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15 Financial Resolutions Every Indian Should Make (And Actually Keep)

Hemant Beniwal
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15 Financial Resolutions Every Indian Should Make (And Actually Keep)

Every January, the same conversation happens in millions of Indian homes. Someone decides this is the year they will finally get their finances sorted. They open a savings account. They download a budgeting app. They Google “how to invest in mutual funds.” And by February, life takes over. Nothing changes.

The problem is not motivation. The problem is that most financial resolutions are too vague to act on and too ambitious to sustain. “I will save more” is not a resolution. It is a wish.

After 25 years of working with families on their finances, I have learned what actually changes financial behavior. It is not grand plans. It is specific commitments, made in writing, attached to a number and a date.

Quick Answer

The most effective financial resolutions are specific, measurable, and attached to automatic systems. “Start a SIP” beats “save more.” “Increase my SIP by Rs. 2,000 in April” beats “start a SIP.” This post gives you 15 financial resolutions across loans, investing, insurance, tax, and retirement planning, each specific enough to act on today.

Financial Resolutions for Indians

Why Most Financial Resolutions Fail

Research in behavioral finance points to a concept called the “intention-action gap.” We form intentions easily. We struggle to convert them into consistent action. The gap exists because good intentions require willpower at every decision point, and willpower is exhaustible.

The solution is to design your financial life so that good behavior happens automatically. A SIP that deducts on the 5th of every month does not require willpower on the 5th of every month. An auto-sweep facility on your savings account moves money to an FD without you having to decide. Systems beat intentions every time.

With that framing, here are 15 financial resolutions worth making, organized by area.

Resolutions on Loans and Debt

1. Cap your total EMIs at 40% of take-home income. If your combined EMIs exceed this, you are financially exposed to any income disruption. Calculate the exact percentage today. If it is over 40%, this becomes your top priority to fix.

2. Prepay the most expensive loan first. If you have a personal loan at 14% and a home loan at 8.5%, extra money goes to the personal loan. Always. The math is straightforward but emotionally people often do the opposite.

3. Never borrow to invest. No loan for the stock market, no loan for crypto, no margin trading funded by borrowed money. The potential upside does not justify the certain downside of paying interest while markets do what they will.

For guidance on managing debt alongside investments, read our post on setting SMART financial goals that account for your full financial picture.

Resolutions on Saving and Investing

4. Start or increase your SIP this month. Not next month. Not after the next appraisal. This month. Even Rs. 1,000 per month started today is worth more than Rs. 5,000 per month started two years from now.

5. Increase your SIP every April. April is when most salary increments take effect. Make a standing commitment: whatever increment you receive, at least 50% of the increment goes to your SIP. Not your lifestyle. Your corpus.

6. Stop looking at daily NAV. This is a resolution that requires subtraction, not addition. Checking your mutual fund NAV daily serves no useful purpose and increases the probability of making emotional decisions. Check quarterly. Annual reviews are enough for most investors.

7. Work on asset allocation, not on market prediction. Decide what percentage of your investments should be in equity, debt, and gold based on your goals and risk tolerance. Maintain that allocation. Do not shift it based on what markets are doing or what the news says.

“The investors who do best are not the ones who predict markets correctly. They are the ones who build a sensible plan and do not deviate from it when markets test them. Discipline beats intelligence in investing. Every single time.”

Resolutions on Insurance

8. Say no to investment-oriented insurance policies. ULIPs, endowment plans, money-back policies. These are expensive, complex products that deliver mediocre returns alongside inadequate insurance. Separate your insurance from your investments. Always.

9. Buy or review your term insurance. If you have dependents and no term plan, this is the single most urgent financial act on this list. A Rs. 1 crore term plan for a 35-year-old costs less than Rs. 1,000 per month. The risk of not having it dwarfs the cost of having it.

10. Review your health insurance sum assured. Medical inflation in India runs at roughly 14% per year. A policy you bought five years ago is worth significantly less in real terms today. If your current sum assured is below Rs. 10 lakh for an individual or Rs. 15 lakh for a family in a metro, it is time to upgrade or top up.

Something Worth Noticing

The most common financial regret I hear from clients in their 50s is not “I wish I had picked better stocks.” It is “I wish I had bought more term insurance when I was younger” and “I wish I had taken health insurance before my condition was diagnosed.” Insurance is the foundation. Everything else is built on top of it.

Resolutions on Financial Planning

11. Write down your financial goals with a number and a date. “Retirement” is not a goal. “Retire at 60 with a corpus of Rs. 3 crore” is a goal. “Children’s education” is not a goal. “Fund my daughter’s engineering degree in 2031, estimated cost Rs. 25 lakh in today’s money” is a goal. The specificity is what makes planning possible.

12. Understand the difference between need and want. A term insurance plan is a need. A ULIP is a want, sold as a need. A health cover is a need. A personal loan to fund a holiday is a want borrowed against a need. This distinction, applied consistently, is the foundation of financial clarity.

13. Make a will or update the one you have. If you have assets and dependents and no will, this is not a financial resolution. It is an obligation. In India, dying without a will creates delays, disputes, and costs for the people you love most.

Resolutions on Retirement Planning

14. Calculate your retirement number this year. Most people approaching 50 have never calculated how much corpus they actually need. Take your current monthly expenses. Adjust for inflation to retirement age. Calculate how many years of retirement you are planning for. The number will surprise you. Knowing it is the first step toward building toward it.

15. Stop treating your EPF as a piggy bank. Every time you change jobs, the temptation is to withdraw your EPF. Resist it. Transfer it. EPF compounds tax-free at 8.25% currently. Withdrawn at 40, it loses 15 to 20 years of compounding. That withdrawal feels like a windfall. In retirement, it will feel like a mistake.

One Bonus Resolution: Find a Good Advisor

The single highest-return financial decision most people can make is finding a genuinely good financial advisor and building a long-term relationship with them. Not a product seller. A planner who looks at your full financial picture, challenges your assumptions, and stops you from making expensive mistakes at critical moments. The cost of a good advisor is a fraction of the cost of the mistakes they prevent.

How to Make These Resolutions Stick

The research on habit formation is consistent: commitments made in writing are kept at significantly higher rates than commitments made mentally. Take this list. Choose five that apply to your situation. Write them down with a specific action and a specific date. Tell one person who will hold you accountable.

And build systems wherever possible. Automate your SIP. Set a calendar reminder in April to increase it. Set your health insurance renewal reminder 60 days before expiry so you have time to consider porting if needed. The goal is to remove your future self from the decision loop wherever you can.

Resolutions are easy to make in January. Systems are what make them real by December.

Want Help Turning These Resolutions Into a Real Plan?

A list of resolutions is the beginning. A written financial plan with specific goals, timelines, and accountability is what changes things. If you are 45 to 60 and want to build that plan before retirement, let us start with a conversation.

Book a Free 30-Min Call

Frequently Asked Questions

What is the most important financial resolution for someone in their 40s?
Calculate your retirement number. Most people in their 40s have never done this calculation. Knowing how much corpus you need, and how far you are from it, is what transforms vague anxiety about retirement into a specific, actionable plan.

Should I prioritize paying off loans or investing?
It depends on the interest rate. For loans above 10%, prepayment typically beats investing in debt instruments. For a home loan at 8.5%, the case for investing in equity alongside loan repayment is stronger. High-cost personal loans should always be prepaid first.

How much term insurance do I need?
A general rule is 10 to 15 times your annual income. A 40-year-old earning Rs. 20 lakh per year should have Rs. 2 to 3 crore in term cover. Factor in outstanding loans and the financial needs of dependents for a more precise calculation.

What is the right age to start financial planning?
Yesterday. The next best answer is today. Financial planning started at 25 is far more powerful than the same plan started at 35, entirely due to compounding. But starting at 45 is vastly better than not starting at all. The best time to plant a tree was 20 years ago. The second best time is now.

How do I stop emotional investing during market falls?
Automate. A SIP that deducts automatically does not require courage during a market fall. It just happens. Investors who rely on manual investing tend to pause or stop during corrections, which is precisely when they should be investing most aggressively.

Before You Go

Related reading: How to Set SMART Financial Goals and Importance of Financial Planning in Your Life.

Which of these 15 resolutions are you committing to this year? Share the ones you are picking in the comments below.

One question for you: If you had to choose just three resolutions from this list to act on before the end of this month, which three would make the biggest difference to your financial life?

How Financial Product Advertisements Manipulate Your Investment Decisions

Hemant Beniwal
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How Financial Product Advertisements Manipulate Your Investment Decisions

“Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” – John Wanamaker

When I started my practice in 2000, a client came to me clutching a newspaper advertisement. Full page. Glossy. A smiling retired couple on a beach. Guaranteed income every month. His eyes were bright with the certainty that he had found the answer to his retirement problem.

I spent the next hour showing him the actual numbers buried in the product brochure. The guaranteed monthly income worked out to a return of less than 2% per annum. His savings account was paying more.

The advertisement was beautifully produced and emotionally persuasive. The product was designed to generate commissions, not retirement income. He almost signed up because the ad had done its job.

Financial product advertisements are among the most sophisticated persuasion tools ever created. Understanding how they work is a form of financial self-defence.

⚡ Quick Answer

Financial product advertisements are designed to sell, not inform. They use emotional triggers (fear, aspiration, family responsibility), highlight benefits while hiding costs, and use celebrity endorsements to create unwarranted credibility. Before buying any financial product advertised attractively, calculate the actual return it will deliver. The number is almost always less impressive than the advertisement suggests.

Financial product advertising and mis-selling - what to watch out for

The Anatomy of a Financial Product Advertisement

Most financial product advertisements follow a predictable structure. Understanding the structure makes them easier to evaluate critically.

The emotional hook. Every effective financial advertisement starts with an emotion, not a fact. A father saving for his daughter’s wedding. A family securing their future against the unexpected. A retired couple living comfortably. These images are designed to activate the part of your brain that makes decisions based on feeling, not analysis. By the time you reach the product details, your emotional commitment to the outcome has already been primed.

The celebrity or authority endorsement. A famous cricketer recommending a mutual fund has not necessarily done any analysis of that fund. A film actor endorsing an insurance policy is not a financial expert. Celebrities are paid to endorse products – their endorsement tells you about the advertiser’s budget, not the quality of the product. Yet we consistently find that endorsements by trusted public figures increase purchase intent significantly.

The headline number. “Get Rs 1 crore at retirement.” “Guaranteed income of Rs 25,000 per month.” “12% assured returns.” These headlines are technically accurate in the most favorable scenario and deeply misleading in context. The Rs 1 crore requires 30 years of specific premiums. The Rs 25,000 monthly income requires a premium outlay that, invested differently, would produce Rs 60,000 monthly. The 12% is pre-tax, pre-cost, and from a period of exceptional market performance.

The fine print. Every claim in a financial advertisement has qualifications in the fine print. “Past performance is not indicative of future returns.” “Guaranteed subject to terms and conditions.” “Returns shown are illustrative.” These disclaimers exist because they are legally required – but they are designed to be ignored. A product whose headline claim requires paragraphs of qualification is a product whose headline claim should not be believed.

“Every rupee spent on a financial product advertisement comes from somewhere. It comes from the charges and commissions built into the product itself. The more elaborate the advertising, the more you are paying for the advertisement through your own investment.”

– Hemant Beniwal, CFP, CTEP | Founder, RetireWise

The Insurance-Investment Hybrid: The Most Advertised Mis-sell

The most consistently advertised and consistently mis-sold category of financial products in India is the insurance-investment combination: traditional endowment plans, money-back policies, and unit-linked insurance plans (ULIPs).

The advertising formula is simple: promise life protection AND investment returns in a single product. Show a large maturity amount alongside the insurance benefit. Create the impression that you are getting two things for the price of one.

The financial reality is different. A product that tries to do two things – provide life insurance and generate investment returns – typically does both poorly. The mortality charges for insurance reduce the investable amount. The fund management charges reduce investment returns. The surrender charges and lock-in periods restrict flexibility. The net result: lower insurance coverage than a pure term plan at the same premium, and lower investment returns than a mutual fund with the remaining capital.

The principle that has served my clients for 25 years is simple: keep insurance and investment separate. Buy the maximum term insurance cover you need for the lowest possible premium. Invest the remaining money in instruments appropriate for your goals and timeline. You will have more cover and more wealth than any combination product can provide.

Are you holding financial products that were sold to you, rather than chosen by you?

A RetireWise retirement plan reviews your existing portfolio and identifies products that are costing you returns without delivering commensurate value.

Book a Free 30-Min Call

How to Evaluate Any Financial Product Advertisement

Four questions cut through almost any financial product advertisement.

What is the actual internal rate of return? Take the total premiums paid over the policy term, the maturity amount or income promised, and calculate the IRR (internal rate of return). For traditional insurance-investment plans, this number is typically 3-6%. A plain FD or liquid fund outperforms this. For annuity products promising “guaranteed income,” calculate the yield: annual income divided by the lump sum invested. Compare this to current fixed deposit rates or bond yields.

What is the total cost? Every financial product has charges: premium allocation charges, mortality charges, fund management fees, administration fees, surrender charges. Ask for the product illustration showing the effect of all charges on your corpus. IRDA regulations require insurance companies to provide this illustration. If the salesperson cannot or will not provide it, walk away.

What is the lock-in and exit flexibility? Many high-commission products are designed with long lock-ins and heavy surrender penalties precisely because they would not survive comparison with alternatives if money could move freely. A product that traps your money for 10-20 years and imposes 20-30% surrender charges in early years is a product whose seller knows the product cannot compete on merit.

Can you separate the components? If a product bundles insurance and investment, ask: what would the equivalent term insurance cost separately? What would the investment component earn in a straightforward mutual fund? If the sum of the parts is materially better than the bundle, the bundle is not serving you.

Read – 5 Insurance Policies That You May Not Need

Read – Long Term vs Short Term Investments: The Only Framework You Need

Frequently Asked Questions

I already bought a traditional endowment plan 5 years ago. What should I do?

First, calculate the actual return you will earn if you hold to maturity versus what you could earn by surrendering now and reinvesting in an appropriate product. In many cases, particularly in the first 5-7 years, the surrender value is significantly below what you have paid in – making surrender immediately costly. Beyond 7-10 years into the policy, the calculation becomes more nuanced: the remaining lock-in is shorter, the surrender penalty is lower, and the opportunity cost of staying is less. There is no universal answer – the right decision depends on how far into the policy you are, your tax situation, and the alternatives available. This calculation is worth doing with a fee-based advisor before deciding.

Are all financial advertisements misleading?

Not all, but all deserve critical scrutiny. SEBI-regulated products (mutual funds) are required to show standardised risk and return disclosures. IRDA-regulated insurance products have specific illustration requirements. The issue is not always deliberate deception – it is that advertisements are inherently selective, showing the most favourable scenario in the most favourable light. Your job as an investor is to ask for the full picture before committing.

How do I know if a financial product is being sold or recommended?

The question that almost always clarifies the situation: “How are you compensated if I buy this product?” A salesperson earning commission from the product sale has a different incentive structure than an advisor earning a fixed fee for advice. Both can give good advice, but knowing the incentive structure helps you evaluate the recommendation appropriately. SEBI Registered Investment Advisers (RIAs) are regulated to disclose conflicts of interest and follow a fiduciary standard with advisory clients.

The most expensive words in personal finance are “I saw this advertisement and it looked good.” A well-made advertisement is evidence of a marketing budget, not investment merit. The two are often inversely related – the products that spend the most on advertising are frequently the ones that cannot compete on transparent performance.

Understand what you are buying. Advertisements are designed to bypass that question.

Want an independent assessment of your existing financial products?

RetireWise reviews your full portfolio and identifies where your money is working for you – and where it is working for someone else.

See Our Retirement Planning Service

💬 Your Turn

Have you ever bought a financial product because of an advertisement – and later regretted it when you understood the actual returns? Share in the comments.

Laxmi Ji or Saraswati Ji – Whom Should You Worship for Wealth?

Hemant Beniwal
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Laxmi Ji or Saraswati Ji – Whom Should You Worship for Wealth?

“An investment in knowledge pays the best interest.” – Benjamin Franklin

My grandmother never went to school beyond Class 5. She raised seven children, ran a household on a modest income, and never once opened a mutual fund account. But by the time she passed, she owned a small piece of land, a fully paid home, and enough savings to distribute to each of her children.

How? She kept separate envelopes for every expense – food, school fees, festival, repair. She spent only from the right envelope. She saved first, spent later. She never mixed money meant for different purposes.

She had never heard the words “financial planning.” But she had worshipped Saraswati – in the most practical way possible. And Lakshmi followed.

⚡ Quick Answer

India saves well but invests poorly. We have one of the highest household savings rates in the world – yet most of it sits in bank deposits, post office schemes, and insurance policies earning near-zero real returns. The problem is not shortage of money. It is shortage of financial knowledge. Every rupee you learn to invest wisely is worth 2-3 rupees in 20 years. Saraswati really does come before Lakshmi.

Laxmi Ji or Saraswati Ji - knowledge and wealth

India’s Great Savings Paradox

India’s household savings rate is consistently between 20-24% of income – among the highest in the world. More than Germany. More than the United States.

And yet we are not among the wealthiest nations per capita. We save more than most. We end up with less than we should.

Why? Because saving and investing wisely are two completely different skills. One is discipline. The other is knowledge.

According to SEBI’s Household Finance Survey, approximately 55-60% of Indian household financial savings still sit in bank deposits, post office schemes, and traditional insurance policies. These instruments, after accounting for tax and inflation, often provide zero or negative real returns. We are saving diligently – and then storing those savings in instruments that quietly erode them.

Saraswati has been neglected. And so, despite Lakshmi visiting regularly through our salaries, she does not stay.

What Equity Has Done Over Time – The Proof

When this article was first written in 2009, the Sensex had just doubled from 8,000 to 17,000 in under six months after the 2008 crash. It seemed like an extraordinary recovery at the time.

Today in 2026, that same Sensex stands near 75,000.

The investors who understood equity – who bought consistently through 2008, 2011, 2015, 2018, 2020, and 2022 – multiplied their wealth several times over from that post-crash level. The investors who treated equity as speculation and kept rotating back to FDs have, at best, preserved purchasing power.

Long-term equity performance is not theory. It is a 40-year Indian fact. The variable is not whether equity works. The variable is whether the investor has the knowledge and temperament to hold through the years when it does not.

The Wealth Difference Knowledge Makes

Two investors. Same income. Same savings rate. Completely different outcomes.

Consider two 35-year-olds starting with the same Rs 20 lakh corpus and saving Rs 20,000/month. Investor A (low financial literacy) keeps 80% in FDs, post office schemes, and traditional insurance – earning an average 6-7% blended return. Investor B (financially literate) allocates 60% to equity mutual funds and 40% to debt – earning approximately 11% CAGR blended.

By age 60: Investor A has approximately Rs 85-95 lakh. Investor B has approximately Rs 1.8-2 crore. Same income. Same discipline. Same 25 years. The only difference: knowledge of where to put the money.

This is not a small difference. It is the difference between adequate retirement and comfortable retirement. Between depending on your children and retaining your dignity. The knowledge dividend compounds just as powerfully as the investment returns themselves.

Your corpus at 60 depends more on what you know at 35 than on how much you earn.

RetireWise helps senior executives build the financial knowledge and structure to retire with confidence. SEBI Registered. Fee-only.

See How RetireWise Works

Why We Invest Where We Feel Comfortable, Not Where It Works

There is a well-documented pattern in Indian investing. In FY 2007-08, when markets were near their peak at 21,000, equity mutual fund inflows were at an all-time high. In 2002, when the Sensex was at 3,000 – genuinely cheap by any measure – we were barely investing in equity at all.

We buy when it feels safe. We avoid when it feels dangerous. And “feels” is driven entirely by recent experience, not by fundamentals.

Psychologists call this the Dunning-Kruger Effect combined with Familiarity Bias. The Dunning-Kruger Effect (Kruger & Dunning, 1999) is the finding that people with low knowledge in a domain tend to overestimate their competence. In investing, this is devastating. SEBI’s 2023 study found that 89% of individual F&O traders lose money – yet most of them entered with confidence they understood the markets.

Familiarity Bias explains why Indians over-invest in gold and FDs. We “know” gold. Our grandmothers bought gold. It feels safe. The fact that gold has significantly underperformed equity over long time horizons is irrelevant to this feeling – because the feeling is driven by familiarity, not analysis.

The solution is not courage. It is knowledge. When you understand why equity outperforms over long periods, you no longer need courage to stay invested during a crash. You simply stay invested because you understand what is happening.

What Worshipping Saraswati Actually Looks Like

It does not mean reading research reports every week. Most investors who read too much actually perform worse – they trade more, react to noise, and underperform simple SIP investors who check their portfolio quarterly.

It means understanding a few foundational truths and never forgetting them. Markets go up and down in short periods. They go up in long periods. Inflation is the silent thief that destroys savings kept in low-return instruments. Time in the market beats timing the market. A diversified equity mutual fund portfolio, left alone for 15-20 years, has never lost money in the Indian market’s history.

That is the entire curriculum. The investors who internalize these five truths and act on them consistently will retire wealthy. The ones who don’t – regardless of their income – will struggle.

“If you find your investment exciting and you are having fun, you are probably not making money. Good investments are always boring.”

– Hemant Beniwal, CFP, CTEP | Founder, RetireWise

Read next: Holding Period and Investment Risk – What 38 Years of Sensex Data Actually Shows

Financial knowledge is not just nice to have. It is worth Rs 1 crore over a working lifetime.

At RetireWise, we build retirement plans around what you know, what you have, and where you want to go. SEBI Registered. Fee-only.

See the RetireWise Service

My grandmother’s envelope system was not sophisticated. But it was built on understanding – knowing where the money was going, and why. That knowledge kept Lakshmi in the house for a lifetime.

First worship Saraswati. Lakshmi will herself come to your doors.

💬 Your Turn

What percentage of your savings is currently in equity? And what was your first reaction when markets fell sharply in 2020 or 2022 – did you buy more, hold, or exit? Your honest answer tells you exactly where you stand with Saraswati.

Insurance Schemes or Insurance Scams? How to Tell the Difference in 2026

Hemant Beniwal
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Insurance Schemes or Insurance Scams? How to Tell the Difference in 2026

“Insurance is not bought, it is sold. And most of the time, what is sold is not what the buyer needs.” – Anonymous Financial Advisor

In 2009, I conducted a financial planning workshop for about 30 employees at a company in Jaipur. Before the session, I asked each participant to write down their insurance policies. Twenty-eight of thirty had at least one investment-linked insurance policy: a ULIP, an endowment plan, or a money-back policy. Not one had a pure term plan.

When I asked them what they were paying for insurance coverage on their lives, most did not know. They knew the premium amount. They did not know the sum assured. They did not know the maturity value versus what they would have if the same premium had been invested in a mutual fund.

That was 2009. The situation in 2026 is better, but not transformed. India still has one of the most systematically mis-sold insurance markets in the world.

⚡ Quick Answer

Insurance mis-selling in India follows a consistent pattern: insurance agents present ULIPs and endowment plans as investment products, misrepresent returns, minimise charges, and target people who have never heard of term insurance. The solution is separating insurance from investment entirely: buy a pure term plan for life cover (10-15x annual income), buy a separate health policy for medical cover, and invest separately through mutual funds or other instruments. Never mix the two in a single product.

Insurance schemes or insurance scams - mis-selling in India

Why Insurance Mis-selling Is So Widespread

The commission structure in Indian insurance is designed for selling, not advising. A term plan – the simplest, cheapest, and most useful form of life insurance – pays an agent a small first-year commission. A ULIP or endowment plan can pay the agent 25-40% of the first year’s premium, sometimes more.

This is not a criticism of every agent. Many agents genuinely believe in the products they sell. The problem is that their training, their incentives, and their performance metrics all point in the same direction: toward products that pay them more, regardless of whether those products serve the client’s actual insurance need.

IRDAI has improved disclosure norms significantly over the years. ULIPs are now considerably more transparent than they were before the 2010 reforms. The charges are better disclosed. But the fundamental problem remains: if you do not know what a term plan is, you cannot choose it over an endowment. And most investors who walk into an insurance agent’s office do not know.

The Three Mis-selling Tactics You Will Encounter

“This gives you both insurance and investment.” This is the central ULIP and endowment pitch. Combining insurance with investment sounds efficient. In practice, both components are more expensive and less effective than their standalone equivalents. The insurance component in a ULIP carries higher mortality charges than a comparable term plan. The investment component carries higher fund management charges and allocation charges than a comparable mutual fund. You pay more for insurance and more for investment by combining them.

“This is guaranteed.” Traditional endowment and money-back policies offer guaranteed maturity values. What agents routinely fail to explain is that the guaranteed return – typically 4-5% per annum over a 15-20 year period – does not beat inflation. The guarantee is real but the value is poor. Comparing the maturity amount to simply keeping the same premium in an FD shows that the “guaranteed” return is often barely better than bank deposits, with 15-20 years of lock-in.

“Only 3 years and then you can exit.” ULIPs have a 5-year lock-in (previously 3 years before 2010 reforms). But the charges are front-loaded: the premium allocation charge and policy administration charge are highest in the first few years. Surrendering early magnifies the cost of entry. An investor who was told “only 3 years” and then exits at year 3 has paid substantially to have their money in a product that delivered significantly less than the premium invested.

The right insurance question is not “which policy?” It is “term plan or ULIP?”

RetireWise helps clients evaluate existing insurance portfolios, identify which policies to retain and which to surrender, and build the right cover for their actual financial situation.

See How RetireWise Evaluates Insurance Needs

The Simple Framework That Protects You

Separate insurance from investment. Always. Life insurance serves one purpose: if you die, your dependents should not face financial hardship. For this purpose, a term plan is the appropriate instrument. It provides large cover at low cost. A healthy 35-year-old can get Rs 1 crore of life cover for Rs 8,000-12,000 per year through a reputable term plan. That is pure insurance.

For investment, use appropriate investment instruments: equity mutual funds for long-term wealth building, PPF or debt funds for stable capital, NPS for retirement accumulation. These serve investment purposes far more effectively than any insurance-linked product.

Calculate what you actually have. If you hold a ULIP or endowment plan, ask your insurance company for an illustration showing: the surrender value today, the projected maturity value, and the equivalent amount you would have had if the same premiums had been invested in a diversified equity fund at 12% CAGR. The comparison is usually illuminating.

Never lie on an insurance application. This deserves mention because it is both ethically clear and practically important. Any material misrepresentation on a health or life insurance application gives the insurer the right to deny the claim. The claim that matters is the one your family will file when you are no longer here. Do not compromise it for a lower premium today.

Read: Wealth Managers, Bank RMs, and Mis-Selling: What Indian Investors Need to Know

Insurance is not an investment. It is protection. The moment someone tries to sell you insurance as an investment, you are being mis-sold. The question to ask is always the same: how much would a term plan with the equivalent life cover cost me?

Avoid insurance as investment. Understand what you need, not what they want to sell.

Do you know what you are actually paying for insurance coverage?

Most people know their premium. Very few know their sum assured, effective return, and what the same premium would have built in a mutual fund. A RetireWise review gives you the honest numbers.

Book a Free 30-Min Call

Your Turn

How many investment-linked insurance policies do you hold right now? And do you know the effective annual return on each one? Share honestly – you may be surprised by what the numbers reveal when you calculate them.

How to Plan for Your Child’s Future: Insurance, Education, and Marriage Goals

Hemant Beniwal
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33
How to Plan for Your Child’s Future: Insurance, Education, and Marriage Goals

“The best inheritance a parent can give to their children is a few minutes of their time each day.” – O. A. Battista

The first thing that happens when a financial agent sits across from a new parent is predictable. They open with the child. Education. Marriage. Security. Within five minutes, there is a product recommendation on the table – usually a ULIP or an endowment plan branded as a “child plan.”

I have sat on the other side of that table for 25 years. I want to tell you what those conversations should actually look like.

⚡ Quick Answer

Never buy insurance in the name of your child. Insurance protects the financial dependants of the person insured – and your child has no financial dependants. The right approach: insure the earning parent adequately with a term plan, then build separate goal-based investments for education and marriage using SIPs in equity funds (for long horizons) and PPF or debt funds (as the goal approaches). Keep insurance and investment completely separate.

Planning for child's future - education and marriage goals

The First Mistake: Insurance in the Child’s Name

I still see it regularly – parents or grandparents taking out insurance policies in the name of a minor child. The emotional pitch is compelling: “protect your child’s future.” But think about it carefully. Insurance protects the financial dependants of the person insured. If something happens to your 8-year-old child, who is financially dependent on that child? Nobody. The child has no income, no dependants, and no financial obligations.

The correct question is: if something happens to the earning parent, who is left unprotected? The child. And the answer to that question is not child insurance – it is a term plan on the earning parent’s life, with the child or spouse as nominee.

A healthy 35-year-old can get Rs 1 crore of life cover for Rs 10,000-15,000 per year through a pure term plan. That single product does more for your child’s financial security than any “child plan” from any insurance company.

The Right Insurance Calculation

The insurance requirement for a parent with young children should cover the total future financial obligations: outstanding home loan, child’s education corpus, child’s marriage corpus, and 5-7 years of living expenses for the surviving family. This is often Rs 1.5-2.5 crore for a typical urban professional family – far more than the token cover inside most investment-linked child plans.

As you build your investment corpus toward these goals over time, you can review and reduce your insurance cover on a step-down basis. Today, before the corpus exists, you need the full cover.

The right child plan is a term plan on your own life.

RetireWise builds integrated financial plans that cover insurance adequacy, goal-based investments, and retirement – all in one integrated picture.

See How RetireWise Plans for Your Family’s Future

Building the Education Corpus

The second step after adequate insurance is calculating how much you actually need, and then building toward it systematically.

Consider a 3-year-old child today. A quality undergraduate degree in India currently costs Rs 10-20 lakh. A professional degree (engineering, medicine, MBA) can run Rs 30-60 lakh at a good institution. Studying abroad – Rs 80 lakh to Rs 1.5 crore for a 2-year master’s programme. These are current costs. Education inflation in India runs at 8-10% per year, significantly higher than general inflation.

For the same child who will be ready for higher education in 15 years: if today’s cost is Rs 15 lakh and education inflation is 8%, the expected cost at age 18 is approximately Rs 47 lakh. That is the target. Not Rs 15 lakh.

To build Rs 47 lakh in 15 years, assuming 12% CAGR from an equity mutual fund SIP, you need approximately Rs 10,500 per month. If you can start earlier – when the child is born – the monthly requirement drops to around Rs 7,000.

The Investment Strategy by Time Horizon

For young parents with children under 5, the investment horizon is 13-18 years – long enough for equity to do its work. A combination of SIP in diversified equity funds and PPF contributions makes sense. You can maintain 70-80% equity allocation at this stage.

For parents whose children are 10-15 years old, the horizon is getting shorter – 3-8 years to the goal. Start shifting gradually to a more balanced allocation: 50% equity, 50% debt. Do not exit equity entirely, but reduce the risk as the goal approaches.

For parents within 3 years of the education goal, move the accumulated corpus progressively to debt funds, liquid funds, or short-term FDs. Equity volatility in the final 2-3 years can cause serious damage to a corpus you cannot afford to wait on.

Planning for Marriage

Marriage costs in India have inflated significantly. A modest urban wedding today might cost Rs 15-25 lakh; a mid-range wedding Rs 40-60 lakh. The same calculation applies: today’s cost inflated at 6% over 20 years (for a 3-year-old child) produces a target of Rs 48-80 lakh.

The good news: a 20-year horizon is very long. Even a relatively modest SIP of Rs 5,000-7,000 per month, started when the child is 3 years old, can build Rs 50-60 lakh by age 23 at reasonable equity returns. The key is starting early and not touching the corpus before the goal date.

A Practical Illustration

Take a 30-year-old parent with a 3-year-old child. Current cost of education: Rs 15 lakh. Current cost of marriage: Rs 25 lakh. Inflation: 8% for education, 6% for marriage. Child’s ages for goals: 18 and 23.

Expected cost at goal date: education Rs 47 lakh, marriage Rs 64 lakh. Total required: Rs 111 lakh.

Insurance required today (before any corpus is built): at minimum Rs 1.1 crore of additional term cover on top of any existing cover, reducing as corpus builds over time.

Monthly SIP to build education corpus (15-year horizon, 12% assumed return): approximately Rs 10,500. Monthly SIP for marriage corpus (20-year horizon, 12% assumed return): approximately Rs 5,500. Total: Rs 16,000 per month across two goal-based SIPs.

This is a planning illustration. Your actual numbers depend on your city, your lifestyle expectations, and the specific institutions you are targeting. The framework, however, remains the same.

Read: 10 Financial Lessons to Teach Your Children

The most important financial decision you make for your child’s future has nothing to do with which child plan to buy. It is whether you have adequate term insurance on your own life – today, before the corpus exists.

Protect the parent. Build the corpus. Keep them separate.

Have you calculated what your child’s education will actually cost in 15 years?

Most parents underestimate by 50-70% because they use today’s costs without inflation. A RetireWise plan shows you the real number and the monthly SIP to reach it.

Book a Free 30-Min Call

Your Turn

Have you separated your child’s education/marriage investments from your life insurance? Or are you still holding a “child plan” that mixes the two? Share your situation in the comments – you may not be alone in it.

Your First Year Premium Was Just ULIP Charges — A True Story From 2009 (And What’s Actually True in 2026)

Hemant Beniwal
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Your First Year Premium Was Just ULIP Charges — A True Story From 2009 (And What’s Actually True in 2026)

In 2009, I wrote a post warning investors that 50-60% of their first-year ULIP premium was being eaten up by charges. Not invested. Eaten. Agent commissions, allocation charges, mortality charges, policy administration — by the time the insurance company was done, there was barely anything left to actually invest in the market.

I had a client — Rakesh (name changed) — who had bought a ULIP believing it was a mutual fund. Fifteen years later, his policy had accumulated a fraction of what a plain mutual fund SIP would have built. When we pulled out his first-year statement, his first Rs 1 lakh premium had invested exactly Rs 37,000 in the market. The rest? Gone to charges.

That post exploded. It got shared everywhere. Agents hated it. Investors finally understood why their “market-linked insurance” wasn’t performing.

But this is 2026. Seventeen years have passed. The rules have changed multiple times. Let me tell you honestly: the old “50-60% first year charges” claim is no longer true for ULIPs sold today. IRDAI capped charges in 2010. Budget 2021 changed the tax rules. Budget 2025 added LTCG tax on high-premium ULIPs. And yet — I still don’t recommend ULIPs for most of my clients.

Here’s what actually changed, what didn’t, and why.

⚡ Quick Answer

The 50-60% first-year charges in ULIPs were real in 2009. Post-2010, IRDAI capped total charges at 3% annually for the first 10 years. Modern ULIPs are much cleaner. But Budget 2021 killed the tax-free maturity for ULIPs with annual premium above Rs 2.5 lakh, and Budget 2025 added 12.5% LTCG tax on them. For most investors, term insurance + mutual funds is still the better approach. ULIPs are only worth considering in very specific situations.

The 2009 Horror Story — Was It True?

Yes. Completely true. Here’s what the ULIP charge structure looked like in 2009:

Charge 2009 Reality
Premium Allocation Charge (Year 1) 25-40% (included agent commission)
Policy Administration Charge Rs 60-150/month (fixed)
Mortality Charge Varies by age and sum assured
Fund Management Charge 2-2.5% per annum
Service Tax (now GST) On all the above
Total First-Year Hit 50-60% of premium (sometimes more)

Rakesh’s Rs 1 lakh premium getting reduced to Rs 37,000 of actual investment wasn’t unusual. It was standard. And the tragedy? Most clients had no idea. The policy document mentioned charges, but in 50 pages of fine print that nobody read. The agent simply said “invest Rs 1 lakh, get returns like a mutual fund” — and walked away with his commission.

What Changed in 2010 — IRDAI Put a Cap

In September 2010, IRDA (now IRDAI) stepped in and changed the game. They introduced charge caps that made the 50-60% first-year hit illegal. Here’s what applies to ULIPs sold today:

Charge IRDAI Cap (Post-2010)
Total Annualised Charges (First 10 Years) Capped at 3% per annum (Net Reduction in Yield)
Total Annualised Charges (After 10 Years) Capped at 2.25% per annum
Fund Management Charge Capped at 1.35% per annum
Surrender/Discontinuance Charge Max 50 basis points per annum on fund value
Charges Distribution Must be evenly distributed during lock-in period

Source: IRDAI ULIP Regulations, 2010 and subsequent amendments.

FAIR DISCLOSURE Modern ULIPs Are Not What They Were

If you’re shopping for a ULIP in 2026, you won’t face the 50-60% first-year hit from 2009. Thanks to IRDAI’s 2010 caps, total charges can’t exceed 3% annually for the first 10 years. Some new-age online ULIPs even claim zero allocation charges. That’s a massive improvement. But “better than the worst” doesn’t automatically mean “good.”

Budget 2021 — The Tax Change Nobody Saw Coming

For decades, ULIPs had one unbeatable selling point: tax-free maturity under Section 10(10D). You paid Section 80C-eligible premiums going in, and whatever you got out at maturity was completely tax-free. That was better than mutual funds, which had LTCG tax on equity gains above Rs 1 lakh.

Budget 2021 ended this for high-premium ULIPs.

Here’s the rule: If your ULIP was issued on or after February 1, 2021, and your annual premium exceeds Rs 2.5 lakh (combined across all ULIPs), the maturity proceeds are no longer tax-free. The LTCG tax rules of equity mutual funds now apply.

ULIP Type Tax on Maturity (2026)
ULIPs issued before Feb 1, 2021 Tax-free under 10(10D) (grandfathered)
ULIPs issued on/after Feb 1, 2021 with annual premium ≤ Rs 2.5 lakh Tax-free under 10(10D)
ULIPs issued on/after Feb 1, 2021 with annual premium > Rs 2.5 lakh LTCG at 12.5% (held >12 months); STCG at 20%
Death benefit (all ULIPs) Tax-free

Source: Finance Act 2021; Budget 2025 announcement (applicable AY 2026-27).

“The one thing that made ULIPs competitive — tax-free maturity — has been watered down. For senior executives paying big premiums, ULIPs now compete with mutual funds on an almost-level tax playing field. Except mutual funds still have lower charges.”

So Are ULIPs Fine Now? — The Honest Answer

Here’s what I tell my clients in 2026:

Modern ULIPs are much better than the 2009 horror story. IRDAI’s charge caps fixed the worst abuses. Some new-age online ULIPs from companies like Max Life, HDFC Life, and Bajaj Allianz have genuinely low costs — sometimes comparable to mutual funds.

But they still have three problems that won’t go away:

1 You’re mixing insurance with investment

The conventional financial planning wisdom — for good reason — is to keep insurance and investment separate. Buy a pure term plan for protection (far cheaper coverage) and invest separately in mutual funds. A ULIP tries to do both and does neither optimally.

2 5-year lock-in removes flexibility

ULIPs have a mandatory 5-year lock-in. You can’t touch the money. Mutual funds (except ELSS) have no lock-in. If your situation changes — job loss, medical emergency, better investment opportunity — your ULIP money is locked away.

3 The tax advantage is mostly gone

For senior executives paying significant premiums (above Rs 2.5 lakh annually), there’s no longer a tax advantage over mutual funds. Budget 2025 sealed this — ULIPs now attract LTCG at 12.5%, same as equity mutual funds.

Still holding old ULIPs and wondering if you should exit?

The surrender decision depends on the age of your policy, charges paid, and tax implications. An unbiased review can save you lakhs.

Talk to a SEBI-Registered Advisor

Term Insurance + Mutual Funds — Still the Better Combo

Let me show you why this combination still wins for most investors. Suppose a 35-year-old wants Rs 1 crore life cover and wants to invest Rs 2 lakh per year over 20 years:

Strategy Life Cover Annual Cost Flexibility
ULIP (Rs 2L premium) Rs 20 lakh (typically 10x) 2-3% charges on corpus 5-year lock-in
Term + Mutual Fund Rs 1 crore (5x better cover) Rs 12-15k term + 1-1.5% MF expense No lock-in

Notice the difference? The ULIP gives you 5x less life cover at 2x the cost, with a 5-year lock-in. That’s not an improvement — that’s the same trade-off I warned about in 2009. The fact that charges are capped at 3% now (vs 60% then) is a relative improvement, not an absolute win.

For a deeper comparison, read our dedicated ULIP vs Mutual Fund analysis.

When Might a ULIP Actually Make Sense?

I’ll be fair. There are narrow scenarios where a ULIP can work:

1. Pre-Feb 2021 policies with annual premium under Rs 2.5 lakh. If you already own one of these, don’t surrender hastily. You still have the tax-free maturity benefit. Calculate your surrender value vs expected maturity and decide.

2. Investors who need “forced discipline.” The 5-year lock-in that I listed as a disadvantage can be an advantage for people who otherwise can’t stop themselves from withdrawing money at the wrong time. Behaviour beats strategy for some clients.

3. Section 80C users seeking equity exposure. For a conservative investor who wants Section 80C benefit but also some equity growth, a new-age low-cost online ULIP under the Rs 2.5 lakh limit can work.

In all three cases, read the free-look period rules carefully and understand every charge before signing.

What I’d Tell Rakesh Today

If Rakesh came to me today with a new ULIP quote, I’d tell him the same thing I told him in 2009 — with one update.

In 2009, I said: “This policy will eat 50-60% of your first-year premium. Don’t buy it. Buy term insurance and mutual funds instead.”

In 2026, I’d say: “This policy is much better than the ones sold in 2009. But it still mixes insurance with investment, locks your money for 5 years, and costs more than mutual funds. And if your premium crosses Rs 2.5 lakh, even the tax advantage is gone. You still want term insurance and mutual funds instead.”

The product changed. The principle didn’t.

Confused between ULIP, term plan, and mutual funds?

A fee-only advisor can help you build the right combination — without earning commission from insurance companies.

Get an Unbiased Review

The first-year charge horror story is dead. But the insurance-plus-investment trap is alive and well. Don’t mix two goals in one product, no matter how cleverly it’s been redesigned.

Protect with term. Invest with mutual funds. Keep them separate.

💬 Your Turn

Did you buy a ULIP before 2010 and regret it? Or have you been pitched a new-age online ULIP recently? Tell me your story in the comments — I’d love to know what agents are saying now vs what they were saying in 2009.

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