Staying Insured While Investing
Unit-linked insurance plans (ULIPs) give you access to both – insurance and investment. These plans allow you to enjoy a life cover as well as the opportunity to earn market-linked returns.
A part of the premium you pay goes towards providing the insurance cover, while the balance, after deducting the distribution and management charges, gets invested as per your choice.
The investment proportion of your premium gets invested into different fund options managed by professional fund managers. These fund options, in turn, invest the premium amount in varying proportions of various financial instruments like equities, debt and money market instruments.
All these investment options carry different levels of risk and return potential. Generally higher the risk, higher would be the return potential. While equities involve the highest investment risk, they also tend to give higher returns over the long run.
You can decide how much amount you wish to allocate in the fund of your choice and also enjoy the freedom to switch between the fund options any time.
|Types of ULIP Funds||Risk / Return||Investments|
|Cash Funds||Low||Cash, bank deposits and money market instruments.|
|Income, Fixed Interest and Bond Funds||Medium||Corporate bonds, government securities and other fixed income instruments.|
|Balanced Funds||Medium||Equities and fixed interest instruments|
|Equity Funds||High||Invest largely in equities|
With ULIPs, you can benefit from:
- A wide choice of investment options
- Systematic investments
- Get more investible surplus
- Get minimum guaranteed returns on pension products
- Enjoy a higher risk cover
ULIPs give you a range of investment options. You can choose to invest your money into pure equity or debt funds or a combination of both, based on your preference and risk profile.
ULIPs encourage investments in a disciplined manner. Investing regularly in small doses over a period of time lets you gain from the benefit of rupee cost averaging, which evens out the highs and lows of a fluctuating market.
|Rupee Cost Averaging|
|Investor A||Investor B|
|Month||Unit Price||Amount Invested (Rs.)||Total Units Purchased||Amount Invested (Rs.)||Total Units Purchased|
|At the end of 6 Months||90,000||3,000||90,000||3,028|
Investor B invests the same amount of Rs 90,000 through periodic investments of Rs 15,000 every month over a period of six months and purchases the same equity share at different rates. At the end of the six-month period, while both the investors had invested the same amount, Investor B has been able to purchase more units.
In this way, rupee cost averaging could help you lower the average purchase costs and make the most of price fluctuations depending upon the prevailing market conditions.
ULIPs let you choose the life cover and the desired premium amount, in most cases. You can also switch between various fund options with ease.
You know how and where your money is invested and can even track your portfolio performance. You are kept informed of all the applicable charges as well as your net investment amount.
Changed for good
Recently, the Insurance Regulatory and Development Authority (IRDAI) introduced sweeping changes in the ULIP structure adding more value to it, resulting in improved benefits for the investor:
ULIPs come with a low charge structure, which implies that a greater portion of the premium is invested to give you fruitful returns.
Your life-time savings will now get enhanced protection from market fluctuations, as pension ULIPs will now ensure a minimum guaranteed return on maturity.
All ULIPs other than pension and annuity products will now provide a minimum life cover or health cover, higher than what is being offered presently. For pension and annuity ULIPs, life/health cover will be provided as riders. Thus, you can now enjoy higher cover to tide over life’s uncertainties.
- Enjoy a longer investment period
- Even distribution of charges
The new ULIPs have a lock-in period of 5 years. Besides, all ULIPs (excluding single premium ULIPs) will now have a premium paying term of at least 5 years. This way you will stay invested for a longer time frame. Investing small amounts at regular intervals over a longer period would help you build a bigger corpus.
Charges on ULIPS are evenly distributed during the lock-in period and you would be paying equal amounts throughout the lock-in period.
Anytime after completion of 5 years of the policy, if you are faced with an emergency, you can choose to surrender your policy without any additional costs or charges.
Thanks to these reforms, Unit Linked Insurance Plans have emerged as a vital long-term protection and savings vehicle, with enhanced customer value.
Unit Linked Life Insurance products are different from the traditional insurance products and are subject to the risk factors. The premium paid in Unit Linked Life Insurance policies are subject to investment risks associated with capital markets and the NAVs of the units may go up or down based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions. Kotak Mahindra Old Mutual Life Insurance Ltd is only the name of the Insurance Company and ULIP Plans offered by the Company does not in any way indicate the quality of the contract, its future prospects or returns. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns. Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document of the insurer. Tax benefits are subject to change in tax laws. You are advised to consult your tax advisor for details. In this policy, the investment risk in investment portfolio is borne by the policyholder. For more details on risk factors, terms and conditions please read sales brochure carefully before concluding a sale. Insurance is the subject matter of the solicitation. Kotak Mahindra Old Mutual Life Insurance Ltd. Regn No. 107. Regd. Address: 9th Floor, Godrej Coliseum, Behind Everard Nagar, Sion (E), Mumbai - 400022.Toll Free No.1800 209 8800.Ref. No. KLI/10-11/E-WEB/188.