Over the years, Unit Linked Investment Plans have become one of the most popular long-term investment plans as they offer the dual benefits of a market-linked investment and a life insurance policy. A part of the premium paid is used to provide life insurance cover and the remaining amount helps create the investment corpus. A unit linked insurance plan offers pay-outs in case of surrender, maturity, or the untimely demise of the insured. Overall, understanding how ULIPs work is quite simple. However, when it comes to the pay-outs offered, many people tend to get confused.
What is Sum Assured?
In the event of the untimely demise of the policyholder during the policy term, the Sum Assured or fund value, whichever is higher, is paid to the policyholder’s family. Sum Assured is the amount promised by the insurer to the policyholder’s nominee in case of untimely demise of the policyholder. On the other hand, the fund value is the total monetary worth of the units owned by the policyholder. If the funds purchased under your plan have been underperforming, the fund value will be lower than sum-assured and hence the sum assured will be paid out and vice versa. For Instance, assume that you bought a ULIP plan that promises to pay Rs. 20 Lakh to your nominees in case of an unfortunate event. In this case, Rs. 20 Lakh will be the Sum Assured for your policy. Additionally, it’s important to remember that the premium you pay towards a ULIP plan and the sum assured is directly related. The higher the premium, the greater will be the sum assured.
Here are some more scenarios that will help you understand the concept of Sum Assured in a better way:
For e.g. Rohan purchases a unit linked insurance plan with a Sum Assured of Rs. 20 lakh with an annual premium of Rs. 50,000 for 20 years. Let’s assume that Rs. 25,000 of this premium goes towards the insurance amount and the remaining Rs. 25,000 is invested in the stock market. The policy may have different payout scenarios such as: –
If Rohan meets with an untimely death before the first five years of buying the ULIP plan, his nominee/s would get Rs. 20 lakh, which is the sum assured.
If Rohan passes away between five and 10 years, his nominees will receive either the fund value or the sum assured depending on whichever amount is higher. So, if the fund value is Rs. 15 lakhs and the Sum Assured is Rs. 20 lakh, the nominees would get the latter amount.
In case Rohan passes away ten years later, the nominees would receive both the sum assured and the fund value.
If Rohan survives the entire maturity duration of the policy, he would receive the entire fund value. He would, however, not get the sum assured.
Now that you understand the different payout scenarios, it is quite evident that you can avail unmatched ULIP benefits. So, don’t wait, buy a unit linked insurance plan online with Finserv MARKETS today!
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