ULIPs or Unit Linked Insurance plans are merchandise that combine investments and insurances. They involve commitment, discipline, and is long term merchandise. One can simply cancel investments, whereas, it is less likely observed the discontinuation of an insurance policy, therefore, such merchandise in some scenarios considered as ideal for long term objectives like retirement or education of your offspring.

Five reasons that made ULIPs ideal
Change flexibility between equity and debt: A number of insurance policies offer a couple of free changes within a year, allowing investors to make free of cost changes between funds.

• Without any capital gains: the changes between funds do not have any element of capital gains that makes it affordable in the comparison with mutual funds or any other sort of investments. The change is convenient and cost effective because changing from one scheme to other results in the attraction of capital gains tax.
• Taxes: under SEC 80C, an investment of worth rupees one lakh is computable and, therefore, proceeds which will be tax free and will be acquired on maturity (the condition to which it is subjected is that the amount of total annual premium paid will not exceed from 20% of the total assured).
• Goal protection: on an adequate insurance policy for a specific goal, ensures the accomplishment of goal no matter what happens to the policy holder. Such policies are ensuring peace of mind that on the death of the policy holder and at the accomplishment of a goal, in both cases the sum assured will be paid.
• Commitment: when individuals choose ULIPs for investment, commitment, and discipline is guaranteed with this long term merchandise. In case, when an investor wants to exit within a short time he/she will have to pay surrender charges in ULIPs.

Five factors working against ULIPs

• Charges or expenses: currently, mutual funds are considered as free, however, ULIPs charges a fee for it which is making it an upscale or expensive investment choice.
• Transparency: the product is reduced transparency because portfolio disclosures are not created on a regular basis as compared to mutual funds.
• Management of funds: ULIPs restricts the option of exiting from investment scheme in case, it is not managed in good manner, whereas, mutual funds allow investors to exit if they feels that the management is not satisfactory.
•  Expertise: in ULIPs, the management could have experience in one type of asset and the investor have no option to move to another one whereas in mutual funds, management allows two different sorts of investment options and never restricts investor to a single option. They can invest in any one according to their preferences.
• Reputation: in past times, ULIPs was loved by people but an advisor mis-sold the merchandise or in other words people failed in understanding it.

Best Reading:

• ULIP FAQ’s
• ULIP Single or Regular Premium
• Mutual funds vs ULIP
• Read before buy ULIP

Conclusion:
ULIPs is an excellent merchandise if an investor invests after taking complete information about its charges and other requirements. The start line in fact has a monetary goal making certain that the sum assured will match the quantum and maturity period, and then having the flexibility to form regular premium payments.

There is one big good news with regards to ULIP, thanks to the innovativeness of IRDA.  The new guidelines by IRDA will reduce the biggest grouse — cost of ULIPs.  Obviously, this great news will make every client happy and more excited in getting and paying for their ULIPs premiums.

Indeed, it is undeniable that IRDA has been moving heaven and earth just to attract policy makers in view of ULIPs. The Insurance Regulatory and Development Authority (IRDA) has been working hard on making unit-linked insurance plans (Ulips) attractive for policyholders. There have been many makeover attempts, the latest being effective from September 1. There are a slew of changes proposed and here’s an overview of how it could impact policyholder.

Here now are the said great optimistic changes.  Let’s take a quick look at the changes to come about in Ulips -

PROPOSALS MADE

• Period of lock-in extended: Lock-in to be extended to five years, against the current three years. This will also increase the mandatory premium payment term from three years to five years.
• Charges’ spread: Overall charges to be evenly spread out over the lock-in period.
• Life coverage to 10 times: Life cover, which was a minimum of five times of sum assured, is now raised to a minimum of 10 times. Considering that it cannot be done for all age groups, Irda reduced it to seven times of annualised premium for those aged above 45 years. For single premiums, the minimum sum assured is fixed at 1.25 times of premium for policyholders below 45 years and 1.1 times for those at or above 45 years.
• Tax exemption to DTC: The Direct Tax Code (DTC) proposes to tax exempt annuity, with other investment-linked insurance becoming taxable on maturity. Irda supports this initiative, by fixing an assured return for pension plans at 4.5 per cent – interestingly, applicable for Ulips as well.

AN EXISTING ULIP HOLDER: Good news for those who are already policy holders!  If you are currently invested in a Ulip, even if it was bought a few years ago, these changes will not affect in any way. It will rather make sense for you (as an existing policyholder) to stop deployment of further cash into the product and switch to the new, improved product, once launched, which will surely be more competitive in terms of cost. Although it is not advisable to look at Ulips as short-term products, you can easily evaluate the scenarios to understand which one is beneficial for you. Further, surrendering a policy within five years should not be considered, especially if you hold the present or older version of the Ulip, where surrender charges are levied all the way till the 4th year or even up to the 10th year, in many cases.

IMPACT ANALYSIS: Moreover, all these moves will make Ulips more investor-friendly. This product is meant for a medium- to long-term horizon. And Ulip makeover will definitely curb mis-selling to a large extent. However, the downside is that it will be less flexible now, with the five-year lock-in and that could be a constraint in emergencies.

Truly, he new norms on Ulip charges has been in significant move. Those insurance products with very high front-end charge in the initial years will have to shed their existing form to even out the charges and deploy more towards investment in the initial years, helping the client from compounding.

IRDA has changed rules for fund allocation as well. Ulips/ULPPs offered fund choices which provided up to 100 per cent exposure in equities. That will no longer be possible. The new rules will ensure a minimum fixed return and will mean a certain percentage of the fund being dedicated towards debt/government securities. This could lower the yield in the long-term and 100 per cent exposure to equities may not being possible. Ulips will no longer be on the same platter as mutual funds.

For someone looking at Ulips for investment, the timing could not be better. After DTC comes into effect from April 2011, Ulips could prove a little less tax-efficient. However, if one were to buy it before DTC becomes operational, it is likely that the maturity amount will not be taxable.

WILL ALL THIS REACH THE CONSUMER?
Definitely.  Sebi did a great thing by wiping off entry load on mutual funds — the objective was to get additional investors on board. However, this did not happen because there aren’t too many sellers/distributors ready to provide service without the assurance of a fixed fee and not too many investors willing to pay for a service. This has been a major deterrent in getting funds into the system over the past year or so since the abolishment of entry load was implemented. Whether Ulips see a similar fate is something to be seen.

Basically, the changes made by Irda are in the interest of the investor. Insurers are already working out their numbers, since the current agency commission structures may not sustain, a long-term commission model will have to be devised, which will provide a regular income stream to the distributor.

Finally, Ulips, today, are an important saving instrument for many policyholders. Ulips also contribute significantly to the inflows into markets and hence it is important for the economy as a whole as well. We hope this becomes a good long-term investment product for the investor and a complementary instrument.

ULIPS’ NEW CHANGES:
1. Lock-in period increased to 5 years from 3 years.
2. For a long-term investor there is no reduction in charges.
3. Front loading of costs will be restricted, and spread over 5 years providing for more investable funds in initial years, which will benefit from compounding.
4. Minimum life cover increase to 10 times premium will impact returns for younger investors who used it primarily as an investment option.
5. The minimum guaranteed return is fixed at 4.5 per cent for pension plans; insurers will be forced to have a balanced portfolio impacting.
6. Pension plans to lose flexibility of early exits. It will now compete against other long-term products like PPF and EPF.

Best Reading:

• Unit Linked Insurance Plans (ULIP)
• ULIP FAQ’s
• ULIP Single or Regular Premium
• Mutual funds vs ULIP
• Read before buy ULIP

As a conclusion to these various positive and very policy makers’ friendly changes, there is no more reason to cast any doubt in getting a premium these days.  IRDA has indeed been doing well its homework in view of the matter and this is something worth commending.  If you want to get an ULIP now, it would be more helpful for you to check and take a closer look regarding all the possibilities on how you can maximize from the benefits of these new changes from ULIPs.  Thanks therefore to all the people behind IRDA for making these great and revolutionary moves that will surely attract more policy ULIPs buyers in the whole of India.

Just very recently, a radical move has been proposed and agreed upon by the governing agency over all Life insurance companies of India primarily to bring into the scenario a more dependable and stronger foundation of the Life Insurance system all over India. The reality of disclosing the assets and financial status of these Life Insurances are basically the one which is demanded by IRDA so as to check and balance all of the income and expenditures of the many Life Insurance businesses mushrooming in India.  This is both beneficial to the clients to be, the government of India and the Life Insurance Companies as well together with their possible investors.

Hence, because of this memorandum of agreement, Life insurance companies planning to raise money from bourses will now have to provide a financial account and disclose the investment performance of various unit-linked insurance plans (Ulips) over the past five years in order to help prospective investors gauge risks better.  In this way, investors will be able to decide on whether to invest or not from those said prospective Life Insurance Companies.

Moreover, these companies will also have to give guidance on earnings from their present business and agreements with foreign promoters this way, clients and investors alike will be able to have a bigger and clearer picture of the entire business company where they will invest their money. This set up is basically to be followed and implemented according to new norms cleared by an inter-regulatory panel set up by SEBI. Good thing is, most of IRDA’s suggestions on disclosures have been accepted by the panel, said a senior official privy to the development.  This new development is therefore close to being a great success.

It is interesting to note that Ulips are similar to equity schemes of mutual funds, but with an insurance cover thrown in. This is something safe and secured due to the cover insurance itself.  This category accounts for over 80% of the portfolio of private insurers. Insurance watchdog IRDA, which has been granted the right to regulate Ulips after a public spat with SEBI, has tightened regulations to ward off criticism against untoward selling of this hybrid product. This practice will prevent abuses from the Life Insurance Companies.

Finally, loss-making companies will be allowed to tap the equity market since given the nature of the business, insurers can’t wait forever till they make profits, said another person familiar with the developments. “They should make all disclosures and let investors take the call,” the person said.  This may not be a good signal to these losing companies but the most important fact is that all parties will be able to find where to stand and start all over again by finding the remedy with the help of everyone concerned.

Best Reading:

• ULIP FAQ’s
• ULIP Single or Regular Premium
• Mutual funds vs ULIP
• Read before buy ULIP

As a conclusion, IRDA, all Life Insurance Companies, the would-be investors and all prospective clients should exert efforts in trying to iron things out and finding the best possible solutions to remedy the problem that may emerge from the Life Insurance Companies’ not disclosing their respective assets and financial transactions.  This would provide all sectors the best plans and evaluation in view of making the most of their business endeavors that will surely bring the economy to its apex progress and the lives of the citizens and these said companies stable.

You might perhaps wonder why in this life there are some people who are simply smarter than the others when it comes to life and business or investment realities.  Are you paying a premium for your insurance?  What insurance have you so far got for your own self, family and assets?

A lot of people are now busy working so hard in order to get the best in life.  These people also understand the importance of securing all that they have worked for.  Hence, they almost always set aside from their earnings a certain amount for insurance of their lives, their loved ones and their assets or valuables.

But what is the most common or sought after insurance form by these clients?

The answer to this question is the ULIP or Unit Linked Insurance Plans.  What is ULIP then? Well, it is a policy which provides for life insurance where the policy value at any time varies according to the value of the underlying assets at the time.

ULIP is indeed a life insurance solution that provides for the benefits of protection and flexibility in investment.

Moreover, the investment is denoted as units and is represented by the value that it has attained called as Net Asset Value (NAV).

In today’s times, ULIP provides solutions for insurance planning, financial needs, financial planning for children’s future and retirement planning.

ULIP is obviously one reality that gives security and future protection for your life that of your family members and those of your hard-earned assets.  It is therefore important to note that ULIP makes a difference between a person who has an ULIP and those without.

These clients however should be very street smart and careful in checking the insurance quotes of the type of ULIPS so that you will see the bigger picture of your insurance and not be shocked or be victimized with hidden charges and other unknown fees that will just puff out in the future.

ULIPS definitely makes your future ready and you will therefore be worry-free at present due to the fact that these ULIP types of insurances will take care of all your future concerns.  Be confident in choosing the best and most suitable insurance type for you and your family.

ULIP distinguishes itself through the multiple benefits that it provides to the consumer. The plan is a one-stop solution providing:

• Life protection
• Investment and Savings
• Flexibility
• Adjustable Life Cover
• Investment Options
• Transparency
• Options to take additional cover against
• Death due to accident
• Disability
• Critical Illness
• Surgeries
• Liquidity
• Tax planning

Furthermore, one can go for these unit linked plan for the period of more than 5-10 years.  It is very interesting to note that these linked plans will certainly go a long, long way for yourself, family and properties:

• Reliance Market Return Plan
• Tata AIG – Invest Assure Gold
• Kotak Flexi Plan
• HDFC Unit-linked plan

Best Reading:

• ULIP FAQ’s
• ULIP Single or Regular Premium
• Mutual funds vs ULIP
• Read before buy ULIP

As a conclusion, there is no reason for you not to get for yourself an ULIP simply because of the fact that you can benefit and that of your loved ones if you have these types of insurances.  It is truly worth investing in view of these form of insurances simply because it provides you with an avenue to protect and take good care of your future and those of your loved ones, not to mention your many hard earned assets.  Therefore invest now in ULIPs insurances!

Happy investing with your ULIP! ALL The Best

Have you applied for your ULIP already?  If not read on…People nowadays are running and going just to get the most financial benefit for themselves and their loved ones.  Yet side by side with money searching is to feel protected and secured in every way.  Among the most bought or preferred insurance form is the ULIP. ULIP insurance policies are on the pedestal or the top of the pyramid’s fame or in the popularity chart simply due to the fact that it gives more benefits than traditional life insurance plans. There are numerous benefits which are available in such as higher returns on investment.  Among those benefits and advantages which the clients will get are the following: partial withdrawal, flexibility to choose life cover, wider fund options, top up facility, free switches, tax benefits, and a lot, lot more.

Indeed, if you are searching for long term investment and better returns, ULIP is a right option to achieve your goal. However, you may find difficulties while purchasing the ULIP due to the fact that there are options to choose from namely:  the single and regular premium option. You have to choose the right option for you. This is where the problem enters.

In view of the single premium ULIP, you simply need to pay a single payment and you will enjoy the benefits throughout the entire policy term. On the other hand, in the case of a regular premium, you have to simply pay your premium on a regular basis, such as annually, semi-annually, quarterly and monthly mode. As regards investment, both products give a similar option such as like equity, debt and liquid. Under regular premium option you may have to ask for commitment to pay more. However, under single premium product you will not be asked to pay more as a matter of commitment.

During the initial years of ULIP, a single premium product offers better returns than the regular premium product. But, the balance power shifts down latter. But this is not the case, since the product is sold very aggressively due to IRDA norms. Regular premium ULIP products are also good in various factors such as affordability, tax benefit and large return. Moreover, there are also ULIP charges to consider in view of a single or a regular premium. It is also important to take an overview of the various or different charges under the ULIP plans. It includes premium allocation charge, risk cover charges, policy administration charges, fund management charges, service tax charge, miscellaneous charge and others.

Best Reading:

• ULIP FAQ’s
• Read before buy ULIP
• Hidden factor of ULIP
• Is ULIP is a Good Option

As a conclusion, ULIP is a good mixture of life cover and investment.  This would definitely be beneficial to all its would-be clients because of the fact that a lot of the advantages will be experienced in getting such policy insurance from ULIP.  It must however be noted that your personal needs should suit best to the kind of ULIP that you will buy.

Gents before you move next please read What is ULIP Almost all insurance companies have in one way or another certain hidden charges.  These charges may not necessarily be illegal but the agents of ULIP or any other insurance company will intentionally not divulge to you during his discussion with you of your insurance plan in one way or another.  One of the most basic reason why these agents will not tell you upfront about those unnecessary hidden charges is because of the obvious fact that once you, his probable client know these additional charges, chances are you won’t get or buy from him a premium of the said insurance plan.  They intentionally hide that list of charges which are obviously to the detriment or disadvantage of the plan holder and the benefit of the insurance company, so as to attract more and more would-be buyers of their plans.  The sad thing however, once the plan holders find out this list of not discussed hidden charges, chances are, and these clients will be disappointed and will tell their friends about the company negatively.  This event will become indeed a bad advertisement which will make the company be in bad light.

Among the common hidden charges which your insurance company such as the ULIPs may include the following:
1). Surrender Charges: These types of charges are usually reduced or deducted for your premature insurance plan either in partial or full encashment.
2). Fund Switching Charges: This is the kind of charges asked from you once you decide to switch ULIP choices  like for instance, from Equity to debt plan. Usually, only limited chances of switches are permitted without any extra charge.
3). Premium Allocation Charge: This is a portion or a percentage of the plan which is reserved towards charges prior to allocating the plan units. This portion or percentage is normally higher in the initial few years varying from one company to the other. For example, if your plan or premium allocation charges is 30%, then out from your total plan or premium paid of Rs. 1,00,000, only a meager Rs. 70,000 is being invested in your funds, the rest goes to charges.
4). Fund Management Charges: These are the usual charges which are taken from your investment in view of managing your funds even before reaching at the so-called Net Asset Value (NAV). The fee for this is usually charged to you as a percentage of funds withinthe scope of management by those fund managers. The said fund ranges from 0.5-2% annually.
5). Policy/Administration Charges: These are usually the charges for taking care of your investment which is sometimes not thoroughly discussed to you by your plan agents to lessen the known charges for greater chances of buying the said plan from the prospected buyers.
6). Maturity Charge: This is the added hidden charge which insurance agencies ask from their plan holders at the end of the plan contract most especially when maturity arrives.

Best Reading:

• ULIP FAQs
• Read before buy ULIP
• Mutual fund vs ULIP
• Hidden factor of ULIP

In conclusion, you should be very keen in scrutinizing your agent in view of the possible charges that you may be paying regarding your insurance plan.  You should trust your agent first and foremost in order to get the best of your insurance plan, lest regret in the end.  Tell your agent to be very transparent and clear with all possible charges so that in the end both of you will be happy with the said plan.
Image Source : http://www.outlookmoney.com

The much anticipated guide and instructions regarding lock-in period for Unit Linked Insurance Plans or ULIPs has finally emerged through the decision of IRDA or the Insurance Regulatory and Development Authority.  From the previous three years period, IRDA deemed it appropriate to increase ULIPs lock-in duration up to five years.  This decision finally stopped the disagreement between SEBI’s market regulators and IRDA itself.

The said decision above formalizes the lock-in period for ULIPs to increase to more years from their current 3 years period, making it to 5 years.  This change has to take effect and must be followed from now on since IRDA would like to assure that ULIPs will now be treated not anymore as short term products but as long term policy insurance product.  Except for the pension product, all the rest of the ULIPs will be categorized as yearly or annuity products.  Meaning to say ULIPs now will have a health cover or a mortality cover as a consequence.

If in case there will be an amount to be paid by the policy holder which is considered as any top in the insurance policy, then this top will definitely be regarded as one single premium. This simply means that all top up that the policy holder makes will incur an added insurance cover that will back up the said insurance premium itself.

Moreover, no withdrawals will be allowed when it comes to the pension and annual product.  ULIPs would like to remind its policy holder that those pension annuity products may not necessarily have a life or health cover.  But, these types of insurances must be upgraded or turned into annuity on its maturation.

ULIPs pension annuity offers will have 4.5% yearly minimum rate of investment or will be dependent in view of the suggestion or the regulator.  Regarding ULIPs loans, there will be 40% of the NAV that the policyholders can take as their net loan.  It must however be noted that it should be in the form of an equity oriented ULIP so that it will give the client an equity as high as 60%.

In view of the ULIPs’ charges,the policy holder should be aware foremost in view of some standard and legal charges which include the following: guarantee maturity charge, highest NAV guarantee charge, surrender charges and fund switch charge.  Other insurance companies may even include hidden charges to their plan holders.

Best Reading:

• What is ULIP
• ULIP FAQ’s

In conclusion, this new guide and instructions will take effect starting September 1st, 2010 in order to give the rest of the companies more than enough time to comply with them.

ULIP is presenting to its clients various fund choices such as the equity, the money-market, guilt, balanced, debt and other fund options.  In relation to these types of fund, the clients’ money in the form of financial investment is kept for a particular time frame.  Hence, it is of utmost importance for the client to be truly careful and intelligent in choosing only the most effective fund in the first place.

How does ULIP fund work as an option?
ULIP fund works in such a way that is easy to be understood by its would-be clients.  This is a very essential matter because the client would only invest in this type of fund unless they know the detailed process of how it works or operates. In ULIP fund, the client which is usually called a policyholder, will be offered to choose the amount he wishes to invest and also the premium that suits his budget.  There is what we call a mortality risk in an ULIP fund and the charge of this is usually deducted from the given sum chosen by the policyholder.  After settling with the sum assured by the client, he then will choose a specific term of payment for his premiums.  The next step is the choosing of the suited fund where he wishes to invest the premium he selected.  The usual types of fund offered by the companies connected with ULIP include the following:  equity, balance, debt, money market and others.  It must be noted by the client that there is also a processing fee which is called management or administrative fee in the investment process.  This will be deducted from the actual premium of the client. Then, the remaining amount which is the net premium will be the money that will be invested in the chosen type of fund by the client or investor.

Why should policyholders choose this option of fund?
Various reasons are present in choosing this type of fund.  We know very well that there are two common kinds of investments, the debt fund and the equity fund.  Both differ in the return of investment and the risk involved.  Debt fund is less risky and the interest return is quite low.  Equity fund where ULIP can be categorized may have high risks involved yet the possibility of high return of investment is present.  The time frame is also to be considered here.  Experts are one in saying that equity fund is in fact high generating and profitable in view of investment if the time frame is longer.

How to choose the most suitable or best fund for you?
A lot of practical consideration is involved in choosing the best and most suitable fund for you.  Experts believe that the usual instinct and tendency of every would-be policy holders are their risk factor and emotional appetite.  Risk and appetite themselves are the driving force for every client in settling with the best fund that suits their needs.  There are aspects that the client or policy holder should gauge or measure his capacity to take risk in choosing his type of investment.  This may include primarily his personal status, whether he is a single person, a newly married man, a person with a family, if you have certain dependent family members, the number of years remaining for you to work, number of years before you retire and other related reasons.  Take into account that not every fund is tailored fit for every would-be policyholder.  Finally, everything in view of these fund investments is anchored with the status and stability of the economy.

Below is the table specifying the status, risk profile, people involved in view of risk and loss and asset allocation in investing at equity fund like the ULIP fund:

Best Reading:

• What is ULIP
• Read before buy ULIP
• Mutual fund vs ULIP
• Hidden factor of ULIP

In conclusion, as much as able, we should not be afraid in investing to equity fund such as the one mentioned in this article, that of ULIP.  Though there is a high risk in the possibility of decreasing the capital investment, it is comforting to note that the chances of earning more are there since it is proven by experts.  In the long run, you will be enjoying the fruits of your hard earned labor and money.  While the iron is hot then strike hard to be ready for the rainy days…

Friends market is not returning well at current level,Today I want to say you one interesting fact related to TV and Stock Market Just 1 week back, some TV people (I will not blame any one here) talked about “best time to buy when Sensex at 10,000 levels”. Now these TV people are talking about recession or slow down as if it is an unexpected one.
That’s why please never give importance these people and always try to read as much data and news as possible and come to your own conclusion. If you commit a mistake, you will learn an investment lesson.Mistake are part of life but do not make them in your habit.I will never believe in these TV people.
One of my reader ask me that Is ULIP is best option, friend our article related to ULIP will help you to solve out your problem.
Below are best ULIP article.

• What is ULIP
• Read before buy ULIP
• Mutual fund vs ULIP
• Hidden factor of ULIP

As always If your investment horizon is of more than 10 years, ideally 15 years, then ULIP is a good option. it will give you good results.All administrative charges and fees are recovered by the insurance company in the first three years hence if you withdraw within first 3 to 5 years, you would end up a loser.Compare the administrative charges before you invest in ULIP.
Life insurance covers lots of different things.You must buy any policy according to your requirement and detail.One more thing read all offer document carefully before investing do not try to sign without reading,their are some hidden factor available so you must know about them.
If you are a new investor or less risky investor, please stay away from Stock markets until we get a clear picture about economy.
Please read trading tips before investing

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Do you have suggestions for improving the blog, or types of content you’d like to see more of? We’re all ears, so please feel free to leave us a comment below. It’s a brand new year, and we’re ready to get started!

This are some collection of ULIP FAQ’s
Before reading this article you must read
What is ULIP
Read before buy ULIP
Mutual fund vs ULIP
Hidden factor of ULIP

Unit linked guidelines were notified by IRDA on 21st December 2005. The main intent of the guidelines was to ensure that they lead to greater transparency and understanding of these products among the insured, especially since the investment risk is borne by the policyholder. It is the endeavor of IRDA to enable the buyer to make the most informed decision possible when planning for financial security. We hope the following FAQs will enable a better insight to all buyers about the character and features of Unit linked Products.
1. What is a ULIP?
ULIP is an abbreviation for Unit Linked Insurance Policy. A ULIP is a life insurance policy which provides a combination of risk cover and investment. The dynamics of the capital market have a direct bearing on the performance of the ULIPs. REMEMBER THAT IN A UNIT LINKED POLICY, THE INVESTMENT RISK IS GENERALLY BORNE BY THE INVESTOR.
2. What is a Unit Fund?
The allocated (invested) portions of the premiums after deducting for all the charges and premium for risk cover under all policies in a particular fund as chosen by the policy holders are pooled together to form a Unit fund.
3. What is a Unit?
It is a component of the Fund in a Unit Linked Policy.
4. What Types of Funds do ULIP Offer?
Most insurers offer a wide range of funds to suit one’s investment objectives, risk profile and time horizons. Different funds have different risk profiles. The potential for returns also varies from fund to fund.
The following are some of the common types of funds available along with an indication of their risk characteristics.

• General Description
• Nature of Investments
• Risk Category
• Equity Funds
• Primarily invested in company stocks with the general aim of capital appreciation
• Medium to High
• Income, Fixed Interest and Bond Funds
• Invested in corporate bonds, government securities and other fixed income instruments
• Medium
• Cash Funds
• Sometimes known as Money Market Funds — invested in cash, bank deposits and money market instruments
• Low
• Balanced Funds
• Combining equity investment with fixed interest instruments
• Medium

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.

• 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.
• 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
• Fund Management Fees :These are fees levied for management of the fund(s) and are deducted before arriving at the Net Asset Value (NAV) .
• 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.
• Surrender Charges :A surrender charge may be deducted for premature partial or full encashment of units wherever applicable, as mentioned in the policy conditions.
• Fund Switching Charge :Generally a limited number of fund switches may be allowed each year without charge, with subsequent switches, subject to a charge.
• 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 varies 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 bein
g 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 effected 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.
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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Disclaimer:
The above material is provided for general information only and do not constitute legal or other professional advice. This information is current at the date of publication but may be subject to change without notice and accordingly, may not be up to date at the time of viewing. Information specific to a product may be obtained from the concerned Insurer.
Source: http://www.irdaindia.org/