THE problem of too much opportunity today is that nothing is good enough. Complaining about your job or your boss is especially fashionable. This generation is more prone to giving up and starting afresh with another job altogether. Some even switch careers!

It's no wonder then that their professional behaviour reflects their financial behaviour too. Ravi Shukla,a 28-year-old executive had happily invested in equity ULIPs (Unit Linked Insurance Plans) through an annual premium of Rs 10,000 but now when he's looking to increase his equity exposure he's thinking of switching to a new policy or to mutual funds instead.

But why not work further upon what is already doing well for you?

What Ravi should be doing is using a top-up facility where the ULIP holder can pay additional premiums as and when he pleases and these premiums can be invested in the existing fund. Why? Because not only are they doing well but he is also familiar with this instrument and it may work out better than buying a new policy or a mutual fund (MF).

Top up v/s New policy
There's no way to convince you except using hard numbers, so here we go:

Case A
a. Suppose you have taken a ULIP by paying a premium of Rs 20,000 per annum for 30 years.

b. After deducting charges (say 20% in the first year and 2% per year thereafter), the balance is invested in a fund of your choice.

c. So out of a premium of Rs 20,000, Rs 4,000 would be deducted in the first year and Rs 400 thereafter leaving you with Rs 5,84,400 as the investible amount of the total 6 lakh.

Case B
a. Now, by the same logic if you instead take a policy by paying a premium of Rs 10,000 per annum for 30 years, you would be investing Rs 2,92,200 over 30 years.

b. If you opt for a top-up and pay Rs 10,000 per annum extra you will incur 1% per annum top up charges. So out of the payment of Rs 3 lakh as top-up over 30 years, your actual investment would be Rs 2,97,000.

c. That means your total investment of the base policy and top ups would be Rs 5,89,200 (2,92,200 + 2,97,000).

Thus, you've got a bigger investible amount through a top up.

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