About ULIP

The expensive cover policy.

A few decades back, only money back and endowment policies used to be sold by LIC agents. The enterance of new private insurers marked the regime of new unique policies that suited individual needs. Now-a-days, except for LIC all other companies are busy selling ULIP's. Unit Linked Insurance plans as provide you with a cover along with the benefit of enhanced returns on the principal. Lets have a look at the features of this policy:

1. One can invest a fixed amount monthly, quarterly, semi-annually or annually.

2. Amount saved in a ULIP plan (net of charges) is invested at the applicable Net Asset Value (N.A.V) and denoted in units.

3. Every month a certain amount goes towards charges like the fund management charge or premium allocation charge and so on.

4. The cover provided is generally 5 to 10 times of annual premium.

5. The investor has to choose from a range of sub-options or plans provided by the company. For example a risk averse person can opt for a Protector type fund where 90 to 100 % of the investment is made in Gilts and Money market instruments which are risk free. Similarly an investor with a greater risk appetite can invest in Aggressive fund where 60 to 100% will be invested in equity and equity related instruments.

6. The term of the policy can be between 3 to 60 years with minimum and maximum age at entry and exit differing from policy to policy.

7. Different types of bonuses are declared during the term and on maturity of the policy that either increases the fund value or additional units are added to the policy.

8. You can opt for a single premium or regular premium ULIP plans.

9. In case of death of the investor during the term the company pays out the fund value + bonuses (if applicable) or the Sum Assured (cover) or both. This too differs from policy to policy.

10. Tax benefit u/s 80C for premiums paid upto Rs. 1 lakh p.a. Also surrender value or maturity benefit is exempt from taxes.

11. One can surrender the policy after three years of policy existence and can redeem the fund value as on that date.

Samir Kunvaria