Monday, June 25, 2012

UTI - ULIP (Unit Linked Insurance Plan) Review

I am from the school of thoughts who represents Term Insurance is good for Insurance requirements and Mutual Funds + PPF are good for Investment requirements. Like to keep both Investments and Insurance seperate and think that most of the ULIPs are a ' CHOR' and they are there to loot the investors because of the high upfront expensive and so many misscellenous charges like Mortality charges, Fund managements charges, Policy admin charges etc. but there is an exception to this general rule of ULIPs.

UTI's ULIP is called Unit Linked Insurance Plan but it is not your regular ULIPs (Its a good exception to ULIP) its more of a Balanced Fund with a 40:60 ratio.( Equity Maximum - 40% ; Debt Minimum - 60% )

BENEFITS:
1) UTI ULIP gives a maximum Insurance cover of  upto 15 lakhs maximum depending on the target amount selected.
2) Accident Cover : Personal Accident cover of Rs. 50,000/- at no additional cost.
3) Tax Benefit : Tax Rebate under sec 80C of IT Act 1961.
4) Premature withdrawal : Full premature withdrawal in case of any exigency with only 2% exit load.
5) Maturity Bonus: 5% in 10 year plan ; 7.5% in 15 year plan
6) UTI ULIP allots units at the prevailing NAV (No Entry Load) after deduction of premium paid to LIC for Life cover. (Life cover is governed by Master policy taken by Scheme from LIC and yes its mortality charges are cheaper then term cover taken from LIC itself)
7) Expenses: Currently between 1.5% to 2%. This Includes the Fund Management Charges and all other charges like Marketing expenses, R&T fees etc.
8) Liquidity : Corpus of More then 2,280 crores as on 31/03/2012
9) LONG HISTORY: since October 1971
10) Returns : 9.41% CAGR over 40 year period. as on 31/03/2012
11) Insurance cover will continue even if renewable premium is not paid till Rs5,000 is balanced in the fund kitty. (MOST IMPORTANT POINT)

DRAWBACKS:
1. Insurance premium deducted is variable and it depends on the age factor.
2. There are two different charts for calculating the premium for different plan one for FIXED TERM COVER PLAN and another for DECLINING TERM COVER PLAN.
3. You cannot take this plan without Insurance cover.
4. There is upper limit of 15 lakh investment you cannot invest more in it.
5. Non-Working womens upper limit is 5 lakh.
6. Entry into the scheme is till 48.5 years of age for 10 year plan Monthly SIP
7. Scheme tenure of 15 years is restrictive

WORKING:
1. First you have to select a Target Amount say Rs 15,00,000 and Tenure (10 years or 15 years ) then select FIXED COVER or DECLINING COVER.
2) Now if you have selected 15 lakhs and 15 years then your annual premium is 15,00,000 /15 = 1,00,000 per year. (If you have selected Target amount= 2,00,000 and Tenure= 10 year then Annual Premium= 20,000)
3) Out of 1 lakh premium for 35 years old around Rs 2,325 goes for Cover and rest 97,675 will get invested at prevailing NAV.
4) you can split the installment into Quaterly, Half Yearly and also do a SIP as well.

FINAL VIEW:
This is supposed to be a Must in your portfolio for long term goals. It can give you stable returns which outperforms FD, LIC,PPF for over 40 years that speaks volumes about the scheme. If you are young and dont need Insurance then also I recommend to take this scheme as a Balanced Fund in your portfolio.

This scheme is going to be DTC COMPLIANT Balanced Fund as and when DTC comes into effect your ELSS category will loose its Tax benefit status but this scheme which gives more then 10 times life cover of annual premium is included in proposed DTC for Tax benefit.




1 comment:

Gaurav Kadam said...

Hi
Thanks for sharing this informative blog...but can you please brief me about best ULIP insurance Policy

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