SINCE their launch, Unit Linked Insurance Plans (ULIP) have been a complete rage; but that's not the case now. This year, thanks to the slowdown, insurers are seeing lower premium income compared to last year.

So to maintain the spark in ULIPs, insurance companies are trying to entice buyers by offering guaranteed returns on ULIPs!

How's that possible? Let’s decode.

As of now three insurance companies are offering guaranteed ULIPs.

Unlike non-guaranteed ULIPs, these newly launched plans shield you from the downside of the market by assuring guaranteed returns.

He explains that these plans are like investing in fixed income products that offer secured returns.

Workings of the plan:
These plans are structured into four phases.

Subscription phase: During this phase, the plan is open for a limited time only. For instance, SBI’s Smart ULIP is open for a period of one year.

Premium paying phase: In this phase, you pay premium only for a fixed term, which is 3 years. However, SBI’s Smart ULIP allows you to choose the premium paying term for 3 or 5 years.

NAV build-up phase: During this phase, the reset dates, set by the companies are exercised. Reset dates are pre-decided dates fixed by insurance companies to record NAVs. Birla Sun Life and Tata AIG record NAV once a month on the reset date decided by them whereas SBI has two reset dates every month to record NAV.

These plans have a fixed term of 10 years.

Accumulation phase: The remaining policy term i.e. the tenure left after all the reset dates have been exercised is the accumulation phase.

What’s unique about guaranteed ULIPs is that they offer the highest Net Asset Value (NAV) recorded over a given a period of time.

Must read: How capital guarantee products work

Benefits:
Maturity benefits: On maturity, you get the highest of:

a. The fund value as on date of maturity OR
b. The fund value at the rate of 'highest recorded NAV' OR
c. The starting NAV of Rs 10 per unit

The is highest recorded NAV is the higest NAV among all reset dates.

Death benefits: In case of your untimely death, either fund value or sum assured will be paid out to your nominee, depending on whichever is higher.

On next page: What to watch out for

Illustration: Abhijeet Kini

Read:
Should I withdraw from ULIP?
The various costs involved in your ULIP

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e-mail: Elda Christy

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