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Make use of ULIP benefits

Here are some benefits that Ulips provide, that can come to your rescue:

FREE SWITCHES

Here, you move your investments from one fund to another, fully or partially. Most Ulips do not charge for the initial five-six switches. For more, you may be charged `50-300.

This is an important feature and policyholders can create a long-term corpus, but this is left unused. It may not be possible for investors to time the markets, but you can cut your losses if you are unhappy with a fund or foresee a market dip, he adds.

Insurers advise you track the performance of your Ulip and switch when required. You can track your schemes, as the net asset value (NAV) is declared periodically.

In volatile markets, you can switch to safer funds and optimise opportunities. And, switch back into equity once the market is up. It is best to switch in a phased manner. This will help leverage different stages in the market cycle.

FREE LOOKING PERIOD

This allows you to cancel the policy after buying if you disagree with it or aren't comfortable. It helps you to pick and choose the best policy for you without any push from the company or agent. But policyholders don't use it and later cry foul, saying the policy was mis-sold. This has to be exercised within 15 days of receiving the policy.

If you want to cancel a policy in this period, you will have to send the original documents of the insurance policy and an application form cancelling it to the customer service department or the local branch of the company. On cancelling during the free-look period, the company refunds the premium paid after some deductions — medical tests costs, stamp duty and risk premium in case the customer is provided cover in the free-look period.

TOP-UP PLANS

The top-up is the additional amount over your regular premium or base policy that you can invest in. Partial withdrawals are allowed only after the initial lock-in of five years. The option is usually given to customers who pay their premiums on time.

There is a premium allocation charge levied on the top-up premium, between one to three per cent (less than that of a fresh policy). We advise you buy a Ulip with a lower premium and later judge its performance and then top it up if you want to continue or want an extra sum assured.

But the top-up premium should not exceed 25 per cent of total premium paid for that year. Typically, the minimum top-up premium should be 2,000. This provision can be useful for investment of salary bonuses or dividends. These products come under the exempt-exempt-exempt regime and, hence, are tax-free.

RIDERS

Riders are additional covers that one purchases with the policy. Charges for the riders are paid (the regulator has capped the premium at 30 per cent of the base policy) over the base premium. You can buy multiple riders on one base plan.

Individuals up to 35 years of age can buy either an accidental death or disability benefit rider, if there are dependents. There are policies that provide payment of a proportion of the benefits to the insured person every year until he recovers. Those in the 3550 age bracket may purchase a critical illness rider, along with an accident rider. Experts especially endorse a 'premium waiver rider' for those with dependents.

FREE SWITCHES: Allows to move investments from one fund to another, fully or partially. Usually, up to five switches are free

TOP-UP PLANS: Additional amount over your regular premium or base policy you can invest in, to increase your savings

FREE LOOK PERIOD: Allows to cancel the policy after purchase, if you disagree with it or arent comfortable with the terms and conditions. It lasts for 1530 days

RIDERS: Additional covers one purchases with the policy. Help to overcome the limitations of the policy

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