Zerodha’s Nithin Kamath flags ULIP, endowment traps; says health policies remain complex

In a post on social media, the Zerodha founder said there is “very little creativity” in the mistakes people make with money, especially when it comes to mixing insurance and investments.

Kamath pointed out that financial influencers, media platforms and finance experts have repeatedly warned against products such as Unit Linked Insurance Plans (ULIPs) and traditional endowment policies, yet sales of such products continue to rise.

According to him, the problem is no longer a lack of access to information. Consumers today can easily compare products online, run calculations, watch explainer videos or even use AI tools like ChatGPT and Claude to understand the hidden costs and weak returns associated with bundled insurance-investment products.

“Even a cursory Google search will tell you the problem,” Kamath said, adding that AI tools can now explain the math, hidden catches and better alternatives within minutes.

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He argued that unlike health insurance – which often contains complex clauses around waiting periods, exclusions, room rent caps and settlement conditions – ULIPs and endowment plans are relatively easier to evaluate, making repeated mis-selling and poor decision-making harder to justify.
Kamath said health insurance deserves more sympathy because many policyholders only discover restrictive clauses at the time of claims, forcing them to pay significant amounts from their own pockets despite having coverage.His comments come at a time when retail participation in financial products has surged sharply, driven by social media awareness, fintech penetration and easier digital onboarding. However, financial experts have repeatedly cautioned that product complexity and aggressive sales tactics continue to push investors towards expensive or low-return products packaged as “safe investments” or “tax-saving solutions.”

ULIPs combine insurance with market-linked investments, while endowment plans typically offer life cover along with guaranteed savings components.

Critics argue that both products often carry high costs, lower transparency and weaker long-term returns compared with buying pure term insurance and investing separately through mutual funds or other market instruments.

He also shared a video on mistakes usually made by people that suggested ways to rectify these mistakes.

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