Trap 17. ‘Take A Bundled Plan For Multiple Benefits’

Usually, such offers are meant to appeal to the human nature of wanting to enjoy multiple benefits in a single stroke or to maximise their profit. For instance, if you go to a supermarket or e-commerce website to buy flour, you may end up picking a bundle of, say, flour, oil and lentils just because there’s an offer on the bundle. This way you end up spending more and buy products you didn’t really need.

The same happens with investments. “Bundled investment products refer to a set of products such as stocks, insurance, bonds, or more such assets. Bundling is done to offer multiple assets to the same client in one product,” says Madhupam Krishna, a Sebi-RIA and chief planner, WealthWisher Financial Planner and Advisors.

Thus, when shopping for, say, insurance, you may end up buying a traditional plan or Ulip instead of a term plan, just because the first two options seem to give you additional benefits. Ulips are the most common example of a bundled product as they combine insurance, tax savings, and investments.

“A network of agents and banks widely sells these plans. The irony is despite many cases of mis-selling, the companies still push this category instead of pure term plans,” says Krishna.

It’s important to remember that the additional benefit has a cost attached. “Bundled plans often seem appealing for their perceived convenience and savings. However, these deals can be deceptively alluring, potentially leading to hidden costs and limitations,”
adds Krishna.

Other such plans could  include insurance plans bundled with investment, pre-packaged investment portfolios, or even bank accounts bundled with loans and insurance products.

Here are some of the downsides of bundled plans.

Transparency: It’s difficult to decipher the true cost of each service in a bundled plan, especially in the case of a traditional insurance policy. You might be paying extra for things you actually don’t need.

Hidden Fees: There might be extra charges you didn’t know about, such as annual fees or penalties if you leave early.

Flexibility: These plans are often like a one-size-fits-all shirt, which may not always be the best fit for everyone. You might end up with features you never use, or have very limited options available in choosing the services that actually work for you.

Limited Options: Sticking with just one provider could mean missing out on better prices or features offered by specialised companies.

So, whenever you spot any bundled plan, treat it as a red flag and assess it thoroughly. Or, better still, simply stay away.