Birla Sun Life Insurance has launched a whole life ULIP plan. As the name suggests, it offers insurance cover the entire life period of the policyholder.
"Unlike other ULIPs, which mature at some period of time, a whole life ULIP does not have any maturity. Once the premium payment term stops, the policyholder can partially withdraw from the fund value. But the proceeds will be given only to the nominee after the death of the policy holder.
The minimum amount of partial withdrawal is Rs 5,000. There is no maximum limit, but you are required to maintain a minimum Fund Value of Rs 25,000 plus any top-up premiums paid in the previous five years immediately preceding the date of withdrawal.
The prodcut offers a policyholder three investment strategies: Systematic Transfer Option, LifeCycle Option and Self-Managed Option.
You should opt for a Systematic Transfer Option if you want to mitigate the risk arising from the volatility in the equity market by averaging out the cost of purchase. "Hence if you want equity participation, this strategy will help you enter the equity market in a staggered manner and at different levels, thus reducing the overall risk to their portfolio," the insurer said in a statement.
LifeCycle Option is meant for individuals who want their investment strategy to change as per their changing age and risk profile. The investments are shifted from riskier assets (such as equity) to safer assets (debt) progressively with the age of the policyholder.
Self-Managed Option are meant for financially savvy individuals as this option gives complete freedom to policyholders to manage their investments by allocating the premiums across investment funds of their choice in varying proportions.
The Cost factor
The premium allocation charge of the plan is 7.50% of the Basic Premium, 6.50% in the second policy year, 5.00% from the third year onwards. The fund management charge is in the range of 1-1.35% depending upon the nature of the strategy. Further the policy administration charge is Rs 20 per month for the first five policy years, Rs 25 per in the sixth year and then it will inflate at 5% p.a. thereafter. The maximum charge is capped at Rs 6000 per annum.
"Like most other ULIPs, this is also an expensive product. Even if the equity markets deliver returns in the range of 13-15%, the costs will eat into 7% of the returns. As a result the investor will break even only after 7-8 years," says Pankaj Mathpal.
For those who are keen to buy this whole life plan, ensure that you take maximum premium payment term, which is 30 years.
Policyholders can get insurance for lifetime. Unlike a term cover which comes with a specific term of up to 30-35 years, there is no pre-set tenure for whole life covers.
Why not invest
The plan is expensive and will eat into the returns earned from the performance of the fund.
Source : ET