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Ulip Plans Select GROUP for Insurance Plan and Details  
ULIP Plan In India
  1. What are ULIPs?
    Unit-linked insurance policies or ULIPs are contemporary life insurance policies that offer investment benefits along with life cover. It is similar to traditional life insurance policies such as endowment, money-back and whole-life, but with one major difference. Unlike traditional policies, in ULIPS investment risks are borne by policyholder and not with the insurance company.
  2. What are the different types of ULIP funds?
    Different types of funds that ULIP offers are
    • Equity Funds
    • Income, Fixed Interest and Bond Funds
    • Cash Funds
    • Balanced Funds
  3. Explain the different types of ULIP funds in detail along with the risk proximity?
    General Description Nature of Investment Risk Proximity
    Equity Funds These funds are invested primarily in company stocks with the general aim of capital appreciation Medium to High
    Income, Fixed Interest and Bond Funds These funds are invested in corporate bonds, government securities and other fixed income instruments Medium
    Cash Funds Few know them as Money Market Funds - invested in cash, bank deposits and money market instruments Low
    Balanced Funds These funds are invested in Equity + fixed interest instruments Medium
  4. What are the Charges, fees and deductions in a ULIP?
    ULIP charges differ with insurers. However the structure for charges and fees remains the same.
    The different types of fees and charges are
    • Premium Allocation Charge
    • Mortality Charges
    • Fund Management Fees
    • Policy/ Administration Charges
    • Surrender Charges
    • Fund Switching Charge
    • Service Tax Deductions
  5. Explain in detail the Charges, fees and deductions in a ULIP?
    • Premium Allocation Charge
    • A percentage of the premium is pre-decided towards this charge and is levied before allocating the units. The premium allocation charge normally includes initial and renewal expenses apart from commission expenses.
    • Mortality Charges
    • These are charges which decide the overall costing of insurance coverage under the plan. Mortality charges depend on number of factors such as age, amount of coverage, state of health etc.
    • Fund Management Fees
    • A fee fund management charge is charged with regards to management of the fund(s) and is deducted before the allocation of units.
    • Policy/ Administration Charges .
    • These are the fees for administration of the plan and levied by cancellation of units. This could be flat throughout the policy term or vary at a pre-determined rate.
    • Surrender Charges.
    • A surrender charge is applied on premature, partial or full encashment of units wherever applicable, as mentioned in the policy conditions.
    • Fund Switching Charge
    • A limited number of fund switches are allowed in a year beyond which is subject to a charge.
    • Service Tax Deductions
    • Before allotment of the units, the applicable service tax is deducted from the risk portion of the premium.
  6. What should one verify before signing the proposal?
    The approved sales brochure should be verified for the following
    • All the charges deductible under the policy
    • Payment on premature surrender .
    • Features and benefits.
    • Limitations and exclusions.
    • Lapsation and its consequences.
    • Other disclosures.
    • Illustration projecting benefits payable in two scenarios of 6% and 10% returns as prescribed by the life insurance council.
  7. How much of the premium is used to purchase units?
    Not the entire amount of premium paid is allocated for purchase of units. Insurers allot units on the portion of the premium pending after providing for various charges, fees and deductions. However the quantum of premium used to purchase units varies from product to product.
  8. Can one seek refund of premiums if not satisfied with the policy, after purchasing it?
    Yes, the policyholder can seek refund of premiums if he disagrees with the terms and conditions of the policy or is not satisfied with the policy, within 15 days of receipt of the policy document. The term is also called as the ?free look period.
  9. What is Net Asset Value (NAV)?
    NAV or Net Asset Value is the value of each unit of the fund on a given day. The NAV of each fund is displayed on the website of the respective insurers.
  10. What is the benefit payable in the event of risk occurring during the term of the policy?
    In the event of risk to the life assured during the term of the policy, the sum assured and/or value of the fund units is payable to the beneficiaries In such an event the value available to beneficiary is pre-mentioned in the policy conditions.
  11. What is the benefit payable on the maturity of the policy?
    The value of the fund units along with bonuses, if any is payable on maturity of the policy.
  12. Is it possible to invest additional contribution above the regular premium?
    Yes, one can invest additional contribution over and above the regular premiums as per their choice, provided the feature is available with the product. It is known as Top Up facility.
  13. Whether one can switch the investment fund after taking a ULIP policy?
    Yes switch option allows for shifting the investments in a policy from one fund to another provided the feature is available in the product. Switches are free of cost up to a specified number beyond which a switching fee is levied.
  14. Can a partial encashment/withdrawal be made?
    Yes, Partial Withdrawal option is available with products which allow withdrawal of a portion of the investment in the policy. This is done through cancellation of a part of units.
Should you invest in endowment plans?

Till private insurance companies started operating in India, endowment insurance plans were the most popular form of life insurance. After the onslaught of private insurance companies unit linked insurance plans (Ulips) seem to have taken over.

    1. An endowment policy is a combination of insurance and investment: The life of the individual taking the policy is insured for a certain amount. This life cover is referred to as the sum assured.
    2. An endowment policy may declare a bonus every year: The money that is invested generates a certain return every year. This return may be declared as a bonus. The bonus is typically generated as a certain proportion of sum assured or life cover as it is popularly known.
    3. The bonus declared is not payable immediately: Like is the case with a stock dividend or a mutual fund dividend which is payable immediately after it is declared, the bonus declared accumulates and is payable only when the policy matures or in case the policy holder dies.
    4. The bonus declared does not compound it, only accumulates.
    5. Since the bonus declared does not compound returns are low.
    6. Take a term insurance policy and invest in the public provident fund: A better way out for an individual is to take a term insurance policy. A term insurance policy is a pure insurance policy. If the policy holder dies during the period of the policy, his nominee gets the amount of the sum assured. If he survives the period of the policy, he does not get anything. Given this, the premiums on a term insurance policy tend to be the least among all insurance policies and they provide an adequate life cover.

Just as we put our eggs in different baskets when we plan our investments, similarly, we should allocate our funds between different policies as each policy can be designed to meet different needs. Secondly, it makes better sense to put funds in insurance as apart from providing tax benefits under section 88, the returns accruing from insurance (except pensions) are exempted from taxes.

 
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Benefits of ULIPs

Unit Linked Plans offer unique opportunity to combine protection with investments. Some special features of Unit Linked Life Insurance Policies (ULIPs) are:

Provides flexibility in investments


ULIPs offer a complete selection of high, medium and low risk investment options under the same policy. You can choose an appropriate policy according to your risk taking appetite, coupled with the opportunity to switch between fund options without any additional expense for specified number of switches. ULIPs provide the flexibility to choose the sum assured and investment ratio in the annual targeted premium. It also offers the flexibility of one time increase in investment portfolio, through top-ups to avail investment opportunity offered by external environment or own income flows.

Transparency

The charge structure, value of investment and expected IRR based on 6% and 10% rate of returns, for the complete tenure of the policy are shared with you before you buy a product. Similarly, the annual account statement, quarterly investment portfolio and daily NAV reporting, ensures that you are aware of the status of your investment portfolio at all times. Most companies publish latest NAVs on their respective websites on a daily basis.

Liquidity

To cope with unforeseen circumstances, ULIPs offer the benefit of partial withdrawal; wherein after 5 years you can withdraw funds from our Unit Linked account, retaining only the stipulated minimum amount.

Disciplined and regular savings

ULIPs help you inculcate a regular saving habit. Also, the average unit costs tend to be lower than one time investment.

Multiple benefits bundled in one product

ULIP is an outstanding solution for risk cover, long term investments with the benefit of various investment opportunities, coupled with tax benefits.

Spread of risk

ULIPS are ideal for those investors who wish to avail the benefit of market linked growth without actually participating in the stock market, with the added benefit of risk-cover.