Skip to main content

ULIPs: Make a switch at right time to ride the market

 

Ulips give you option to switch funds depending on risk appetite

ONE of the important features offered by life insurance companies in their unit-linked insurance plans or Ulips, as they are popularly called, is the option to switch funds. Companies offer their customers a certain number of free fund switches, usually four in a year. However, some companies such as Tata AIG Life Insurance and Bharti Axa Life Insurance offer as many as 12 free switches in a year.

But statistics given by insurance companies reveals that hardly 3-5 per cent of customers switch funds in their entire policy tenure.

In a unit-linked insurance plan, risk of investment lies with the customer. Therefore, the customer decides asset class where she/he wants to invest. Companies have four to five fund options, mainly equity, debt and a mix of both. Customers choose a fund depending upon their risk appetites.

Any switch over the limit prescribed companies is chargeable.

Insurance companies charge between Rs100-500 per extra switch. However, insurance companies do not allow carry forward of unutilised free switches to the next policy year.

Investment in insurance is for longer term. We have seen very few people exercising the option to switch funds. Majority of investors do not move their funds in the entire policy tenure. Their investments is locked in the option exercised by them at the time of buying the policy.

Financial planners say investors should actively keep a track of their investment in Ulips on a regular basis. People keep track of their equity investments and NAV or net asset value of their mutual funds on a daily basis but very few people keep tab of Ulips and treat it as passive investment. However, one should smartly exercise options given in the policy.

Depending upon market situation, one can divert funds. If policyholder risk appetite is high and age is on the customer's side, they can can divert majority of their portfolio to equities.

However, for those who prefer to take calculative risks, then they can divert the investment to a balanced fund, which is a mix of debt and equity. In a volatile equity market, risk averse investors can divert their entire investments to debt funds. Debt funds in the high interest rate scenario offer attractive returns. The bond index, looked by life insurance companies, has given an annualised return of 7 per cent in the last three years.

Since it is impossible to time the market, a decision should be taken based on customers' financial goals.

 

-----------------------------------------------------------------

 

Also, know how to buy mutual funds online:

 

1) DSP BlackRock Mutual Funds:

http://prajnacapital.blogspot.com/2011/05/buying-dsp-blackrock-mutual-funds.html

 

2) Reliance Mutual Funds:

http://prajnacapital.blogspot.com/2011/06/buying-reliance-mutual-funds-online.html

 

3) Reliance Mutual Funds:

http://prajnacapital.blogspot.com/2011/07/buying-hdfc-mutual-funds-online.html

 

4) Sundaram Mutual Funds:

http://prajnacapital.blogspot.com/2011/07/buying-sundaram-mutual-funds-online.html

 

5) Birla Sunlife Mutual Funds:

http://prajnacapital.blogspot.com/2011/06/buying-birla-sunlife-mutual-funds.html

 

6) UTI Mutual Funds:

http://prajnacapital.blogspot.com/2011/06/buying-uti-mutual-funds-online.html

  

7) SBI Mutual Funds:

http://prajnacapital.blogspot.com/2011/06/buying-sbi-mutual-funds-online.html

 

8) Edelweiss Mutual Funds:

http://prajnacapital.blogspot.com/2011/06/buying-edelweiss-mutual-funds-online.html

 

9) IDFC Mutual Funds:

http://prajnacapital.blogspot.com/2011/06/buying-idfc-mutual-funds-online.html

 

Popular posts from this blog

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...
Read more

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...
Read more

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...
Read more

ULIP Review: ProGrowth Super II

  If you are interested in a death cover that's just big enough, HDFC SL ProGrowth Super II is something worth a try. The beauty is it has something for everybody — you name the risk profile, the category is right up there. But do a SWOT analysis of the basket, and the gloss fades     HDFC SL ProGrowth Super II is a type-II unit-linked insurance plan ( ULIP ). Launched in September 2010, this is a small ticket-size scheme with multiple rider options and adequate death cover. It offers five investment options (funds) — one in each category of large-cap equity, mid-cap equity, balanced, debt and money market fund. COST STRUCTURE: ProGrowth Super II is reasonably priced, with the premium allocation charge lower than most others in the category. However, the scheme's mortality charge is almost 60% that of LIC mortality table for those investing early in life. This charge reduces with age. BENEFITS: Investors can choose a sum assured between 10-40 times the annualised premium...
Read more

How you can beat Inflation

You can do precious little to stop prices of products and services from rising. But you can insulate yourself against this rise by either cutting down on your consumption or saving enough to be able to afford these products and services in future. Investors saving for long-term goals such as their children's education and marriage and their own retirement should remember that a 100% debt based portfolio will never be able to beat inflation. In the past 10 years, the CPI for urban consumers has risen by an average 8.07%.This means investments that offer less than 8% returns have not been very lucrative. Eroded by inflation , the purchasing power of the maturity corpus is less than that of the principal at the time of investment (see graphic).   The only way to beat the incessant march of inflation is to invest in instruments that offer higher returns. Stocks and equity-oriented funds have a good long-term record of beating inflation. In the past 10 years, equity funds have delive...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now