The Simplest Way to Choose the Best ULIP Plan!

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Best ULIP Plan
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The Simplest Way to Choose the Best ULIP Plan!
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• The parameters needs to be considered while
  choosing a Best Ulip Plan are explained below so
  that you should not be miss-leaded or cheated by
  any insurance agent or sales person. Also, I
  advice all my readers to have an eye on all these
  parameters based on the information provided on
  the company printed brochure only, as the chances
  of agents or sales people printing their own
  sales support promotional materials which
  normally talks only about the benefits but not
  the demerits of the product.
• Basic Parameters to Compare
• 1. Premium Allocation Charges
• This is the very basic thing to be considered as
  the premium allocation charges in different plans
  vary from 2 to 100 of the first premium. There
  are plans of few companies where they project
  that the premium allocation charge is nil, but
  the fact is they would be charging equal amount
  or more than that through policy administration
  charges or initial management charges or
  surrender charges. Therefore you should be more
  cautious about such products where sales people
  claim that the premium allocation charges are nil.

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• Premium allocation charges are levied on an
  insurance product primarily to cover the cost
  involved in paying the commission to agents or
  sales people and the huge marketing expenses
  involved in acquiring every insurance policy.
  Normally an Insurance agent or a broker or a
  sales person earn between 2 to 80 of the first
  year premium as his/her part of commission apart
  from the regular renewal commission he receives
  thereafter.
• The reason for any insurance company to take out
  so much of money from the hard-earned investment
  of an innocent customer is "Competition". Yes the
  competition in Insurance industry is completely
  pushing away the ethical side of the insurance
  business and today almost 60-80 of the insurance
  business is been done in unethical way. Indian
  Insurance market is completely driven by sales
  people as buying insurance still remain as a
  luxury than a very basic need for Indians. Even
  after 10 years of privatization of insurance
  industry there is very little effort been put
  forth to promote term insurance plans as the
  profit to a insurance company by selling term
  insurance plans is very less more than that
  selling a term insurance plan is certainly an
  uncertain commitment for the insurance companies.

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• Therefore, I advice all my readers to be very
  cautious while comparing the premium allocation
  charges levied on different products of different
  companies and As I mentioned earlier the premium
  allocation of ULIPs starts from as low as 2.
• 2. Policy administration charges
• Policy administration charges are those charges
  that the company takes out from the fund value
  available in customers account to meet various
  administrative expenses incurred while managing
  the policy during the whole tenure of the policy.
  This charge is been deducted normally on a
  monthly basis. This charge is not covered under
  premium allocation charges or the fund management
  expenses. Most of the time this charge is been
  deducted as a percentage of the fund value or a
  fixed amount or a percentage of the premium or a
  percentage of sum-assured.
• Policy administration charges in most of the
  products ranges from Rs 30/month to Rs 200/month.
  But in few plans it goes up to 40-50 of the
  first year premium, up to 35 of the second and
  third premium and up to 10 of the premium paid
  thereafter.

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• Normally this charge is levied at the beginning
  of each policy month from the policy fund by
  canceling units for equivalent amount. This could
  be flat throughout the term of the policy or vary
  at a pre-determined rate. Normally these charges
  are higher during the first few years and can
  come down to zero latter.
• 3. Fund Management Charges (FMC)
• Fund Management Charge is levied as a percentage
  of the value of assets and shall be appropriated
  by adjusting the Net Asset Value. This is a
  charge levied at the time of computation of NAV,
  which is usually done on daily basis.
• If the fund management charge in a particular
  fund is 2 pa then the average fund management
  charge per day would be 2/total number trading
  days in a year. Fund management charges vary from
  0.25 to 2.5 as it depends on different
  companies, depend on different products, and
  depend on different funds.
• Normally fund management charges in ULIPs are
  comparatively lesser than the fund management
  charges levied by mutual funds.

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• 4. Surrender Charges
• Surrender Charges are levied on the total fund
  value available at the time of surrender of
  insurance contract or at the time of partial
  withdrawal before the planned maturity date. This
  charge is usually expressed either as a
  percentage of the fund or as a percentage of the
  annualized premiums. Some companies do not charge
  anything after first three years but some
  companies charge till the end of 10th year or
  before till the date which is anytime before the
  maturity. Now, IRDA has made it compulsory for
  every ULIP plan to have 5 year minimum lock in
  and a customer can take out money from his ULIP
  account only after completion of the 5th policy
  year. The surrender charges levied on a ULIP plan
  normally varies from 0 to 70 depends on the
  product and the tenure chosen by the customer.
  But few insurance companies have designed such
  plans where the premium allocation and policy
  administration charges are very nominal as they
  take a bigger chunk of the fund value during the
  time of surrender. In this case, insurance
  companies normally makes money from the fund
  management charges if a customer stays with the
  fund for long time and from the surrender charges
  if he withdraw from the fund before the maturity
  date.

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• 5. Switching Charges
• These charges are levied when you shift your
  investment from one fund to another during the
  time of market crash or economic imbalance to
  protect your fund value. The charge will be
  usually a flat amount per each switch and it is
  always nominal in almost all the companies.
• 6. Mortality charges
• Mortality charge is the cost of life insurance
  cover. This will be levied either by cancellation
  of units or by debiting the premium but not both.
  Mortality charge may be levied at the beginning
  of every policy month. The method of computation
  will be explicitly specified in the policy
  document.
• I am sure that all of you will be able to choose
  the Best ULIP plan for yourself if you cautiously
  compare all the above mentioned parameters.
  However you have IndianMoney.com to advice you,
  without cost anytime to choose the best financial
  product.

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