Unit Linked Insurance Plan (ULIP)

With a Unit Linked Insurance Plan, money invested as premium is transferred to a pool called ‘Unit Linked Fund'. The insurance company manages this fund by investing the money in debt and equity instruments to provide dual benefits of insurance and investment returns to the policy holder.

The individual parts that a unit linked insurance plan is divided into is called a unit.

Fund value refers to the total value of the premiums of the policy holder invested in various funds. Fund value is calculated using the following formula - Total Number of Units under a ULIP policy X Net Asset Value.

The sections that you need to verify include: 1. Any charges or deductibles mentioned (policy allocation/fund management), 2. Any features and benefits included in the ULIP policy (premium payment options/loyalty additions), 3. Any exclusions/limitations mentioned in the policy (lock-in-period/waiting period/pre-existing illnesses), 4. Policy lapse and disadvantages associated, 5. Any benefits that are payable, and 6. Any other disclosure/s mentioned in the proposal form.

Yes, there are. You can claim the money invested in ULIPs under the following sections - 80C (life insurance) and/or 80CCC (pension). For this, the maximum amount that can be claimed under these sections is Rs. 1,50,000. Deductions on life insurance can be availed up to 10% of sum assured or the annual premium, whichever is lower subject to a limit/ceiling of Rs. 1,50,000. In addition to this, the overall limit under Sections 80C/80CCC/80CCD (1) is capped at Rs. 1,50,000. You may choose to invest a bigger/higher amount, however, the cap on deductions is Rs. 1,50,000.

ULIPs have always had an edge over Mutual Funds and with the new LTCG tax in place, it is pegged to deliver even more. This edge existed even before long-term gains arising out of stocks and mutual funds were proposed to be taxable. Earlier, for equity mutual funds or balanced schemes that were held for less than a year, a 15% tax was levied on the short-term capital gains. However, when it comes to ULIPs, since it is an insurance product, short-term gains are tax-free under Section 10(10D). With the implementation of the LTCG tax, all gains from balanced and equity schemes are to be taxed at 10% but ULIPs continue to be tax-free. The benefit of ULIPs extends beyond equity funds. It encompasses the fixed income space too. Income made from fixed deposits is taxed at a rather marginal rate while LTCG for debt funds get taxed at 20% post indexation. Gains from ULIP are tax-free, whether short-term or long-term.

The benefit that the ULIP policy holder receives at the end of his/her policy term is called the Maturity Benefit. This amount is equal to the value of the fund at that specific time of maturity.

In the unfortunate event of the death of the policy holder (in this case, you), the death benefit amount shall be paid to your nominee. This will be a lump sum amount which is higher than the sum assured opted by the policy holder (you) or the value of the fund as on the date of the death of the policy holder. However, for this to come through, the policy must be active and all premiums must be duly paid, till date.

There are 5 charges involved when you invest in ULIPs. These charges are deducted from the insurance premium amount that you pay. The remaining amount is then invested in various strategies and polices that will generate returns for you. The types of charges levied include: Premium Allocation Charges: This refers to a percentage of the premium amount which is deducted upfront and goes towards allocation of premium to various funds selected by the policy holder. Policy Administration Charge: This is charged by the insurance company and goes towards the administrative charges borne by the insurer for the maintenance of the ULIP plan. Mortality Charges: This refers to the charges levied by the insurer for providing policy holders with the insurance coverage. Fund Management Charges: As the term suggests, this charge is levied by the insurer and goes towards fund management. Surrender Charges: Should you decide to surrender your plan prematurely (before tenure), you would have to bear a charge. This is referred to as surrender charges. Normally, one can surrender their ULIP plan after a period of 5-years.

No. The interest that you earn on a ULIP plan is tax-free.

Generally, you would need to wait for the end of the 5-year lock-in period to surrender your ULIP plan. However, should you choose to do it earlier, you will have to pay a charge as applicable.

Any additional investment which is over and above the normal premium amount that you are allowed to make in a ULIP plan is called a top-up. When it comes to tax-exemption, top up premiums enjoy this benefit, just as a regular premium would.

Instead of going for a lump sum amount during maturity, some of the ULIP plans allow policyholders the option of receiving these benefits as periodic instalments over a 5-year period. This happens post-maturity and is referred to as ‘Settlement.’

Yes, there are. Partial Withdrawal is only allowed under the following circumstances: 1. If the amount of withdrawal is Rs. 5000, 2. The value of the Regular Premium Finds does not fall by four times as compared to the Annual Premium post partial withdrawal, 3. The maximum amount of the partial withdrawal is 10% of all the premiums that have been paid. 4. The total amount that is withdrawn throughout the term of the ULIP policy cannot exceed more than 50% of the total premiums that are paid, 5. The interval between two partial withdrawals is not less than 3 months. This said, a partial withdrawal is only allowed when the insured attains 18 years of age.

Under the following scenarios, your ULIP plan will automatically and immediately get terminated - 1. Policy foreclosure, 2. On the date the insurance provider receives intimation about the death of the policyholder, 3. If payment of surrender benefit or discontinuance value is made by the policyholder, 4. On the date of the maturity of the ULIP plan, unless settlement opted for by the policyholder, 5. Expiry of the settlement, 6. Cancellation of the policy during the initial free look period. If the policyholder has opted for settlement, the ULIP policy gets terminated post the last settlement pay-out.

No, life cover isn't available during the settlement period.

When the policy comes to an end, as on the date of maturity, the complete amount deducted as mortality charges during the tenure of the life cover policy term is added back as ROMC to your fund.

There are 8 funds to choose from: 1. Equity Growth Fund II, 2. Accelerator Mid-Cap Fund II, 3. Pure Stock Fund, 4. Pure Stock Fund II, 5. Asset Allocation Fund II, 6. Blue chip Equity Fund, 7. Bond Fund and 8. Liquid Fund.

As a policyholder, you can seek a refund of the premiums upon disagreement with the terms and conditions, within 15 days of receiving the policy document, also known as the free-look period. In such a situation, the premium amount shall be refunded after deducting any expenses incurred for medical examinations, stamp duty and the risk premium proportionate to the coverage period.

Yes, you can invest in any additional contribution which is over and above your regular premium based on your choice, subject to the additional feature being available for the unit-linked insurance plan. This facility is called as ‘Top-Up.’

Yes, we allow policyholders to switch funds, provided the feature is available for the unit-linked insurance plan.

The insurance company provides and allocates the loyalty additions to the fund value of a regular premium as a percentage of one annualized premium. This happens from the 6th year of the policy, provided all premiums are paid and up to date. These additions include: 1. 5-year policy: Here loyalty additions are not applicable, 2. 10-year policy: 0.50% of loyalty addition applicable, 3. 15-year policy: 1% of loyalty addition applicable, 4. 20-year policy: 1.5% of loyalty addition applicable.

On the date of maturity, boosters are added to the fund value of the regular premium, provided all premiums are up to date and paid. These fund boosters that are provided as a percentage of one annualized premium are: 1. 5-year policy: Fund Booster benefit not applicable, 2. 10-year policy: 20% fund booster benefit applicable, 3. 15-year policy: 40% fund booster benefit applicable and 4. 20-year policy: 60% fund booster benefit applicable.

Under Bajaj Allianz Future Gain, there are two portfolio strategies. These are - 1. Investor selectable portfolio strategy and 2. Wheel of life portfolio strategy. Investor selectable portfolio strategy - Under this strategy, the policyholder can choose to invest between 8 funds and enjoys the freedom of allocating premiums based on his/her choice. Wheel of life portfolio strategy - Financial needs and goals change as life progresses. Therefore, having an investment strategy that can be re-aligned to such changes is essential. The wheel of life investment strategy allows the policyholder to allocate premiums among 5 funds in pre-defined ratio. This ratio changes as the policy ages towards maturity.

Yes, this is possible. However, the policyholder must wait for a year to do so. Also, do keep in mind that this is subject to the minimum amount allowed under the particular product and is only allowed on policy anniversary.

Yes, the choice to increase or decrease the term of premium payment is provided to the policyholder. However, this is again subject to the minimum and maximum terms allowed under that specific ULIP product/plan.

As you already know, the entire premium amount is not used for purchasing units. Though we do not charge any allocation fees, there are other deductions and charges that vary from product to product. These are deducted from your premium amount and the remainder is used for purchasing units.

On discontinuance of premiums during the first 5 policy years: At the end of the notice period of 30 days, the policy will be converted to a Discontinued Life Policy and the Fund Value minus discontinuance charge will be transferred to the Discontinued Life Policy Fund. The discontinuance value shall be payable at the end of the lock-in period of 5 policy years. On discontinuance of premiums after the first 5 policy years: A notice will be sent by the Company to the Policyholder within 15 days of the expiry of the grace period to exercise one of the options mentioned below within 30 days of receipt of such notice - 1. Option A: Revive the Policy or, in writing, agree to revive the policy within the revival period by paying all due premiums, 2. Option B: Intimate the Company In writing to surrender the policy and receive the surrender benefit, or 3. - Option C: In writing, intimate the Company to continue the policy as a paid-up policy with a paid-up sum assured with all the other benefits excluding additional rider benefits, Loyalty Additions & Fund Boosters, subject to deduction of all applicable charges under the policy. Till the expiry of the revival period or receipt of intimation of surrender request as per or receipt of intimation to convert as paid-up policy, whichever is earlier the policy shall be treated as in-force with all risk cover, including additional rider benefits, if any, by deduction of all applicable charges under the policy. If the company does not receive any intimation then, on the Date of Discontinuance, the Policy will be terminated and the Surrender Benefit shall be paid immediately.