IndiaFirst Life Insurance Co. Ltd has launched a new unit-linked insurance plan (Ulip) called the Wealth Maximizer Plan. Ulip is a market-linked insurance plan that offers insurance and invests your money in the markets. “This is our fourth Ulip and this plan is specifically meant for HNIs (high net-worth individuals). The unique feature of this plan is that it offers a lot of flexibility in investment as well as structuring the investment benefits,” said Rushabh Gandhi, director, sales and marketing, IndiaFirst Life.
What’s on offer
In terms of insurance, this is a type-1 Ulip, which means on death of the policyholder the policy pays higher of the fund value or the sum assured, subject to a minimum of 105% of all the premiums paid to the beneficiary. How much insurance cover you can buy depends on factors such as your age and policy term. For instance, for policyholders less than 45 years of age, the insurance cover is higher of 10 times the annual premium or half the policy term multiplied by the annual premium.
For investment, you could choose from seven funds that range from equity to debt, or you could go for one of the three investment strategies. The automatic trigger-based investment strategy puts your money in the equity fund and if the return on the fund is 10% or more, the appreciated value is transferred to the debt fund. The fund transfer strategy starts by putting your money in the debt-oriented fund and systematically moves all of your money to the equity fund. The age-based investment strategy starts with an equity-heavy portfolio (70% in equity funds till age 25) tapering to a debt-heavy portfolio.
On maturity, you get the fund value back. You can either take it as lump sum or stagger it over 5 years. “In terms of maturity benefits, you can design this plan to be a money-back plan, or a whole-life plan or an endowment plan,” added Gandhi. The policy term in this plan is up to 85 years. Given that the minimum entry age is 5 years, you can buy this plan up to 90 years of age.
You can also opt for systematic partial withdrawal after completion of first 5 years of policy and choose what percentage of the fund value you want and at what interval. However, this is subject to a minimum and maximum cap.
In order to get you to stay longer, the plan offers three kinds of loyalty additions. These loyalty additions are calculated as a percentage of the fund value and are added to the fund value periodically.
How does it work
The premium that you pay gets invested in the funds of your choice, and the fund management charge and the cost of insurance are met from the fund value.
The premium allocation charge, however, is deducted straight from the premium and is 6% of the premium in year one, tapering to 2% from the sixth year onwards. For online sale, the policy gives a discount in the first year. The fund management charge is fixed at 1.35%. Mortality charge will depend on factors such as your age and the sum assured. There is no policy administration charge, which is generally a standard cost head in other Ulips.
Suppose a 35-year-old buys this plan for a policy term of 25 years and an annual premium of Rs2.50 lakh (the minimum annual premium in this plan) the sum assured will come to Rs31.25 lakh. Assuming the fund grows at 8%, the fund value at the end of 25 years will come to about Rs1.66 crore. This is a net return of 6.86%.
Mint Money take
As far as type-1 Ulips go, the charges in the plan are among the lowest. However, the insurance component is weak. This is a type-1 plan that only pays higher of the fund value or the sum assured. “If you need insurance, this plan is not for you, as the cover is not sufficient; plus, if you lapse the policy or decide to discontinue it you will have to give up the insurance component as well. So, buying insurance through an investment plan is not recommended,”said Pankaj Mathpal, a Mumbai-based certified financial planner.
“And if you want to invest, then why should you pay extra for insurance? The charges in Ulips have come down but the product structure is still not convincing,” he added.
Ulips are front loaded and are not portable. Even as this plan packs in a lot of features, you need to consider the product structure of a Ulip. So make sure you understand the policy well before investing.
