better returns?