Knowledge Center |
| Unit Linked Insurance
Policy |
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| 1. What is ULIP ? |
| A ULIP is a life insurance policy which provides
a combination of risk cover and investment in equity and debt markets. Unlike
traditional plans, the ups and downs of share market have a direct effect
on the performance of the ULIPs. |
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| 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. |
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| 3. What is a Unit? |
| It is a component of the Fund in a Unit Linked
Policy. |
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| 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. |
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| General
Description |
Nature
of Investments |
Risk |
| 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 |
|
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| 5. 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. |
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| 6. 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. |
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| 7. 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. |
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| 8. 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. |
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| 9. 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. |
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| 10. 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. |
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| 11. 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. |
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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. |
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| 12. 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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