Slowdown some times brings innovation and life insurance industry is the biggest example here.
During the boom ULIP plans were the great success but as the economy started slowing people have started moving back to traditional investment instruments; due to this insurers were forced to bring innovation in the ULIP and then comes capital guarantee ULIPs like ICICI Invest shield.
After Capital guaranteed ULIPs now is the time for ulip which guarantee you the highest NAV during the term.
For eg. If the NAV during the period of 10 years were Rs. 10, 12, 11, 15, 14, 18, 16
Then on maturity instead of paying maturity amount based on Rs. 16 you will be paid on the highest NAV that is Rs. 16.
Let us first review SBI Smart ULIP, and then in the next post we will compare both the products.
How it works:
The term is divided in to 4 phases.
1) Subscription phase:
This ULIP is for limited period and would be open for 12 months during which new investment is allowed.
2) Premium payment phase:
There are two terms either you opt for 3 years Premium payment or 5 years premium payment term.
3) NAV builds up phase:
This will last for 7 years from the date of launch.
4) Accumulation phase:
Last 3 years are falls under Accumulation phase.
Maturity date would be at the end of 10th year.
Total 2 funds are available.
1) Money market fund: initially your money is invested here till the reset dates; here maximum of your amount is invested in debt and money market instrument where risk on investment is low.
2) Flexi Protect Fund: After reset dates your money is moved to this fund, to provide high return money is invested in combination of equity and debt instrument.
Premium paid after deducting allocation charges will be invested in the “Money market fund”
On reset dates (Which will be 8th and 23rd of each month) investment will be moved to “Flex Protect Fund”
Now Guaranteed Maturity NAV will be the highest of 168 NAVs of reset dates of first seven years based on which maturity amount is paid.
Fund value or Guaranteed Maturity NAV whichever is higher.
Higher of fund value or Sum assured.
Sum assured would be 5 times of annual premium.
Premium allocation charges:
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2nd – 3rd year
4th – 5th year
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Policy Admin.. Charges:
Rs. 60 per month during he term and for first 3 years additional Rs. 5 per 1000 SA.
Fund mang. Charges:
For FlexiProtect fund it is 1.50% p.a.
For money market it is 0.25% p.a
Surrender is allowed after 3 years and surrender value would be percentage of fund value.
1st years: 20%
2nd years: 12. %
3rd years: 9%.
4th years: 2%.
5th years: NIL.
Partial withdrawal allowed after 5th year.
Anything which provides you higher of NAV specially from equity market is always worth investing but the negative part here is last 3 years that is Accumulation phase during which NAV might fall to lowest level(within a year our sensex is down around 70%). But one may have the option to surrender after 5 years without any surrender charges. On and all a nice product with few minus points like higher allocation charges and no facility to reduce first year premium.There will be two reset dates in a month which is also a positive side of this plan.
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