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What is Fund Value in ULIPs?

By Finserv MARKETS - Sep 13,2019
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Understanding What Is Fund Value In ULIPs

Any person who is planning to invest in the financial market has surely heard the term ULIP. A Unit Linked Insurance Plan is a smart investment option that lets you enjoy the benefit of insurance along with making smart investment choices.

As a novice, if you delve into the subject further, you come across terms such as sum assured and fund values. Although, expert investors are well versed about the meaning and importance of these terms, inexperienced or new investors are still unclear about them. To gain some clarity about these Glossary terms, one needs to first understand what are ULIPs and how do they work?

ULIP 101

ULIPs are financial offerings in the Indian market that offers varying provisions of insurance and investment to an investor. For instance, suppose you select a unit linked insurance plan with an annual premium of INR 1 lakh. Half of the premium amount, i.e INR 50,000 will go into the insurance while the remaining half of INR 50,000 would get invested in market funds. There are different types of ULIP plans available in the market, such as Pension Plans, Child Plans, etc.

ULIP returns are market linked. Also, as an investor, you are given a choice to choose the type of market fund to invest debt or equity. But, before we discuss about the various types of unit linked insurance plan payouts, we must first get clarity about the following important terms-

  • Sum Assured
  • Fund Value

Sum Assured

A “sum assured” is the amount promised to a policyholder’s nominee by the insurance provider in case of the demise of the policyholder during the policy term. Thus, in a way, the sum assured acts as financial security to the policyholder’s kin for the future. It is important to note that the sum assured and the premium amount are directly related. Higher the premium, higher the sum assured amount.

Fund Value

ULIP plans offer flexibility to an investor to choose among the different types of funds available in the market as per his/her risk appetite. The total monetary valuation of the units owned in these funds by an investor is known as ‘fund value’.

This fund value keeps changing depending on the net asset value (NAV) of each unit on a given day. You can calculate the fund value by using the following formula:

Fund value = NAV x no. of units held.

ULIP Payouts

A ULIP payout can happen in the following three cases-

  • Case 1: Upon Maturity

As is the norm with any insurance policy, the total fund value of the investment is given to the policyholder at the time of maturity of ULIP.

  • Case 2: Upon the death of the policyholder

In case of the untimely death of the policyholder before the end of the policy term, either the sum value or fund value, whichever is higher, is granted to his/her nominee. As discussed earlier, the fund value keeps fluctuating depending upon the NAV. Thus, at the time of the demise of the policyholder, if the funds are under performing, then the higher valued sum assured is paid to the nominee.

  • Case 3: Upon the surrender of the policy

Generally, ULIPs have a lock-in period of 5 years. However, if a policyholder wants to surrender his plan before the lock-in period, the insurer pays a surrender value to him/her after deducting the applicable charges from the fund value.

In case, the policyholder decides to surrender his policy after the completion of the lock-in period, the insurance provider pays him the entire fund value, depending on the NAV for that day.

Want to secure your future by investing in such a plan? Browse through the various types of investment plans available at Finserv MARKETS. Apply today and enjoy tax benefits on your investments. The Bajaj Allianz ULIP plans available on our platform offer various options such as a retirement plan, or a child education plan. You can select a plan based on your financial goal.

To know more on ULIP investments in depth, you can check out these blogs:

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Bajaj Finserv Direct Limited ("BFDL") is primarily engaged in distribution of financial products and services through its digital platform (“Bajaj Finserv MARKETS”) and inter alia renders services of customer acquisition, providing preliminary credit support activities, fulfilment services and post-acquisition customer services to Banks, NBFCs, HFCs. BFDL is also a registered Corporate Agent (Composite) under valid IRDAI registration number: CA0551 valid till 10-Apr-2024 for solicitation and servicing of Insurance Products. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522