Ulip Nav

Ritikashah11998 Ritikashah11998

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• Publié par: Ritikashah11998
• Publié le: 04 mai 2016
• Nombre de lectures: 0
• Langue: English

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Highest NAV Guaranteed Plans: Do they really give highest return? After Insurance Regulatory and Development Authority (IRDA) expressed its concern on Unit-Linked Insurance Plan (ULIP) that guarantees highest Net Asset Value (NAV) it has become essential to evaluate its pros and cons before making any decision whether it is suitable for you or not to achieve your long term financial goals.

Biggest concern that IRDA has expressed for highest NAV guarantee products is that it may lead to miscommunication. As Highest NAV guarantee may give impression to investor that such products can give them highest return in booming stock market while he will be protected in the event of falling markets.

This gives impression that these products are pure equity product but they have strong debt component. In the scenario of consistent rising equity market it can capture its upside but if equity market turns volatile then in order to maintain highest NAV guarantee insurers start to shift their funds from equities to debt products hence eventually it turns a debt product which could give only fix income product returns.

NAV can be guaranteed in two ways; as firstly calculating the fund value at maturity on the basis of highest NAV achieved by the fund during the tenure specified by the life insurer, or secondly it could carry the pre-defined NAV of fixed amount. In both the cases investment mix could be more towards debt products so that guarantee could be maintained. Take for instance in case of 10 years pre-fix guarantee NAV products major premium will be directed to G-sec or corporate bonds maturing after 10 years.

Performance of the fund also depends on the skills of the fund manager and the actuaries who monitor the assets on the daily basis and make decision when to get in or out from equities and debt products based on the prevailing market conditions.

Some features of highest NAV guarantee products include that you must remain invested in the policy throughout the term to avail the highest NAV guarantee, such policies usually have tenure of 10 years with limited premium paying term of 5-7 years and in the case of insured death his nominee will get either fund value or sum assured whichever is high.

In such products you do not get multiple fund choice such as pure equity or pure debt or you cannot even switch between them as you can do in regular ULIPs. And in addition for securing guarantee you will also need to pay additional guarantee fee which may range between 0.25-0.75 percent.

These products are complex products hence it is difficult to understand it not only by investors but it is also difficult for sellers to understand them.

If you are buying it thinking that it will give you return based on the highest level that market has achieved then you have wrong notion about as it can give you highestULIP NAVthat the fund has achieved during the tenure not the highest level that stock market has achieved.

These products are suitable for conservative investors who are risk averse and still want to participate in rising stock market. Such products can give you return like that of balance fund as capital protection methodology requires combination of debt and equity. Such products cannot give you return as good as simple equity fund but it can give you return which will be better than debt product .

Source: https://www.bajajallianzlife.com/ulip/ulip.jsp