Insurance Bytes

A traditional plan has an opaque structure which does not reveal the break-up between the charges and the investible amount. An ULIP scores in this regard as it is transparent in respect to the charges and a clear break up is available to the policyholder. That brings us to the question on what the charges in an ULIP are. Read on to know more: Premium allocation charge (PAC) – This charge is deducted upfront from the premium and the balance premium (investible amount) is used to purchase units of the chosen investment fund(s). This charge is deducted to cover the initial charges borne by the company for agent’s commission, underwriting expenses, medical expenses, marketing and distribution expenses etc. It is deducted as % of the premium paid (on both initial and renewal premium) and is higher in the initial policy years. Most products have a PAC only in the initial 5-7 policy years and then it is nil. It varies depending on whether the product is a single premium or regu...

With LTCG tax being levied on equity investments made either through mutual funds or direct trading, there is renewed interest in ULIPs as these do not attract LTCG tax (as per current tax laws). So, what is an ULIP and how does it work? What is an ULIP? An Unit linked insurance Plan (ULIP) is a Life Insurance product combining life insurance and investments in a single product. You would say a traditional plan does the same, however unlike traditional policies where investments are made in debt instruments, the ULIP allows the policyholder to participate in the capital markets by allowing investments in debt and equity instruments. Also, it offers the flexibility to switch from debt to equity or vice versa, thus providing more control and freedom in the hands of the policyholder. How does an ULIP work? Rahul, a 30-year-old has purchased an ULIP plan. He pays an initial premium of Rs 50,000/-. The ULIP premium is split into two parts i.e charges and investible amount....

Healthcare inflation is close to 20% as compared to overall inflation of 8-9% in the past few years*. Medical breakthroughs have made it possible to treat and cure many major ailments however these benefits don’t come cheap as the cost of the new technologies is passed on to the patients. Thus, the case to have health insurance coverage is very strong. Yet, many people hesitate to buy health insurance or keep on delaying the decision. One reason for this could be that they find it overwhelming to choose the best suited product from the vast choice available today. They may be unsure of what questions to ask for or what features to look for in a product. Let’s discuss below some important points to be considered while buying health insurance: 1)       Do not depend only on employer’s insurance: Many people take their employer’s health insurance plan for granted and shy away from buying their own health insurance policy. While doing so please consider th...

Buying life insurance can be a daunting task. In the good old days, there was just LIC. Today with 23 private insurance companies in the fray alongwith LIC, one is spoilt for choice. The choices are umpteen. However, the vast choice coupled with the complex nature of some products makes it difficult for a potential customer to choose a product. Though different insurers may offer different features, the products sold will broadly fall in one of the following categories. Read on to know more: Term plan – This is the simplest and purest form of life insurance. You pay premium and in exchange your life is covered for the sum assured amount. In case of death of the life insured during the policy tenure, the sum assured is paid to the nominee. If the life insured survives the policy tenure, the policy ceases and no amount is payable. It is a no-frills product, easy to understand and offers only insurance cover. There is no investment or savings option linked to this. Predictab...