Summary of this article
Nithin Kamath advises against mixing life insurance coverage with equity investment goals.
Investors should perform independent research before buying bundled endowment and ULIP products.
Health insurance remains complex due to hidden clauses like room rent limits.
Zerodha co-founder Nithin Kamath has cautioned investors about some of the most common mistakes people tend to make when it comes to financial planning. In a post on social media platform X, he specifically mentioned Unit-linked insurance plans (Ulips) and endowment plans.
"Take investing. Pretty much every influencer, every serious finance writer, and the financial media have been screaming for years: don’t mix insurance with investments. Ulips are usually a bad idea. Endowment policies are usually a bad idea,” Kamath wrote in his post.
He explained that people continue to buy the products by falling for the pitches instead of themselves evaluating the right use case for purchasing them. Kamath added that while a massive amount of content exists, which seeks to raise awareness against mis-selling, investors continue to fall for such pitches.
“With products like Ulips and endowment plans, there’s no excuse. These are not impossibly complicated products. Even a cursory Google search will tell you the problem. And today, in 2026, you can just ask ChatGPT or Claude whether a product is a good idea, and they’ll usually show you the math, explain the catches, and give you pointers on what to do,” Kamath said.
Why Ulips and Endowment Plans Are ‘Traps’
Kamath’s cautionary note centred on the inefficiency of mixing two separate goals of insurance and investing, namely risk management and wealth creation, respectively, within the ambit of financial planning. He added that people are often lured by the promise of “guaranteed returns” or “tax-saving benefits” when it comes to some insurance products without understanding that these products can sometimes provide inadequate insurance coverage and low investment returns.
However, it is important for buyers to understand that these financial instruments are not inherently “wrong” or fraudulent. These products have their own use-case as disciplined risk-averse investors who require a forced savings mechanism or those with very specific tax-planning needs, can use them in accordance with their financial goals and investing philosophy.
Essentially, the trap does not lie in the financial product's existence, but in the lack of suitability; the issue highlighted by Kamath focuses on investors purchasing such financial products as a default wealth-building tool without performing due diligence.
The Health Insurance Hurdle
While Kamath talked about the problems regarding Ulips and endowment plans he admitted that choosing the health insurance plan remains a significant challenge.
Kamath added that health policies often come with complex clauses and exclusions which are not very straightforward to understand, such as caps on room rent, disease-specific waiting periods, and co-payment requirements. Often policyholders come to know about these clauses upon filing the claim, and end up paying significant out-of-pocket expenses despite having active coverage.
Kamath’s comments come at a time when retail participation in financial products has surged, driven by greater penetration of fintech platforms and easier digital onboarding. His advice remains clear: use the technology available in 2026 to “run the math” before purchasing any financial product.
