ulips final

8/8/2019 ULIPs Final

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By Chandan Chandwani Hemal MehtaRakesh Rajput Prinal KapadiaDhaval Pandya Mentor

Anand Panchal Prof. Ganatra Kashyap A.


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Insurance A brief synopsisWhat are Unit Linked Insurance PlansComparison between Traditional Plans & ULIPsWhy ULIPsWhen will ULIP work best Charges Involved How to choose ULIPs


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Insurance A brief synopsisWhat is Insurance? Insurance is a policy from a large financial institution that offers a person, company,or other entity reimbursement or financial protection against possible future losses or damages.

B asic function of Insurance:Primary Function:

Providing protectionCollective risk bearingEvaluating riskProvide Certainty

S econdary Function:Preventing lossesCovering larger risks with small capitalHelps in the development of larger industries

Other Function:S avings and investment tool

Medium of earning foreign exchangeRisk Free trade


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Types of Insurance Plan

Term Insurance Plan

Whole Life Insurance Plan

Money Back Insurance Plan

Endowment Assurance Plan

Universal Life Plan

Unit Linked Insurance Plan


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What are Unit Linked Insurance PlansUnit linked insurance plan (ULIP) is life insurance solution that provides for

the benefits of risk protection and flexibility in investment. The investmentis denoted as units and is represented by the value that it has attainedcalled as Net Asset Value (NAV). In a ULIP, the invested amount of thepremiums after deducting for all the charges and premium for risk cover are pooled together to form a Unit fund. A Unit is the component of the fundin a Unit Linked Insurance Policy.

The returns in a ULIP depend upon the performance of the fund in thecapital market. ULIP investors have the option of investing across variousschemes :

Equity funds,B alanced fundsDebt funds etc

It is important to remember that in a ULIP, the investment risk is generallyborne by the Investor.


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Traditional Plans Vs ULIPs A Comparison

TRADITIONAL PLANS ULIPs

O ldest types of Insurance Plans available. Relatively new launched and very popular.

Generally withdrawals are not allowed beforematurity.

Partial withdrawals allowed.

Cater to customers with a low risk appetite. Generally taken by Aggressive Investors.

Primarily invests in debt instruments. Invests in Capital Market.

S teady & almost assured returns over the longterm.

Returns depends on Market Performance.

Death B enefit is S um Assured + guaranteed &vested bonus.

Death B enefit is S um Assured or Fund Valuewhichever is higher.

Premium to S um Assured ratios are fixed for each plan & age.

Premium differ as per the age.


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Why ULIPs

F lexibility :S um Assured and Premium amount can be customized.Premium amount can be changed at any level of the plan.The flexibility to change asset allocation by switching between funds with ease.Premium Holiday facility can also be availed by the investor in ULIP Plans.S urplus funds can also be invested through Top-ups.

Transparency :

All the charges are transparent and known to the investor through S ales Illustration, Policy brochure& by the advisor.Day to day tracking of performance of the fund so that customer can decide to stay invested or switching to different fund.

Liquidity :An investor has an option to withdraw partially after locking period for any contingencies.Policy can be also be surrendered subject to surrender charges in case of unforeseen events.


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Why ULIPs (Contd)F und Options :

A ULIP will offer you a wide choice of funds, ranging through equity, debt, cash, or a combination of the three.The customer is also afforded the option of choosing your fund mix based on your desired assetallocation

G oal Based Savings :

ULIP offers saving through different goal based plan.In absence of such a focused approach, there is a high possibility of savings towards one objectivegetting utilized for an immediate short term requirement, thus jeopardizing the long term goal.

Tax Benefit :

The Tax benefit available is : a) Life Insurance Plans are eligible for deduction under S ec 80 C. b)Pension Plans are eligible for a deduction under S ec 80CCC. C) The maturity proceeds are exemptunder section 10 (10D).


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When will a ULIP work best Appropriate life cover :

Cover to be chosen basis the desired Goal.Cover should be decided to secure the family with adequate finances.

R ight fund option :

As per the future plan, age and other prospects, an investor should choose the aggressive fund or conservative fund.A wise choice of fund option will ensure that your ULIP guarantees the important life goals be itretirement planning, planning for childrens education or wealth creation.

Long-term investment :

ULIPs are meant to guarantee your financial goals over the long term as they are less affected bytemporary market fluctuationsTo get the best of your ULIP, an investor should remain invested for the long-term of at least 8-10years.


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When will a ULIP work best (Contd)

K now the features :

To know the feature is very important according to the investors future plan.B asic features: Top up, switch between funds, increase & decrease the protectionlevel, cover continuance option, surrender option & range of riders.

K now the charges :

Sales Illustration :A sales illustration illustrates various charges, year by year, for the term of the plan so that youknow exactly how much money is deducted as charges and what is getting invested.

Brochure :A brochure informs you about the various charges and their purpose applicable on your policy.

Advisor : You should enquire your advisor about all the charges applicable on your policy.


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Charges Involved in ULIPsUnlike conventional traditional products charges are segregated in ULIP & thus madeknown to the customer. Following are the type of charges generally involved in ULIPs:

Policy Administration Charges :These charges are deducted on a monthly basis to recover the expenses incurred by the insurer onservicing and maintaining the life insurance policy like paperwork etc.

Premium Allocation charges :A percentage of the premium is appropriated towards charges initial and renewal expenses apartfrom commission expenses before allocating the units under the policy.

Mortality Charges :

These are charges for the cost of insurance coverage and depend on number of factors such as age,amount of coverage, state of health etc.

F und Management Charges :Fees levied for management of the fund and is deducted before arriving at the NAV.

Surrender Charges :Deducted for premature partial or full encashment of units.

F und Switching Charges :

Usually a limited number of fund switches are allowed each year without charge, with subsequentswitches, subject to a charge.

Service Tax Deductions :S ervice tax is deducted from the risk portion of the premium.


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How to choose ULIPsUnderstand the concept of ULIPs thoroughly :

Do your homework well and read as much as you can about ULIPs before investing. This will helpyou know the benefits and structure of ULIPs.

F ocus on your requirements and risk profile :Identify a plan that is best suited by keeping in mind the requirements & risk appetite.

Understand the charges levied in the product :Understand all the charges levied on the product over its tenure.

Examine the performance of the plan :Compare the performance of the plan with benchmark indices like BS E S ensex or Nifty in the pasttwo or three years to get a better idea about the performance.


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How to choose ULIPs (Contd)

Compare ULIP products of different Companies :

Compare products of different insurance companies in terms of premium payment, cost structure,performance of the scheme, additional facilities & future goal before investing in the product.

K now about the Company :

Last but not the least, insure with a trusted brand to honor its commitment and service inaccordance to the requirements.


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New Guidelines by IRDA


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ulips final

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