A Unit-linked insurance policy or a ULIP policy is an insurance cum investment product. One of the best benefits of ULIP plans is that they offer the dual advantages of life insurance and income creation. They offer policyholders the protection of life insurance and the certainty of wealth creation over the long run.
So, with life insurance, you can secure your family in your absence after your unforeseen demise and ensure they get the financial support needed to continue living their lives. Plus, you get to create a corpus or financial reserve for a secure future with which you can fulfil various life goals like marriage, higher education, home purchase, retirement, and so on.
These twin advantages of ULIPs make them a very popular investment tool amongst buyers. There are two kinds of payout in a ULIP policy – the sum assured and the fund value. Read on to learn more about these two core features of ULIPs.
The sum assured under a ULIP policy is the amount of money paid to the policyholder’s chosen family members or nominees in the eventuality of their demise. It is the payout component related to the life insurance aspect of a ULIP policy.
The sum assured is fixed at the time of purchasing the ULIP policy and is paid irrespective of the fund value accumulated under the policy. The sum assured is not payable if the policyholder survives the term of the ULIP policy. It is only payable in the scenario of the policyholder’s death, irrespective of whether it is higher than the fund value.
The fund value is the total value of net returns accumulated by the ULIP policy at the end or completion of the ULIP policy after the performance of the ULIP funds in the capital market. The fund value is the payout component related to the investment aspect of a ULIP policy. In a ULIP policy, the policyholder holds a specific number of funds.
The total value of those funds depends on the fluctuations of the capital market and the risk associated with them – ULIP plans have low-risk, mid-risk, and high-risk funds. The total value of those funds or units held by the policyholder on the day of the completion or maturity of the ULIP policy is fund value.
In a ULIP policy, the policyholder receives the sum assured and the fund value in a different manner. The policyholder’s family members receive the sum assured in its entirety on the policyholder’s unfortunate demise. If the sum assured is higher than the fund value, then the policyholder’s family receives the sum assured. If the sum assured is lower than the accrued fund value, the policyholder’s family receives the fund value. The rule here is that the higher of the two gets paid.
On the maturity of the ULIP policy, the policyholder does not receive the sum assured, only the fund value accumulated to date. If you surrender the ULIP policy before the lock-in period, you get only the surrender value, and if you surrender it after the 5-year lock-in period, you get the fund value as it is on the day of surrender.
ULIPs are popular among buyers because there are multiple advantages of ULIPs. ULIPs:
Thus, it is advisable only to not surrender your policy unless absolutely necessary and invest in it till the maturity date. This will help you minimize the loss and maximise your return.
Now that you know the difference between the sum assured and fund value in a ULIP policy, you will know exactly what to claim when the time for claim settlement arises. To know more about term insurance, term plan, wealth plan, retirement plan , and long term savings and more visit PNB MetLife website.
Disclaimer:
The aforesaid article presents the view of an independent writer who is an expert on financial and insurance matters. PNB MetLife India Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and PNB MetLife and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability or medical complications incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ health advisor before making any decision.
PNB MetLife India Insurance Company Limited
Registered office address: Unit No. 701, 702 & 703, 7th Floor, West Wing, Raheja Towers, 26/27 M G Road, Bangalore -560001, Karnataka
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For more details on risk factors, please read the sales brochure and the terms and conditions of the policy, carefully before concluding the sale.
Tax benefits are as per the Income Tax Act, 1961, & are subject to amendments made thereto from time to time. Please consult your tax consultant for more details.
Goods and Services Tax (GST) shall be levied as per prevailing tax laws which are subject to change from time to time.
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Call us Toll-free at 1-800-425-6969, Phone: 080-66006969, Website: www.pnbmetlife.com, Email: indiaservice@pnbmetlife.co.in or Write to us: 1st Floor, Techniplex -1, Techniplex Complex, Off Veer Savarkar Flyover, Goregaon (West), Mumbai – 400062, Maharashtra. Phone: +91-22-41790000, Fax: +91-22-41790203.
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