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    Dec 9, 2009

    What is ULIP

    1.         What is a ULIP?

    ULIP is an abbreviation for Unit Linked Insurance Policy. A ULIP is a life 


    5. Are Investment Returns Guaranteed in a ULIP?  
    Investment returns from ULIP may not be guaranteed.”  In unit linked
    Products/policies, the investment risk in investment portfolio is borne by the 
    policy holder”.  Depending upon the performance of the unit linked fund(s)
    chosen; the policy holder may achieve gains or losses on his/her investments. It
    should also be noted that the past returns of a fund are not necessarily indicative 
    of the future performance of the fund. 

    6.  What are the Charges, fees and deductions in a ULIP?  
    ULIPs offered by different insurers have varying charge structures.  Broadly, the 
    different types of fees and charges are given below. However it may be noted
    that insurers have the right to revise fees and charges over a period of time.
    6.1       Premium Allocation Charge
    This is a percentage of the premium appropriated towards charges before
    allocating the units under the policy. This charge normally includes initial and 
    Renewal expenses apart from commission expenses.
    6.2       Mortality Charges
    These are charges to provide for the cost of insurance coverage under the plan.
    Mortality charges depend on number of factors such as age, amount of coverage,
    State of health etc
    6.3Fund Management Fees 

    These are fees levied for management of the fund(s) and are deducted before
    Arriving at the Net Asset Value (NAV).  
    6.4       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.
    6.5       Surrender Charges  
    A surrender charge may be deducted for premature partial or full encashment of 
    Units wherever applicable, as mentioned in the policy conditions.
    6.6Fund Switching Charge 

    Generally a limited number of fund switches may be allowed each year without
    Charge, with subsequent switches, subject to a charge.

    6.7     Service Tax Deductions
    Before allotment of the units the applicable service tax is deducted from the risk
    Portion of the premium.

    Investors may note, that the portion of the premium after deducting for all
    charges and premium for risk cover is utilized for purchasing units

    7.   What should one verify before signing the proposal?

    One has to verify the approved sales brochure for  
    •     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.
    8.  How much of the premium is used to purchase units? 

    The full amount of premium paid is not allocated to purchase units. Insurers
    allot units on the portion of the premium remaining after providing for various
    charges, fees and deductions. However the quantum of premium used to purchase
    Units vary from product to product. 

    The total monetary value of the units allocated is invariably less than the amount 
    Of premium paid because the charges are first deducted from the premium
    Collected and the remaining amount is used for allocating units.

    9.   Can one seek refund of premiums if not satisfied with the policy, after
    Purchasing it?
    The policyholder can seek refund of premiums if he disagrees with the terms
    And conditions of the policy, within 15 days of receipt of the policy document 
    (Free Look period). The policyholder shall be refunded the fund value
    Including charges levied through cancellation of units subject to deduction of
    Expenses towards medical examination, stamp duty and proportionate risk
    Premium for the period of cover.

    10. What is Net Asset Value (NAV)?
    NAV 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.

    11.  What is the benefit payable in the event of risk occurring during the term of? 
    The policy?

    The Sum Assured        and/or value of the fund units is normally payable to the
    Beneficiaries in the event of risk to the life assured during the term as per the 
    Policy conditions.

    12. What is the benefit payable on the maturity of the policy?

    The value of the fund units with bonuses, if any is payable on maturity of the 
    policy.

    13.  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 subject to the feature being available in the
    Product. This facility is known as “TOP UP” facility.


    14.  Whether one can switch the investment fund after taking a ULIP policy?
    Yes.  “SWITCH”     option provides for shifting the investments in a policy
    from one fund to another provided the feature is available in the product.
    While a specified number of switches are generally affected free of cost, a fee
    is charged for switches made beyond the specified number.

    15.  Can a partial encashment/withdrawal be made?
           Yes, Products may have the Partial Withdrawal” option which facilitates
    withdrawal of a portion of the investment in the policy. This is done through
    Cancellation of a part of units.

    16.  What happens if payment of premiums is discontinued?

    a)   Discontinuance within three years of commencement – If all the 
    Premiums have not been paid for at least three consecutive years from
    inception, the insurance cover shall cease immediately. Insurers may give
    An opportunity for revival within the period allowed; if the policy is not
    Revived within that period, surrender value shall be paid at the end of 
    Third policy anniversary or at the end of the period allowed for revival,
    Whichever is later?
    b)   Discontinuance after three years of commencement -- At the end of the
    Period allowed for revival, the contract shall be terminated by paying the
    Surrender value. The insurer may offer to continue the insurance cover, if
    So opted for by the policy holder, levying appropriate charges until the 
    Fund value is not less than one full year’s premium. When the fund value
    reaches an amount equivalent to one full year’s premium, the contract
    shall be terminated by paying the fund value reaches an amount equivalent
    to one full year’s premium, the contract shall be terminated by paying
    the fund value.



    17. What information related to investments is provided by the Insurer To?
    The policyholder?  
    The Insurers are obliged to send an annual report, covering the fund
    Performance during previous financial year in relation to the economic
    Scenario, market developments etc. which should include fund performance 
    Analysis, investment portfolio of the fund, investment strategies and risk
    Control measures adopted.

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