Tips On Best ULIP Insurance Policy

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Tips on Best ULIP Insurance Policy
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Understanding ULIPs
ULIPs are a combination of insurance
investments. It has the double benefit of
providing a RISK cover investing in stock
markets. However, Unlike traditional plans the
ULIPS are subject to the risk factors where the
risk is borne by the policyholder, the investment
risk is related with the stock markets
accordingly the NAVs of the units go up down
depending upon the funds performance the
factors affecting the capital market .
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Basic Charges in ULIPs
Premium Allocation Charge  This is a percentage
of the premium appropriated towards charges
before allocating the units. This percentage is
generally higher in the first few years varying
greatly from company to company. Say your premium
allocation charges are 30, and then out of your
total premium paid of Rs. 1, 00, 000 Rs. 70, 000
are invested in the funds effectively.
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Mortality Charges  These are the charges to
insure you against life cover which depends on no
of factors such as age, amount of coverage, state
of health etc(age primarily). In a policy without
life cover(eg some pension plans), then the
mortality charges become zero. Fund Management
Charges  These charges are deducted for
managing the funds before arriving at the Net
Asset Value(NAV). The fee is charged as a
percentage of funds under management by the fund
mangers. These are ranging from 0.5-2 per annum.
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Policy/Administration Charges  These are the
charges for administration of the plan which
could be flat throughout the policy term or vary
at a pre-determined rate. These are a monthly
fixed amount which varies every year with
inflation or as a percentage of sum
assured. Surrender Charges  These charges are
deducted for premature partial or full encashment
of units.
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Fund Switching Charges  The charges when you
wish to switch ULIP options like from Equity to
debt. Generally a limited number of switches are
allowed without any charge.
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REMEMBER Duration of investment  Dont
expect the moon in 3 years , stay invested for
5-8 years for good returns. The charges are
higher in the first few years which is why it
takes more years for your funds to grow. Most
insurance agents will inform you of the option to
withdraw the money after 3 years, but REMEMBER to
stay invested for 5-8 years to get good returns.
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Know the charges  The Insurance Regulatory
Development Authority of India(IRDA) has issued
guidelines according to which the investors
should know all the charges no hidden charges
can be charged. Invest as per your risk
profile You must understand your risk appetite
accordingly allocate assets across different
categories. Choose your fund Equity or
otherwise, depending upon your age and risk
profile. Thumb rule is that of your equity share
should be 100 age, i.e reduce equity shares
with age.
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Other features  Apart from the charges you
should also look at the flexibility in switching
your funds, fund management charges the funds
past performance should also be looked upon
before you look out for Best ULIPS Insurance
Policy.
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