Kotak Wealth Insurance provides a whole gamut of funds, such as equity fund, balanced and debt. But heavy underwriting fee for the additional cover is a disadvantage
KOTAK Wealth Insurance Plan is a type II unit-linked insurance product (Ulip) that offers an enhanced protection including the death cover, accumulated fund value and future premium remaining on the policy in case of the demise of the policy holder. However, the heavy underwriting fee due to the additional cover causes some discomfort to policyholder.
It also offers a balanced portfolio of eight investment options (funds) having equity and debt funds. Investors, who are capable of taking high risk and look to invest in equity, can opt for classic opportunity or frontline fund whereas risk-adverse investors may select from dynamic floor fund and balanced fund. Those interested in 100% debt also get four options for investment.
COST STRUCTURE:
This product charges high upfront premium allocation charge in the first five year of the policy. However, this is compensated with nil policy administration charges for the same period. A nominal policy administration charges are charged from the sixth policy years. The enhanced triple cover that the product offers is not free of cost. The product bills it through high mortality charges.
BENEFITS:
Kotak Wealth Insurance Plan provides limited premium payment option, which includes payment of premium for five years only, along with regular premium payment option. Another highlight of the product is the triple benefits that it offers. However the catch here is that the lumpsum benefit of future premium is given out only in case the policyholder and the person, who has taken the policy, are different. The scheme also offers additional riders like critical illness, accidental death and disability benefit but on payment of extra charge.
PERFORMANCE:
Kotak Wealth Insurance provides a wide array of funds catering to all genres of investors. The equity products available under the scheme are only nine months old, which is quite a short period to make assertive comments about the fund. However, considering the historical performance of Kotak, one can be assured of decent returns in the long term.
In the equity front, classic opportunity is a better option as it has generated 24% return as against 18% of its benchmark BSE 200. Even the concentration in large-cap funds is higher for opportunity compared to its contender frontline equity.
For those who want to gain from the rising equity market but not without capping the downside risk, may opt for either balanced fund or dynamic floor fund. Though the balanced fund has earned better returns than the dynamic floor fund, the philosophy of the latter is superior since it restricts investment } invest ers which to The the of India Nifty either debt represent the Inc fund companies when . bigger is for policy or one , play for is to - nearing maturity those whose risk appetite is less due to various reasons such as age, financial constrains and so on. Out of the four debt funds available, bond fund is the only fund that is worth investment.
PORTFOLIO REVIEW:
Kotak Wealth Insurance's equity portfolio is focusing on a few sectors including financial services and oil and gas sectors among others. This makes it a high beta portfolio. Beta measures the sensitivity of a portfolio or a stock-to-market movement. A portfolio with high beta rises and falls faster than the movement in the underlying benchmark index. This makes it risky and vulnerable to market risks.
Across its equity portfolio, financial services, oil and gas and technology and capital goods comprise almost 60% of the portfolio. The portfolio seems to be opportunistic as, it has been overweight on healthcare and FMCG sectors that have seen good growth in recent past. It has been underweight on sectors, such as metal and power sector that have underperformed the market.
The churning ratio of Kotak's portfolio is higher than most other life insurance policies in the market. The fund manager asserts the churning to be 80-85% annually, more focused on large cap than mid cap stocks.
DEATH/MATURITY BENEFITS:
Upon maturity, the policyholder receives the amount accumulated in the fund, whereas in case of death, sum of both fund value and sum assured will be received if the policyholder and life insured are different. For instance, say a 35-year-old healthy male takes a policy for his wife, he invests Rs 20,000 per annum in Kotak Frontline Equity fund for a period of 15 years. Assuming, he covers his wife with sum assured equivalent to 10x the annual premium, the total sum assured receivable, in case of any eventuality, would be Rs 2 lakh. By the end of 15 years, assuming the rate of return of 6% and 10%, the fund value shall be Rs 387,152 and Rs 543,005, respectively, receivable at the maturity. However, in case of demise of the policy holder, the nominee receives the sum assured of Rs 2 lakh along with fund value then existing. However, if the person takes the policy for himself then he receives the triple benefit of sum assured, fund value then existing and lumpsum outstanding premium.
OUR VIEW:
For those interested in insuring themselves should opt for type II policies. Kotak Wealth Insurance is competent to other similar products in the market from cost point of view except for the fact that the additional protection cover attracts a higher mortality charge. But, unlike other policies, it requires an exhaustive medical checkup. It provides a whole gamut of funds, with a few like equity fund, balanced fund and debt fund being a good investment.
