The world of investment and insurance can be quite challenging for someone who is a first-timer. If you have decided to purchase a Unit-Linked Insurance Plan, it’s crucial that you familiarize yourself with the various terms and jargons used. This can immensely help you understand your policy better and make an informed decision.
What is ULIP?
Let’s start with the basics. A unit linked insurance plan is a unique financial tool that provides investors, the dual benefit of an investment as well as insurance. A portion of your premium amount would be used to provide insurance cover, while the remaining portion is invested in debt instruments and equity funds or a combination of both.
Commonly Used Terms in ULIP Plans:-
Here are some of the commonly used terms that you should be aware of before investing:
The sum assured is the guaranteed amount that a nominee is liable to receive in case of the untimely death of the policyholder during the policy term. This is also known as the death benefit. The sum assured varies with the types of ULIPs namely, Type I and Type II.
The lock-in period is the specified time period during which the policyholder is restricted from exiting the policy. Investments that have tax-saving options have a lock-in period. For ULIPs, the lock-in period is 5 years.
A top-up premium is the additional sum that is paid at regular intervals voluntarily over and above the premium amount. These amounts can be used to increase the sum assured or can even be invested.
Fund value is the total value of the owned units. The fund value can be calculated by multiplying the number of units by the Net Asset Value (NAV) or monetary value of each unit.
A sales illustration is a document that explains the working of a life insurance plan.
A policyholder has the option to switch funds according to market conditions and financial goals. Most plans will put a cap on the number of free switches an individual can make within a policy year.
The insured is allowed to reallocate the premium amount – partially or fully. This is done taking into consideration market conditions and the risk appetite of the policyholder.
Maturity benefit is the fund value that is payable at the end of the policy term or on maturity of the policy.
Survival benefit is the specific amount that is payable to the policyholder at specific intervals in case the policyholder is still alive throughout the policy tenure.
In case a policyholder decides to exit the policy before the completion of the lock-in period, the insured person would be liable to pay the present fund value minus applicable deductions.
The guaranteed surrender value is the amount that the insurer pays to the policyholder on policy surrender.
Knowing these terms will help you understand your policy better and will also allow you to choose good ULIP plans, like Bajaj Allianz Future Gain or Bajaj Allianz Goal Assure. Buying a unit linked insurance plan from Finserv MARKETS is easy, convenient and completely hassle-free. So why wait? Invest with us, today!
Also read in detail about the ULIP tax benefits you can avail with investment plans available on our platform.
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