Most insurers offer a wide range of funds to suit one’s investment objectives, risk profile and time horizons. Hence investors can decide to invest their money in line with their market outlook, time horizon, investment preferences and needs. Different funds have different risk profiles. The potential for returns also varies from fund to fund.
How do ULIPS work?
We have seen many investors blindly going for ULIP Plan without understanding the nature of the product and hence ending up with an unwanted policy.
When you decide the amount of premium to be paid and the amount of life cover you want from the ULIP, the insurer deducts some portion of the ULIP premium upfront. This portion is known as the Premium Allocation Charge, and varies from product to product. The rest of the premium is invested in the fund or a variety of funds chosen by you. Mortality charges and ULIP administration charges are thereafter deducted on a periodic (mostly monthly) basis by cancellation of units, whereas the ULIP fund management charges are adjusted from the NAV on a daily basis.
Since the fund of your choice has an underlying investment – either in equity or debt or a combination of the two – your fund value will reflect the performance of the underlying asset classes. At the time of maturity of your plan, you are entitled to receive the fund value as at the time of maturity.
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