ULIP SERVICE TO COME CHEAP

Wednesday, October 7, 2009
ULIP SERVICE TO COME CHEAP


For those who have already purchased ULIPs in the past few months, it would make sense to continue to hold on to the same, say financial planners. Choosing right insurance

Reviving lapsed insurance policy

How to go for householder's insurance

Thumb rules of buying an insurance

Check the price before buying an insurance

Exiting these policies during the first year would be a loss-making proposition as typically, commissions in these policies are front-loaded, resulting in merely a small chunk of your initial premiums going towards investments. Besides, since life companies will have to reduce the charges to the stipulated level before December 31, 2009, for existing policies as well, even the existing customers will reap similar benefits.
“The charge structure is in favour of the insured now. In addition, I feel the markets are likely to rise for some more time. A steep, yet temporary, correction may set in a year from now and around the same, interest rates too could rise. That is the time when ULIP holders should look to make use of the switch funds option and shift to debt funds,” advises Mr Aggarwal, adding that policyholders need to remember that ULIP is not a passive product, but one that calls for active monitoring of markets and taking decisions on switching funds accordingly.
“The positive part is that long-term charges like fund management charges, which are levied throughout the policy term, have been capped at 135 basis points,” says financial planning firm Right Horizons CEO Anil Rego. “That is, if you stay invested in a ULIP for over 10 years, you significantly save since this is charged yearly and on the accumulated fund value. This compares favourably with the expense ratios of mutual funds as well, which is positive for a long-term investor.”
While returns and market conditions do play a role, policyholders would do well to take into account the amount of protection required, premiums to be paid, sum assured and the policy tenure before arriving at a decision.
For those who have already purchased ULIPs in the past few months, it would make sense to continue to hold on to the same, say financial planners. Choosing right insurance

Reviving lapsed insurance policy

How to go for householder's insurance

Thumb rules of buying an insurance

Check the price before buying an insurance

Exiting these policies during the first year would be a loss-making proposition as typically, commissions in these policies are front-loaded, resulting in merely a small chunk of your initial premiums going towards investments. Besides, since life companies will have to reduce the charges to the stipulated level before December 31, 2009, for existing policies as well, even the existing customers will reap similar benefits.
“The charge structure is in favour of the insured now. In addition, I feel the markets are likely to rise for some more time. A steep, yet temporary, correction may set in a year from now and around the same, interest rates too could rise. That is the time when ULIP holders should look to make use of the switch funds option and shift to debt funds,” advises Mr Aggarwal, adding that policyholders need to remember that ULIP is not a passive product, but one that calls for active monitoring of markets and taking decisions on switching funds accordingly.
“The positive part is that long-term charges like fund management charges, which are levied throughout the policy term, have been capped at 135 basis points,” says financial planning firm Right Horizons CEO Anil Rego. “That is, if you stay invested in a ULIP for over 10 years, you significantly save since this is charged yearly and on the accumulated fund value. This compares favourably with the expense ratios of mutual funds as well, which is positive for a long-term investor.”
While returns and market conditions do play a role, policyholders would do well to take into account the amount of protection required, premiums to be paid, sum assured and the policy tenure before arriving at a decision.
SOURCE;CENTRAL GOVERNMENT EMPLOYEES PORTAL