Phone NumberTo Buy: 1800-258-5899 (9 am to 6 pm)

|

Emailcustomerservice@canarahsbclife.in

|

Locate BranchLocate Branch

What Impacts The Value Of Your ULIPs?

What Impacts The Value Of Your ULIPs?

Life Insurance Policy For Unmarried

ULIPs are popular instruments because of their unique composition. They offer a dual benefit of insurance and investment in a single plan. If you want to venture into investing and yet stay as safe as possible, you can buy life insurance along with a relatively safe investment in the form of a ULIP.

What is a ULIP?

When you have a ULIP, you don’t need to buy life insurance and investment funds separately. A part of a ULIP premium goes towards a life cover, while the other is invested in funds which are chosen according to your risk appetite. Your fund can be a debt fund if you want to be rather safe, an equity fund if you are willing to take calculated risks, or even a balanced fund if you want to hit the sweet spot in the middle.

What is the fund value of a ULIP?

Fund value, often confused with the sum assured, is actually the monetary value of the units you hold. It can be calculated by multiplying the NAV (Net Asset Value) of every unit on the specific day by the total number of units held by you. The NAV keeps changing, and thus, fund value also keeps changing due to fluctuations in the market.

The NAV is basically the price per unit of your fund.
NAV = (Value of Current Assets + Market Value of Investments Held) - (Value of Current Liabilities and Provisions) /
Total no. of outstanding units on the particular date
Just like shares have a share price, mutual funds and ULIPs have an NAV.

What impacts the fund value?

All the values which go into the calculation of the NAV impact your fund value.

  • The current market value of your investments
  • The market value of your current assets
  • The market value of your current liabilities and provisions
  • Number of units existing on valuation date (the date of calculation)

How is fund value different from Sum Assured?

The sum assured for a ULIP is the same as that when you buy life insurance. It is the amount that the insurer will pay to your beneficiary in the event of your death. Depending upon the policy terms, your family could receive either the sum assured, or the fund value, or the higher of the two upon death. Upon survival, you will receive the fund value upon maturity, and not the sum assured.

What is surrender value?

Surrender value, as the term suggests, is the value that you get upon surrendering your ULIP before maturity due to a certain reason. This value depends upon a lot of factors.

What impacts the surrender value?

  • The mortality charge or the cost of providing insurance which is deducted from your premiums will be deducted from the number of premiums paid for calculating the surrender value. Mortality charges are usually minimal and are paid back at the end of the policy.
  • While buying a ULIP, one of the charges that you need to be clear about is the management charge. It is one of the most important deductions from your premiums. It is usually in the range of 0.5%-2% of your premium. It is basically a charge that you pay for your fund manager who ensures that your fund gets you good returns.
  • The longer the duration for which you pay your premiums, the greater the increase in valuation of your policy. The base amount of your policy upon maturity is the sum of all the premiums paid, after deduction of mortality and management charges. However, there is another factor that is taken into account, which is the insurance to investment ratio.

Conclusion

A ULIP is an elaborate, detailed instrument. Make sure you know exactly what kind of returns you are in for when you buy one. For maximum choice and flexibility, choose a ULIP like Invest 4G which provides a plethora of options.

Invest 4G

All of us have dreams for ourselves and for our families. Canara HSBC Oriental Bank of Commerce Life Insurance's Invest 4G is a ULIP that supports you in planning to achieve your dreams. It is a protection and savings oriented plan that provides you maximum flexibility with 7 different funds and 4 different portfolio strategies to choose from. There is also an option of Return of Mortality Charge. Switching and redirection of funds is a breeze with this plan. Plus, you also get Loyalty Additions and Wealth Boosters, and all of this is just a few clicks away!

Speak to an insurance specialist now!

FAQs

In order to understand ULIP NAV, you first need to understand how ULIPs work. In ULIPs, a portion of premium from different investors is accumulated to create one investment corpus. This money is invested in several different market instruments. So to divide the returns properly among all the investors, the fund manager divides the net asset value in to small units with a specific face value. NAV is the per market share value of a fund. To better understand the definition of NAV, take a look at the formula below -

Net Asset Value = [Assets-(Liabilities + Expenses)] / Outstanding Units

It's not risky to invest in ULIP if you chose a safer path. Risk factor in ULIPs depends on the investment option you choose. If you are not okay with sharp movements, then choosing a low risk investment is a better idea. For people with high risk appetite, it's good to choose equity funds while risk-averse investors can go for debt funds.

You can opt for settlement option if you want to take your fund value in periodic installments. With the settlement option, you can get your maturity amount in installment as per the frequency chosen by you over a maximum period of 5 years. You can choose complete withdrawal of fund value at any point of time. Although, you will not get any life cover during this period.

ULIPs are life insurance products that provide paths to invest. And just like other investment option, there's no guaranteed investment return in a ULIP. Although, if you like taking risks and want to earn more returns on your investment, then opt for equity funds.

At the time of maturity of ULIP policy, you will get the fund value on your prevailing NAV. Fund value is the number of units of policy multiplied by NAV (net asset value).

Value of the fund = Total units of policy x NAV (Net Asset Value)

Well, discontinuing your premium payment will disrupt your savings as well as financial goals. In such case, you can approach your insurance company and ask for the revival of discontinued policy within the stipulated timelines. Also, you will have to pay all the unpaid premiums.

ULIP plan is a combination of investment and insurance. Thus, one must hold this plan for a duration of at least 10 years so as to get investment benefits out of it. As an early exit will have its own consequences. ULIPs have a lock-in-period of 5 years. Thus, you may surrender your policy before the completion of 5 years, but you will be paid only after the end of 5 years.

Generally, minimum lock-in period for ULIP is 5 consecutive policy years. During this time period, if the policyholder discontinues or surrenders the policy, then he/she will not able to receive any payouts. Withdrawals are only allowed at the end of the lock-in period. In addition to this, if you surrender your policy before the lock-in period ends, then you will have to pay surrender charges as well. Also, it is advisable not to exit your plan after the completion of 5 years of lock-in period, because if you stay invested for a longer duration it will help you reap better benefits.

The amount that you pay towards the Unit Linked Insurance Policy is eligible for tax deduction as per Section 80C of the Income Tax Act, 1961. This means that the premium amount paid will be deducted under section 80C from your taxable income up to a maximum limit, which is currently ₹1.5 Lakhs. However, the aggregate amount of deductions under section 80C, section 80CCC and 80CCD (1) shall not, in any case, exceed ₹1.5 Lakhs. Also, upon the maturity of the policy, the payout amount you receive will be exempt from income tax, subject to the applicable provisions of Section 10(10D) of the Income Tax Act, 1961.

Here’re the following major benefits of buying ULIP

1. Tax Benefits – It helps you to reduce tax liabilities. This means you are liable to enjoy tax benefits on the premiums paid towards the policy as per Section 80C of the Income Tax Act.

2. Long-term growth– One of the major benefits of buying a ULIP plan is that it offers long-term benefits. ULIPs come with a lock-in period of 5 years which will keep you invested for a longer period.

3. Dual benefits – ULIPs not only offer life coverage but also come with a wide range of investment funds that will help you earn great returns. This includes balanced funds, debt funds or equity funds. You can invest in any of them depending on your need and risk appetite.

4. Flexibility – It gives you the flexibility to switch between funds basis your risk appetite. You could select multiple funds and different investment strategies.

5. Partial withdrawal option – It allows you to make partial withdrawal in case of any uncalled medical emergency or contingency after completion of lock-in period.

ULIP is a perfect investment option if you are looking for long term wealth creation. It could be buying your own house, a new car, going on a long vacation, or your child’s higher education or marriage, ULIP helps you to meet all your long-term financial goals. Moreover, it comes with a lock-in period of 5 years which keep you invested for a longer period and helps you earn better returns. The lock-in period is calculated from the date when the policy is issued.

Call BackCall Back Pay PremiumPay Premium
Chat
Back to top