Knowledge about investment Insurance (Ulip)

People spend their whole lives working hard for their family and loved ones. Holding on their professional life and creating a valve of greater professional goals helps people to establish a strong financial excellence. People tend to believe in investing their finances into something which is more beneficial and helps in sustaining financially secure future. Investments are broadly defined as abstracts like, time, energy, or matter which is spent for creating a hope of futuristic based benefits. These benefits are expected to be acquired within a specific date or time. For many people investments can have different meanings depending upon their personal beliefs. In finance, Investments are defined as a process of putting money into creation of assets with a positive expectation of capital appreciation, dividends and earnings. Insurance in Modern days is considered to be the best option for futuristic benefits.

Investment insurance plans basically aim for target audience which understand the market risks and want to insure the investments that they own. Insurance not only provides them with safety coverage of their investments but also helps in providing tax exemptions on investments. INVESTMENT-PLAN Therefore making them a tax free investment. Investing for beginners is much easier than at the later stage. For beginners the rate of premium is much more less than at the latter stage. In case of occurrence of death of the insurance holder the benefits are given to the nominee chosen by the insurance holder. An investment insurance plan has a specific time frame till which an insurance holder needs to pay premiums. This Time frame is selected by the insurance buyer at the time of buying the policy. Ulip Plan or Unit Linked Plan is defined as a combination of insurance as well as investments. The premium paid by the policy holder is utilized by the insurance provider to provide insurance cover back to the policy holder whereas the rest of portion is invested in various equity and debt schemes. Unit linked policy holders are given features like top up facilities along with an option of switching funds during the tenure of the policy.

Source: http://www.policyx.com/blogs/562/

What is ULIP

Ulip or term insurance? What's better?

Looking for a suitable insurance to meet your insurance cover? Confused by the differing opinions of financial advisors whether Ulips are better than term insurance or vice versa?

Want to know how to choose between the two? Then read on to know how to go about it in order to get the best insurance for your needs.

Features of term insurance vis-a-vis Ulip

	Term Insurance	ULIP
Investment component	Nil	Present
Maturity Value	Nil	Value of the corpus invested in different assets like stocks, bonds and cash
Charges	Not declared by the insurer	Declared by the insurer
Insurance term	Short term	Long term, with the compulsion to pay premium for at least 3 years
Premium	Decided on the basis of age and health condition	Decided on the basis of your payment capacity
Insurance cover	Very high	Nominal
Suitable for	Those having dependents or have liabilities like home loan	Those looking to avail of investments along with life cover and tax benefits
Performance issues	Not Applicable	Need to be considered as the charges, and performance of funds of different insurers varies significantly.
Premium charged	Lowest	Highest as part of the premium goes towards investment

So from above, you can safely conclude that Ulip Plan Comparison are similar to mutual funds except that they provide life cover, tax benefits and need to be kept for long term.

On the other hand, term insurance is actually insurance where your dependents get sum insured in case you die, but nothing if you outlive the insurance term.

Pros and cons of term plans and Ulips

Both term plans and Ulips do have their benefits and drawbacks. Here are some of them.

Term plan: Pros

• Highest sum assured
• Lowest premium charged
• Can be stopped at the end of premium term, as the life cover exists only for the year for which premium is paid.
• Simple to understand.

Term plan: Cons

• No maturity value as there is no investment component.
• Available only up to 50 years age and the life cover will continue only till 65 years. Also those insurers who offer insurance cover to seniors end up charging very high premium.
• No provision to increase the premium with the increase in income.

Ulips: Pros

• You get returns when the policy matures
• Can increase the premium as per increase in your income.
• Flexibility of investing across various asset classes, thereby helping you maximize returns.
• Long-term investment, helping you inculcate value of savings

Ulips: Cons

• Very high charges
• Nominal insurance cover
• Difficult to compare amongst Ulips from other insurers due to non-standard charges, asset allocation, etc.
• Inability to pay the premium will lead to lapse in policy. Also despite many insurers telling you that paying premium for 3 years is enough, remember mortality charges will be deducted from the corpus invested.
• If the value of the corpus is lesser than the mortality charges due to erosion in the value of the underlying asset, your life cover will stop. Your policy will lapse and you will have to take a fresh policy.

How to decide whether to opt for term insurance or Ulip?

If you need to decide which one to choose, answer these questions:

• Do you have dependents?
• Do you have a liability like a home loan?
• Are you young and want cheap insurance with high life cover?

If you have answered yes to these questions, then term plan is must for you.

On the other hand if you answer yes to these questions, then opt for Ulips:

• Can you afford to pay high premiums till the end of policy term?
• Are you looking for an investment option along with insurance and tax benefits?
• Are you saving towards a particular goal?

Both term plans and Ulips have their pros and cons. Which one is suitable for you will be decided by your personal circumstances. Always take them into account before choosing the right one for you.

[Source: https://bestulipinsurancepolicy.wordpress.com/2015/10/14/ulip-or-term-insurance-whats-better/]

Highest NAV Guaranteed ULIPs – The untold story

Now remember guarantees and stock markets don’t mix. The returns from the equity markets are not guaranteed. So in order to give you guaranteed returns these plans tend to shift their portfolio between debt and equity in such a way that that the plan’s highest NAV is locked by shifting a part of equity assets to debt. This debt portion is selected in such a way that its maturity value equals highest NAV reached.

Nowadays market is flooded with Highest NAV Guaranteed ULIPs like LIC Wealth Plus and Reliance Life Highest NAV Guaranteed Plan. These plans  give many people the wrong impression that they will get the highest returns from the stock markets. But is it true? Should you opt for it? Let us take a brief look at these plans and see if they are right for you.

Actual meaning of Highest NAV Guaranteed: If you think that you are earning the highest returns from the stock markets, then think again. It is not the highest returns from the stock markets that you get, but the highest NAV of the plan that the company assures you. E.g. if the highest NAV of the fund is Rs 20, that is what you stand to gain. However the returns from the stock markets could be far higher than that.

How do they work?: Now remember guarantees and stock markets don’t mix. The returns from the equity markets are not guaranteed. So in order to give you guaranteed returns these plans tend to shift their portfolio between debt and equity in such a way that that the plan’s highest NAV is locked by shifting a part of equity assets to debt. This debt portion is selected in such a way that its maturity value equals highest NAV reached.

E.g. if the highest NAV of the plan is Rs 15, the company will shift the asset allocation from equity to debt whose value at the end of maturity is Rs 15. This means you will gain Rs. 15, even if the highest NAV at the time of withdrawal is Rs. 12.

As the plan moves closer to maturity, a majority of the portfolio will be invested in debt, to ensure you get highest NAV.

Pros and cons of the products: The main benefit is you get capital guarantee right from the day 1. Also it is suitable for risk adverse investors who don’t want to expose their capital to undue risk. This is because as the product is primarily debt-based, it will protect their capital.

However this product does have its drawbacks. The main drawback of this plan is the charges. E.g. in Reliance Life Highest Guaranteed NAV plan, you are paying 20% towards premium allocation charge for the 1^st year, which subsequently reduces to 3% for 2^ndand 3^rd year, 2% for 4^th and 5^th year and 1% from 6^th year till end of the term. The policy administration charge is Rs 40 per month and fund management charge is 1.35% pa. But the biggest charge is 0.15% for guaranteeing the highest NAV. All these charges are quite high for mainly a debt-based product.

Moreover the fund manager can decide to allocate a major chunk of his portfolio towards debt right at the start of the plan. Also you don’t get the highest returns from the stock markets but rather the highest ULIP NAV reached by the fund. Besides the returns from these funds lie between 9-10%, slightly higher than the 100% debt funds.

Now if you decide to surrender the policy after 3 years or you die within a couple of years of starting the policy, you don’t get the highest NAV but the current value of your investment. So this product is meant for long-term investors only.

Should you opt for it: Avoid at all costs. Remember SEBI does not permit mutual funds and other stock market participants to guarantee the returns. So when any company offers you guaranteed returns, they are violating the SEBI guidelines. Also you don’t get to benefit from the primary benefit of market movements: buying more when the markets go down and less when the market goes up. 

This in turn will affect your returns. Moreover paying high charges for modest returns doesn’t make any sound investment sense. Don’t forget life is uncertain. You may die, you may lose your job or some unexpected expenses may crop up, due to which you will never be able to pay the premium. In this case you lose all the benefits of this plan. Lastly, remember all these companies exist mainly in the market to make money and are not to protect your money. So be careful.

[Source: http://blog.bankbazaar.com/highest-nav-guaranteed-ulips-the-untold-story/]

Should you surrender your old frontloaded ULIP’s?

I was talking to some of the premium service members in the last one month and majority of them have invested in Unit Link Insurance Policies (ULIP’s) and want to surrender old frontloaded ULIP’s. One of the members was so much frustrated saying his agent has miss-sold these ULIP’s without providing adequate knowledge about this. Though I agree this to some extent, the primary responsibility in choosing an investment or insurance product lies with the investor itself. Should you surrender your old frontloaded ULIP’s?

What are ULIP’s?

Unit Linked Insurance Plans (ULIP’s) are those which act as insurance + investment products. These ULIP’s would charge premium allocation charges + policy administration charges etc. up to 30% of the premium paid in the initial 1 to 3 years. Gradually the allocation charges would reduce to 2% from 4th year onwards. There are some ULIP’s which indicated that 100% of first year premium paid would be the policy administration charges. Means you are paying heavy premium allocation charges to insurance company for the first 3 years along with the risk of surrender charges. During Sep-2010, IRDA has made some changes to these ULIP’s guidelines and put a cap on surrender charge to Rs 6,000 for first year gradually reducing it to Rs 2,000 for the fourth year. From fifth year, you need not pay any penalty charges. If you are among the crowds who have taken ULIP’s prior to Sep-2010, then the 3 year lock-in period would ends by Sep-2013. Such investors have been re-thinking whether they should surrender their old front loaded ULIP schemes or whether they should continue.

Points to be noted before you think of surrendering your old frontloaded ULIP’s

1)  Surrender Costs frontloaded: ULIP’s taken before Sep-2010 have charged heavy surrender / penalty costs. Means the costs are already front loaded in initial years from 1 to 3 years of policy term. If you observe, your fund value is very low comparing to yearly investment which you have done from 1st year to 3rd year. The premium allocation and policy administration charges are already reduced from your ULIP amounts. If you surrender such policies, you would lose the money. E.g. If you have invested Rs 100,000 per annum, for 3 years, your investment amount should have been Rs 300,000. However due to high premium allocation charges for first 3 years, your fund value after considering 10% return might be only Rs 2.4 Lakhs to Rs 2.5 Lakhs.  You would be incurring Rs 60,000 to Rs 70,000 as loss if you surrender such policy.

2)  What about your insurance coverage?

While you have taken the ULIP for both insurance coverage as well as investment purpose, before you pull out your ULIP you need to consider about insurance coverage. If you are in 50’s, getting a term insurance coverage now, would cost you very high. Also if you are an NRI, you cannot get online insurance policy. You need to keep these things in mind before closing ULIP’s

3)  How is your ULIP fund performing? 

If you observe, people talk about only hefty charges charged by insurance companies in initial years. What about the fund performance where you’re ULIPs have been invested? Ideally after considering all charges, the balance amount invested should provide good returns. The returns can range between 9% to 12% per annum. If your fund value indicates that it has provided lesser returns and is consistent under performer, you should think of surrendering your ULIP NAV.  The period of performance can be checked for 3 to 5 years to arrive at this decision.

4)  Zero refund for first year premium:

There are several ULIP’s issued earlier which contains a clause indicating that first year premium would be retained by insurance company for future benefits. Such benefits would be provided only if the insured would continue till the end of the policy. Means, if you surrender the ULIP policy in mid, you need to forgo your first year premium.

5)  ULIP’s sold after Sep-2010 – 5 year lock-in period – Refund only after lock-in period

If you have purchased ULIP’s after Sep-2010, these are issued with 5 year lock-in period. If you want to surrender such ULIP’s purchased after Sep-2010, then you would not get your premium refund immediately. The premiums paid would be credited to discontinued policy fund and insurance companies would pay back your money only after 5 year lock-in period along with interest.

Conclusion: If you have purchased ULIP prior to Sep-2010, think of such surrender / frontloaded costs before surrendering them. If your ULIP’s fund is performing well, it makes sense in continuing the ULIP instead of booking the loss and re-investing in other insurance or investment products.

[Source: https://bestulipinsurancepolicy.wordpress.com/2015/09/01/should-you-surrender-your-old-frontloaded-ulips/] 

Should you continue to have faith in your ULIP Policy

All of us who have invested in ULIPs over the years have this question before us? In most situations ULIP have given below expected returns and you may tempted to think of cutting your loss by surrendering and investing the amount in other higher return investments. Let us therefore examine, whether it is good to surrender or continue with it till maturity. What is ULIP? Unit Linked Insurance Policy (ULIP) is a product offered by insurance companies that unlike a pure insurance policy gives investors the benefits of both insurance and investment under a single integrated plan. How it works? A part of the premium paid is utilized to provide insurance cover to the policy holder while the remaining portion is invested in various equity and debt schemes. The money collected by the insurance provider is utilized to form a pool of fund that is used to invest in various markets instruments (debt and equity) in varying proportions just the way it is done for mutual funds. Policy holders have the option of selecting the type of funds (debt or equity) or a mix of both based on their investment need and appetite. Just the way it is for mutual funds, ULIP policy holders are also allotted units and each unit has a net asset value ( NAV ) that is declared on a daily basis. The NAV is the value based on which the net rate of returns on ULIPs are determined. The ULIP NAV varies from one ULIP to another based on market conditions and the fund’s performance. Performance of ULIPs Performance of ULIPs ULIP is a market related instrument, and if the market does well so will be the ULIPs. However, research suggests that not all ULIPs have performed well and have given reasonable returns to the investors. Though the market is the primary reason for ULIP’s performance, it also depends on what charges and fees a ULIP deducts from your investments. The common charges are Premium allocation charge, Top up allocation charge, Mortality Charges, Fund management charge, Policy administration charge, switching charge and surrender charge etc. Besides, the surrender value is calculated as Fund Value – Surrender Charges, where fund value is Total no. of units under the policy NAV of the fund chosen. However, these charges are not same for all ULIP, some charge lower. Because of so many charges, the residual investment of any ULIP is not enough to give considerable return even if the market is doing well. Here lies the reason for dissatisfaction of investors like you, and you now want to get out of it. You, therefore, want to take such a decision. [Source: https://bestulipinsurancepolicy.wordpress.com/2015/08/26/should-you-continue-to-have-faith-in-your-ulip-policy-2/]

Ulips: Only long-term benefits

Ulips: Only long-term benefits from Mihir Shah

Does investing in ULIP make sense?

Unit-linked insurance plans or ULIPs is an investment vehicle that offers dual benefit that is life cover and investment. The premium paid under ULIP is divided into two parts, where the first part goes toward cost of life cover, and the other is invested in funds.

 An investor has the option to choose from equity, debt or hybrid funds, where their premium will be directed. However, despite the dual benefits available under ULIPs, it was rejected by the investors lately due to higher charges, which were equal to one-year premium in many cases and lower returns. Such undisclosed charges resulted in a steep decline in the fund value of investors, who find it hard to recover the value due to poor performance of the product.

 Buy ULIP or Not

Apparently, Best ULIP Insurance Plan Regulatory and Development Authority (IRDA) took measures to clearly structure the ULIPs so as to make them more customer friendly. High agent commissions and charges were capped, after which ULIPs became more attractive to the customers. So is it sensible to buy one now? The answer could depend on the time horizon of the investor. That means that if someone is willing to remain invested for a longer term then ULIPs could be an answer.

 Generally Financial advisors recommend separating out the life cover objective with investment and hence, ask to buy a term insurance plan and invest into equity funds to meet the goal. But, if one is convinced to keep the two goals together then they could go ahead with the ULIP investment. A ULIP has a lock-in period of 5 years versus the 3 years lock-in period of equity-linked saving schemes (ELSS) from the tax perspective. Ideally, a ULIP held for more than 10 years could return higher profits over the period of time.

 Online Plans

Investors interested in ULIPs might have to struggle to get the right information now, given the scenario when agents are reluctant in selling ULIPs due to lower commission. However, one could get the information on an insurance company's site, and the option of buying an online ULIP plan is also available now for the investors.

[Source: http://www.indiainfoline.com/article/news-top-story/does-investing-in-ulip-make-sense-115010800310_1.html]

ULIPs are back with a bang!

From being once the most sought out investment products to the most hated, ULIPs or Unit Linked insurance plans have completed a full cycle. Now with a string of reformatory measures introduced by insurance watchdog IRDA, ULIPS are trying to make a successful comeback in the financial mainstream offering policyholders the multiple advantages of investing in equity markets for wealth creation as well as offering life protection.

The high charges levied by insurance companies in the first phase of ULIPs made way for rampant mis-selling by distributors and insurance agents, and ULIPS became a “tread with caution” product. Now with the Insurance Regulatory and Development Authority capping the annualized charges of ULIPS at 2.25% for the first 10 years of holding, the second innings of ULIPs are likely to be more eventful and positive both for insurance companies and investors.

Introduction of reforms to make ULIPs more customer friendly

In its attempt to make Unit Linked insurance plans or ULIPS more transparent and customer friendly, the insurance sector watchdog IRDA issued new guidelines for ULIPs. The first major reform in the ULIP segment was introduction of a cap on charges and commissions which were not allowed to be front loaded but evenly distributed throughout the tenure of the policy. The second import reform in the new ULIP rule made by IRDA is to increase the lock in period of the ULIP policy along with a higher death benefit for the policyholder.

Impact of new ULIP Reforms

 As a result of the new ULIP reforms, all unit linked insurance plans introduced recently have been offering better avenues of growth by balancing both protective cover as well as wealth creation for the policyholder. While fundamentally ULIPs remain a long term investment product, the increase in lock in period has helped since all upfront charges get evenly distributed over the five year lock in period.

Another advantage offered by new Best ULIP Insurance Plan  compared to the pre 2010 ULIPs is the reduced cost structure effectively allowing a large chunk of the first year’s premium to be invested in the equity markets allowing the money to grow from the initial period itself. The Internal Rate of Return commonly known as IRR which amounts to returns after adjusting all the costs and expenses cannot be less than 7.75% in any case as per the new guidelines. As a result of these structural changes, Large-cap ULIPs  from various companies including Bajaj Allianz Life, TATA AIA Life, IDBI Federal Life have delivered an average return of 35 per cent in the last one year while ULIPs in the mid- and small-cap category have delivered even higher returns.

Source from : http://blog.bankbazaar.com/ulips-are-back-with-a-bang/

Select a ULIP that best suits you

At the time of initial investment you can chose which funds to go for depending on your investment objective. There are many options available to you to chose from as can be seen from the below chart.

ULIP NAV

One of the big advantages that a ULIP offers is that whatever be your specific financial objective, there is a ULIP plan which you can choose from:

Equity Funds ULIPS – These ULIPs mainly invest in Equity Stocks. The investment pattern can range from 60%-100%. The investment objective behind investing in such products is to meet long term goals like retirement planning, children’s education planning, marriage planning etc. These investments come with high risk and returns. The minimum investment horizon for such investments should be at least 5 years.

Debt Based ULIPS – Quite contrary to equity investment based ULIPs, debt based ULIPs are more safe and hence returns are very predictable. These investments are normally meant for short term goals or one can utilize this category to shift funds from Equity Funds as the goal maturity comes closer by using the Switch facility. Through switch option, one can move from Equity to Debt fund and vice-versa at any point in time

Highest NAV Guaranteed ULIPS – These are capital guarantee products that ensure that the amount you invest does not lose value and you get some upside of equity also. However it is foolish to assume that you get Sensex-linked return, with zero risk. Moreover, the highest NAV is only possible if you stay throughout the tenure of the fund. These plans pay the highest NAV achieved by fund units over a specified period of time ranging between seven and 10 years. They work on the constant proportion portfolio insurance (CPPI) model, which, while limiting downside in the event of falling stock markets, also tend to constrict gain and leverage that could be achieved through participation in rising markets. In ULIP NAV   , given the guarantee, over the policy term, a significant portion of the fund stays invested in debt market instruments. Depending on the percentage of guarantee offered, there is also usually a separate guarantee charge, which lowers the investment component. Such plans will appeal to investors with lower risk appetite who do not mind foregoing higher equity returns and paying extra charges for the sake of guarantee.

In a nutshell, it can be quite a considerable task for a novice investor to choose from the various investment options available. Hence it is always advisable to take the help of a financial advisor before committing your hard earned money.

Source from : http://lifeinsurance.bajajallianz.com/ulipedia/select-a-ulip-that-best-suits-you/

Changes in Unit Linked Insurance Policies Impact Finances Positively

IRDA has planned few major changes in the way ULIP’s would be sold to the buyers. Industry experts will give you detailed information about updated insurance policy riders. These changes will affect insurance policy benefits. Below are some important changes which could modify the way Unit Linked insurance plans work from now on:

Charges

IRDA has announced a cap on charges like surrender charges. Make sure that surrender charges cannot be more than Rs 6,000 in the first year from now on. These charges are capped at around Rs 2000 during the fourth year and in the fifth year, these charges will not applicable. Plus, the cost structure of Indian insurance policy would change which means more of policyholder’s invested amount will actually be invested so that insured get more return.

Commissions

For insurance agents, maximum limit of commission in India would be around 15 percent for first year, then 7.5 percent for second year and five percent from thereon. It would be just the same as was mentioned for traditional Indian insurance policy.

Higher Sum Assured

Now, the least sum assured in case of ULIP’s has been nearly ten times the sum assured. Remember that higher cover is always beneficial to the policyholders, more so if it is sold at an affordable rate.

Longer lock-in Periods

For ULIPs, the minimum lock-in period has been increased to five years from three years. Due to longer lock-in periods, person remains insured for a longer tenure and thus, avoids pre-mature withdrawals.

Ban on Products

IRDA has enforce a ban on ‘Highest NAV Guaranteed’ plans because people believe that it would make double within certain years of investment and investors would get the highest NAV that would double the investment in no time. But, the commissions and charges never took the NAV anywhere near to that level.

Best ULIP Insurance Plan  have become better with such changes. But, it is still advisable to select a pure term insurance for security and pick a mix of bonds, mutual funds and deposits for investments.

Source from : http://blog.policyboss.com/insurance/insurance-policy/page/2/

Better returns from new ULIPs

The insurance regulator, Irda, have given a more customer-friendly avatar to the unit-linked insurance plans, or, ULIPs. One of the major reforms in the guidelines was the introduction of cap on charges and commissions that could not be front-loaded and had to be evenly distributed throughout the policy term. Also, the regulator mandated a higher death benefit and a longer lock-in period

As a result, compared to the old Ulips, the new ones provide better avenues for wealth creation along with adequate cover. With reduced cost structure, there is more that gets invested and therefore makes a significant difference to the returns earned in the long term.

The upfront charges are now uniformly distributed over the five year lock-in period. So, a good portion of the first year premium will be invested and your money starts to grow from day one

Also, the maximum reduction in yield at maturity, that is, the difference between the gross yield and the net yield has been capped at 3% for policies whose tenure is less than or equal to 10 years, whereas, for plans whose tenure exceed 10 years, the total charges can't exceed 2.25%. This means, the IRR, or, internal rate of return cannot be less than 7.75% in any case.

The lock-in period has increased from 3 years to 5 years which ensures that these policies have long-term orientations and enjoy greater compounding benefits—higher the returns the more your earnings get re-invested.

They have also become more flexible offering different cover sizes and premium paying terms. Also, there are more fund options to cater to different risk appetites along with top-up options to invest additional premiums. A few insurers are also offering unlimited number of partial withdrawals and higher death benefit as much as up to 40 times the yearly premium.

Being essentially an insurance product, they haven't lost their core component either. A requirement of Best ULIP Insurance Policy  is minimum sum assured should now be at least ten-times the yearly premium paid ensures they are provide adequate protection as well.

Source from:http://economictimes.indiatimes.com/wealth/insurance/analysis/better-returns-from-new-ulips/articleshow/29448854.cms

How Ulip scores over others as a better investment product

ULIP, ULIP NAV

What's in it for you

Unit-linked insurance plans (Ulips) are a category of goal-based financial solutions that offer dual benefits of protection and investment. Your unit-linked insurance plan is linked to the capital market and offers you flexibility to invest in equity or debt funds depending upon your risk appetite.

Ulips are typically bought for long-term capital gains and offer a protection cover too. Though much has been written about Ulips in the past, a lot has changed for the better in the past four years. In 2010, insurance regulator Irda issued new guidelines for Ulips to improve the returns for investors by reducing the charges and to ensure that the new product is sold and bought as a long-term protection and savings tool.

In the last few years, the demand for traditional insurance plans has gone up considerably overshadowing the Ulips. So what is the new Ulip all about and what’s in it for you as a customer.

What makes Ulip a better investment product? First of all, it can help customers avoid everyday hassles of managing stocks: Investing in Ulip provides you expertise in fund management, multiple options to choose a fund on which the premiums will be invested and different investment strategies like, for instance, opportunist and balanced approaches.

Secondly, a Ulip can help you to churn your portfolio. It allows you to shift your money from one fund to another without disturbing your long-term financial plan by using fund switch, premium redirection or partial withdrawal options.

In fund switching, you can shift your money from equity funds to debt funds or vice-versa while the premium pedirection strategy allows you to redirect future premiums to any fund of your choice while keeping your existing fund composition intact. The partial withdrawal option in a Ulip provides the flexibility to its policyholders to ‘partially’ pull out some amount of money from the accumulated fund value within the policy term.

Other unique features of an Ulip include the duel benefits of investment and insurance cover, multiple investment options and tax benefits.

Ulip is a two-in-one plan, giving the investor twin benefits of life insurance cover and investment. The multiple investment options of an Ulip allow investors to invest in multiple fund options based on lifestage needs and risk profiles. Plus, investments made in a Ulip enjoy tax benefits under Section 80C & 10(10D) as per prevailing tax laws.

While investing in Ulips, an investor should keep in mind the charges applicable, the payment policy in case of premature surrender, the investment options offered, limitations and exclusions mentioned in the policy document, lapsing and its consequences, various disclosures required and also the various benefits offered.

Busting various myths 

>> Ulips are expensive: Irda has capped the charges by regulation since September 2010. In simple words, the overall charges cannot exceed the prescribed limit set by the regulator. The net reduction in yield cannot be more than 3 per cent for a 10-year term policy. This reduction in yield includes all charges, except mortality and morbidity charges. Even fund management charges (FMC) are capped at 1.35 per cent. This cap on charges ensures a reasonable value proposition for customers.

>> Ulips offer low returns: There are several factors that enable an investor to earn good returns. First of all, one has to invest for the long term. Best Ulip insurance plan offered by life insurance companies are a good long-term avenue for investing in a disciplined manner, as it also offers the valuable life cover.

Finally, your choice for funds and judicious switching, redirection of funds/ premiums can ensure healthy growth of your fund. Life insurance companies have also leveraged the power that internet brings and have introduced online best Ulip insurance policy that are easy to buy and extremely cost effective.

(Source: http://www.mydigitalfc.com/insurance/how-ulip-scores-over-others-better-investment-product-699)

Should you continue to have faith in your ULIP Policy

All of us who have invested in ULIPs over the years have this question before us? In most situations ULIP have given below expected returns and you may tempted to think of cutting your loss by surrendering and investing the amount in other higher return investments. Let us therefore examine, whether it is good to surrender or continue with it till maturity. What is ULIP? Unit Linked Insurance Policy (ULIP) is a product offered by insurance companies that unlike a pure insurance policy gives investors the benefits of both insurance and investment under a single integrated plan.

 What is ULIP?

Unit Linked Insurance Policy (ULIP) is a product offered by insurance companies that unlike a pure insurance policy gives investors the benefits of both insurance and investment under a single integrated plan.

How it works?

A part of the premium paid is utilized to provide insurance cover to the policy holder while the remaining portion is invested in various equity and debt schemes.

The money collected by the insurance provider is utilized to form a pool of fund that is used to invest in various markets instruments (debt and equity) in varying proportions just the way it is done for mutual funds . Policy holders have the option of selecting the type of funds (debt or equity) or a mix of both based on their investment need and appetite.

Just the way it is for mutual funds, ULIP policy holders are also allotted units and each unit has a net asset value ( NAV ) that is declared on a daily basis.

The NAV is the value based on which the net rate of returns on ULIPs are determined. The NAV varies from one ULIP to another based on market conditions and the fund’s performance.

Performance of ULIPs

 ULIP is a market related instrument, and if the market does well so will be the ULIPs. However, research suggests that not all ULIPs have performed well and have given reasonable returns to the investors. Though the market is the primary reason for ULIP’s performance, it also depends on what charges and fees a ULIP deducts from your investments.

 The common charges are Premium allocation charge, Top up allocation charge, Mortality Charges, Fund management charge, Policy administration charge, switching charge and surrender charge etc. Besides, the surrender value is calculated as Fund Value – Surrender Charges, where fund value is Total no. of units under the policy NAV of the fund chosen. However, these charges are not same for all ULIP, some charge lower.

Because of so many charges, the residual investment of any best ULIP insurance policy is not enough to give considerable return even if the market is doing well. Here lies the reason for dissatisfaction of investors like you, and you now want to get out of it. You, therefore, want to take such a decision.

(Source: http://www.moneycontrol.com/news/insurance/should-you-continue-to-have-faithyour-ulip-policy-_954762.html)

Customers now understand ULIP’s value proposition better

With the bulls continuing to rule Dalal Street and stock market indices hitting record highs every other day, unit-linked insurance plans (ULIPs) are making a comeback in a big way.

Are there any indications to show that ULIPs have made a strong comeback?

The growing popularity of ULIPs is due to customers understanding the value proposition offered, juxtaposed with the overall positive economic sentiment. In our case, 96 per cent of our ULIP funds have outperformed their respective benchmarks, since inception.

What is the current mix between ULIPs and traditional products for I-Pru? How was the mix in 2007-08?

The new ULIPs are cost-effective as charges have been reduced. Given the prevailing market sentiments and an overall positive macro-economic environment, ULIPs have become popular with individuals looking for both protection and long-term savings. Our product mix has always been in favour of ULIPs, as of the first half of fiscal 2014-15 ULIPs comprised more than 80 per cent of our product mix.

Given that global and Indian stock markets are volatile, do you think ULIPs will be difficult to sell as a push product?

Firstly, ULIPs are long-term products. Volatility is an integral part of capital markets and can adversely impact returns where the investment horizon is short. However, historical evidence suggests that, over the long term volatility gets ironed out providing customers with positive returns.

The advantage of best ULIP insurance policy is that a customer can opt for paying monthly premiums to take care of the issues relating to volatility. Over a long period, say 10 years, equity as an asset class is known for giving superior returns and ULIPs are an ideal way to invest in it over a longer period of time. Therefore, customers should continue with their unit-linked plans and regularly make premium payments during the tenure of the policy.

I-Pru’s charges are on the higher side compared to similar products offered by competitors. What is your take on this?

One should always evaluate the charges over the long term since life insurance is a long-term product. More importantly, ULIPs being offered today have been completely recalibrated and the cost structures have been rationalised. IRDA has specified a cap on the reduction in yield (RIY). RIY is the measure of the gap between what the customer’s funds earn and what the customer actually gets after deduction of charges. The lower the difference, the higher is the return to customers. Our current set of products have extremely low RIYs, in fact, for some products, it’s as low as 0.9 per cent for a 20-year term.

(Source: http://www.thehindubusinessline.com/markets/stock-markets/customers-now-understand-ulips-value-proposition-better/article6815758.ece)