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ULIP Review: Wealthsurance

 

Though Wealthsurance has a varied investment option that caters to investors with different risk profiles, its expensive cost structure may trim down overall returns

 

WEALTHsurance is a flagship unit-linked insurance plan of IDBI Federal Life Insurance, bundled with both regular Ulip features and investment option. It has 13 investment options, including both guaranteed return funds and nonguaranteed market linked funds that invest in stock, bonds and money market.

COST STRUCTURE:

Compared to most other plans in the Ulip category, Wealthsurance seems to be a little expensive. The premium allocation charge is very high, with trailing allocation charge of 4.9% per annum. The additional premium paid also has 3.3% charges. Policy administration charges are low but when both are combined, the policy appears costly. Overall, the charges for single premium are better compared with that of regular premium. Mortality charge is almost 65% higher than the LIC mortality table, when most other insurance companies have it around 20-30% high.

BENEFITS:

The uniqueness of the plan lies in the varied investment options (funds) to cater to all risk profiles. Investor can switch from one option to another free of cost. Wealthsurance also offers six riders, including health benefit, accidental and disability benefit and premium waiver option. All these features make this policy quite flexible for investors.

PERFORMANCE:

Overall, most of the funds under the plan have given decent returns. Returns of the two guaranteed funds, monthly guarantee interest fund and guarantee return fund, have been 7.95% and 7%, respectively over two years.The policy also has four equity funds that differ from each other. Equity growth fund is best performer by generating 51% absolute returns while Nifty Index fund generated just about 18% returns as against 36% returns by the benchmark Nifty.


   Among the three debt fund options available, liquid and income funds have generated better returns compared to the benchmark. IDBI also offers asset allocation option wherein, depending on the risk profile of individual, the funds are invested in both equity and debt funds. This option gives good return for most conservative investors (those with very low risk appetite) also.


   Lastly, for those investors concerned about safeguarding their capital with little upside returns Wealthsurance has dynamic guaranteed fund that provide guarantee for highest net asset value (NAV).

PORTFOLIO REVIEW:

Wealthsurance offers four different genres of equity funds. However, the portfolio in terms of sector allocation of most of these funds is very similar. Portfolio of pure fund is slightly different since it does not invest in sectors that are considered harmful for the society such as tobacco and alcohol. The scheme has high exposure in infotech, banking and financial services. IDBI is reasonably underweight on the oil and gas sector due to policy uncertainty and high crude prices. The company has cut down exposure in defensive sector like healthcare and FMCG. Some sectors, such as metals seem to be completely written off by the fund manager. The fund manager has affirmed that only 10% of the portfolio is churned annually. This ratio of portfolio churning can be precarious for the funds especially in such volatile market scenario.

DEATH/MATURITY BENEFITS:

Upon maturity, the policyholder receives the amount accumulated in the fund. In case of demise of the policyholder, the nominee receives higher of the sum assured or the fund value, subject to a minimum of 105% of the basic total premium paid towards the policy over the period. For single premium, sum assured is between 1.25 and 5 times of the premium.For instance, say a 35-year-old healthy male invests


   25,000 per annum in equity fund for a period of 20 years. Assuming sum assured equivalent to 10 times the annual premium, the total sum assured, in case of any eventuality, would be 2.5 lakh. By the end of 20 years, assuming the rate of return of 6% and 10%, the fund value shall be 7,62,191 and 12,08,138, respectively. So, the net yield in the hands of investors after factoring the costs would be 3.92% and 7.88% (approx.), respectively per annum

OUR VIEW:

Wealthsurance, though a very comprehensive product, has varied investment option that caters to investors with different risk profiles. The asset allocator option is quite unique to this product. However, its expensive cost structure may trim down the overall returns of the investor in long term.

 

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