What is Sum Assured in a Unit Linked Insurance Plan (ULIP)

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Meaning of Sum Assured in a ULIP

  • 12th Mar 2021
  • 772

View Plans Meaning of Sum Assured in a ULIP

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.

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How do you get paid in case of a ULIP?

The payment method in a ULIP depends on the type of claim.

  • In case of a death claim: The higher of the sum assured or fund value is paid to the nominee when the death claim is requested.
  • In case of policy surrender: ULIPs have a 5-year lock-in period, after which you can surrender a policy. The insurance company will cut the surrender charges and pay you the fund value as on the day of surrender. This will be calculated as per the NAV of your units.
  • In the case of policy maturity: At the time of maturity, the total fund value is paid to you. This includes your invested capital, the returns on your investment, and any bonuses accrued over time.

ULIPs by Kotak Life

Kotak Life offers multiple ULIP plans with flexible options and multiple portfolio strategies, such as theKotak Invest Maxima Plan: and the Kotak Wealth Optima Plan:. Here are some of their features:

1. Kotak Wealth Optima Plan:

  • No premium allocation charge
  • Several choices of portfolio strategies
  • Rewards for staying invested

2. Kotak Invest Maxima Plan:

  • Option for whole life cover
  • Choice of two investment strategies
  • Yearly additions after the end of the lock-in period
  • Wealth boosters for enhanced savings
  • Option to add riders for increased protection

- A Consumer Education Initiative series by Kotak Life


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