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In this policy, the investment risk in the investment portfolio is borne by the policyholder.
Kotak e-Invest
Features
Ref. No. KLI/22-23/E-BB/492
The fund value in the Unit-linked insurance plan represents the total worth of investments in the policy, comprising both insurance and investment components.
Undeniably, having a ULIP policy has multiple benefits. At the same time, it is important to understand each and every aspect related to ULIP, especially its terminology and way of functioning, before buying one.
For example, a unit-linked insurance plan is a 2-part financial tool, where your premium is divided between insurance cover and investment corpus, based on your financial requirements and the policy guidelines.
A ULIP is a type of life insurance policy that provides both life cover and investment opportunities. When you invest in a ULIP, a portion of your premium goes towards providing you with insurance coverage, while the remaining portion is invested in various funds such as equity, debt, or a combination of both, based on your risk appetite and financial goals.
Now that you know what ULIP is, it is time to understand the fund value of ULIP. Fund value in ULIP represents the current monetary worth of your investment in the chosen funds within the ULIP scheme. Unlike traditional insurance plans, where the premiums are invested in predetermined avenues, ULIPs offer policyholders the flexibility to invest in various funds such as equity, debt, or balanced funds, based on their risk appetite and financial goals.
The fund value fluctuates over time, primarily influenced by the performance of the underlying assets in which your premiums are invested. Depending on the fund’s investment objective, these underlying assets could include stocks, bonds, or a combination of both.
Sum assured refers to the guaranteed amount the insurance company commits to pay out to the policyholder or their nominee in case of an unfortunate event, such as the policyholder’s demise during the policy term. In the context of ULIPs, sum assured plays a critical role in providing financial protection to the policyholder’s beneficiaries.
Net Asset Value or NAV is the value of one fund unit. It is calculated by deducting the basic policy charges and the cost of associated liabilities from the assets of the fund. NAV is used to measure the actual price of a fund’s single unit and helps in the estimation of the total fund value in insurance.
Here is the formula for mutual fund NAV calculation:
NAV = (Assets – Liabilities) / Total Shares
You can access the calculated NAV on official websites or through third-party applications you have chosen to invest in mutual fund schemes. By logging into your trading account, you can efficiently gather all necessary information about a mutual fund before investing, including its NAV.
Alternatively, you can determine the NAV of the mutual fund scheme you’re interested in by following this method:
Net Asset Value is computed as the Net Asset of the Scheme divided by the Outstanding Units. In this scenario, the net asset of the schemes can be estimated as the market value of investments, receivables, other accrued income, and additional assets. This value should then be subtracted from the total and the sum of accumulated costs, other payables, and liabilities.
The fund value in a ULIP represents the total worth of the investments held within the policy and fluctuates based on various factors. Understanding these factors is crucial for investors to assess the performance of their ULIP investments and make informed decisions. Let us explore the key factors affecting the ULIP fund value:
The performance of the financial markets is one of the primary factors influencing the fund value in a ULIP. Fluctuations in stock prices, interest rates, and other market indicators directly impact the value of the underlying investments within the ULIP funds. During bullish phases, when the markets are performing well, the fund value tends to increase, while during bearish phases, the fund value may decline.
The allocation of funds across different asset classes, such as equities, debt instruments, and cash equivalents, significantly influences the performance and volatility of the ULIP fund value. A well-diversified portfolio with an appropriate asset allocation strategy can help mitigate risks and enhance the long-term growth potential of the fund value.
The expertise and efficiency of the fund managers managing the underlying funds play a crucial role in determining the fund value. Experienced fund managers employ various investment strategies, such as stock selection, sector allocation, and risk management techniques, to maximize returns and minimize risks, positively impacting the fund value.
Various charges deducted by the insurance company directly affect the ULIP fund value. These charges include premium allocation charges, fund management charges, policy administration charges, mortality charges, and surrender charges. It’s essential for investors to understand and evaluate the impact of these charges on the overall growth of the fund value and factor them into their investment decisions.
ULIPs offer a unique combination of insurance coverage and investment opportunities, making them a popular choice for individuals seeking financial security and wealth creation. Understanding the various scenarios in which payouts occur under ULIPs is crucial for policyholders to make informed decisions and maximize the benefits of their investment. Let’s explore the different cases of ULIP payouts:
One of the primary purposes of a ULIP is to provide financial protection to the policyholder’s beneficiaries in the event of their untimely demise during the policy term. In such cases, the insurance company pays out the higher of the sum assured or the fund value to the nominee(s) designated by the policyholder. This payout offers a crucial safety net to the policyholder’s loved ones, ensuring that they are financially secure and able to meet their needs even in the absence of the policyholder.
Upon the maturity of the ULIP policy, if the policyholder survives the entire policy term, they become eligible for the maturity benefit. The maturity benefit equals the fund value accumulated over the policy term. The policyholder has the option to receive the maturity proceeds as a lump sum or in installments, as per the terms and conditions of the ULIP. This payout allows the policyholder to reap the rewards of their disciplined investment over the years and achieve their financial goals, whether it be retirement planning, children’s education, or wealth accumulation.
Policy surrender refers to the premature termination of the ULIP policy before the completion of the policy term. In such cases, the policyholder may choose to surrender the policy and withdraw the surrender value, which is the fund value, after deducting applicable charges and penalties. The surrender value may be lower than the total premiums paid, especially in the initial years of the policy, due to the deduction of various charges such as premium allocation charges, fund management charges, and policy administration charges. Surrendering a ULIP should be carefully considered, as it may result in financial loss and impact long-term financial goals.
Fund Value is a critical component of ULIPs, reflecting the performance and worth of the investments held within the policy. Understanding the factors influencing Fund Value and regularly monitoring its fluctuations can help policyholders make informed decisions and optimize the financial outcomes of their ULIP investments. By staying informed and consulting with financial advisors, policyholders can navigate the complexities of ULIPs and achieve their financial goals effectively.
1
Fund value in ULIP refers to the total worth of the investments held within the policy at any given time. It represents the market value of the assets allocated across various funds chosen by the policyholder, such as equity, debt, or balanced funds.
2
The fund value in ULIP is calculated by multiplying the number of units held in each fund by the Net Asset Value (NAV) of the respective fund. The total fund value is the sum of the values of all units across different funds.
3
No, the fund value is different from the maturity amount in ULIP. Fund value represents the current worth of the investments held within the policy, while the maturity amount is the total amount payable to the policyholder upon maturity, which includes the fund value plus any bonuses or additions.
4
Fund value in ULIP refers to the total worth of the investments held within the policy at any given time. On the other hand, cash value is a term commonly used in traditional life insurance policies and refers to the amount of cash available to the policyholder if they choose to surrender the policy before maturity.
5
No, fund value and surrender value are not the same in ULIP. Fund value represents the current worth of the investments held within the policy, while surrender value is the amount payable to the policyholder if they choose to surrender the policy before maturity after deducting applicable charges and penalties.
Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.
Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors
In this policy, the investment risk in the investment portfolio is borne by the policyholder.
Kotak e-Invest
Features
Ref. No. KLI/22-23/E-BB/521
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
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