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A unit-linked investment plan is an insurance product that also offers investment opportunities. Since a ULIP offers both life insurance and growth on your investment, many people often get confused about the sum assured of a ULIP. There are various components of a ULIP that include the sum assured, accrued bonuses, fund value, etc.
This article talks about the meaning of sum assured in a ULIP and how it is different from other components. Read on to know more.
What is the sum assured in a ULIP?
The sum assured refers to the death benefit that is paid to the nominee of the policy in the unfortunate event of the insured person’s death. However, there is also an insurance element involved in such plans. Some people confuse this with the sum assured. To understand this, let’s compare a ULIP with a term insurance policy.
Term insurance plans: In the case of a term insurance plan, the sum assured is a pre-determined amount that is specified in the policy document. The insurance company has to pay the sum assured to the nominee in the event of death during the policy term. For instance, if you pick a term insurance plan with a sum assured cover of ₹ 1 crore, your loved ones will receive this entire amount in the unfortunate event of your demise within the policy term.
ULIP: In case of a ULIP, the sum assured also includes the fund value at the time of claim settlement. Depending on the policy’s terms, the insurance provider can offer your nominee the sum assured or the fund value or the higher of the two.
How is the sum assured different from the fund value in a ULIP?
The total value of your invested money at a given point of time is known as the fund value. It is determined as per the Net Asset Value (NAV) of your assets and is calculated by multiplying the NAV with the total number of units held.
The sum assured is the predetermined amount of money that your loved ones will receive as a death benefit. However, the fund value keeps changes as per the fluctuations of the market.
How do you get paid in case of a ULIP?
The payment method in a ULIP depends on the type of claim.
ULIPs by Kotak Life
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