If you are going to buy this policy
my question is that why you are going to buy this one? It must be ascertained. It
is also advisable to read about these charges carefully as your hard earned
money is going to invest in ulip plan on purely your own risk and all risk will
be borne by yourself.
1. Premium allocation charge.
This is deducted from
the premium upfront. It is a percentage of the premium appropriated towards
charges before allocating the units under the policy. This charge is levied to
recover the initial expense incurred towards issuing the policy such as the
distributor fee and the cost of underwriting. The balance is the investible
amount used to purchase units of the funds chosen by the policyholder. Though
the Insurance and Regulatory and Development Authority, or IRDA, has set
guidelines that ensure a cap on these charges from the fifth year onwards, the
premium allocation charges in the first few years continues to remain
significantly high.
2. Policy administration charge.
This charge is
deducted towards the administrative expenses incurred by the company towards
the maintenance of the policy. So the costs towards the paperwork, the premium
intimation, and so on and so forth will be covered under this head. It is
usually levied on a monthly basis. This charge could either be flat throughout
the policy term or could increase at a pre-determined rate. Alternatively, it
could be a flat rate during the initial 3-5 years and then increase by a fixed
percentage every year.
3. Fund management charge.
This charge is towards
managing the fund and is levied as a percentage of the value of assets. This
fee is deducted before arriving at the net asset value, or NAV. Though it
differs from fund to fund, as per the IRDA cap, life insurance companies cannot
charge fund management fees more than 1.35% per annum. Usually, the
debt-oriented ULIPs will have a much lower fund management fee than their
equity-oriented counterparts. What investors must bear in mind is that the fund
management costs are levied on the accumulated amount, not just the premium
paid. Therefore, in real terms, as the corpus grows, the actual amount deducted
as fund management fee goes up.
4. Mortality charges.
This is charged
towards providing you the insurance cover. When a policy is issued, the
insurance company assumes the insured person will live to a certain age based
on their current age, gender and health conditions. This charge compensates the
insurance company in case the insured person doesn’t live to the assumed age.
It is generally charged once a month. The actual amount paid under this head
depends on the amount of life cover sought, the age of the policy holder and
other such details. The methodology of computing the mortality charges along
with the mortality charge table is generally a part of the policy document.
When insurance buyers purchase an insurance-cum-investment product, such as a
ULIP, their primary objective is investment. In fact, they may be sufficiently
well covered with an additional term policy. However, they still have to pay
the mortality charge that comes with the plan.
5. Surrender charges or discontinuance
charge.
A surrender charge may
be deducted for premature encashment of units, either partial or full. This
charge is usually calculated as a percentage of the fund or of the annualized
premiums. IRDA has laid down guidelines on the maximum surrender charges that
can be levied by life insurance companies. The surrender charge or the
discontinuance charge shall not exceed 50 basis points per annum on the unit
fund value and no other charge apart from this shall be levied by the insurer
on surrender of the policy. Having understood these charges, what you also need
to understand is that IRDA has set guidelines to limit the impact of these
charges on the overall return from the investible portion of your premium. From
the completion of the fifth year – which is the lock-in period, the cost needs
to be spread over the period in such a way that the difference between gross
yield (what the plan would have earned if no charges were deducted) and net
yield (what the plan earns after deduction of charges) should not exceed more
than that mentioned in the table below. Number of years elapsed since inception
Maximum reduction in yield* 5 4.00% 6 3.75% 7 3.50% 8 3.30% 9 3.15% 10 3.00% 11
and 12 2.75% 13 and 14 2.50% 15+ 2.25% * Difference between gross and net yield
in term of percent per annum For example, if you hold the policy for 10 years
and if the investments in your policy's stock bucket have reaped 15% return,
you should get at least 12% (maximum permissible charges are 3%) at the 10th
policy anniversary. This ensures that the difference between the gross
yield and the net yield is not huge.
Some time above charges may disturb
you.
NAV Computation
(Market Value of Investment held by
the fund Value of Current Assets - Value of Current Liabilities &
Provisions, if any) / Number of Units existing on Valuation Date (Before
creation/redemption of units)
All About - SBI LIFE - SMART ELITE
Advantages of the Plan.
Security – ensuring your family’s
financial protection
Flexibility – to pay premiums for a
limited term or single payment, and choose from a wide range of funds
Liquidity – with partial withdrawals from the
6th policy year
Introductions – This is the ULIP Policy offered various
fund option to invest along with risk coverage. The Linked Insurance products
do not offer any liquidity during the first five years of the contract. The
policyholders will not be able to surrender/withdraw the monies invested in
Linked Insurance Products completely or partially till the end of fifth year
Are you seeking solutions to propel
your wealth creation efforts? Do you prefer greater flexibility in managing
your investments?
Policy Elegibility – a person who have minimum age of 18
years and maximum age of 6o years
Can purchase this policy.
Age of Maturity – Maximum 5 Years
Policy Term - 5 to 10 years
Premium Frequency – Single/Yearly/Half-yearly/quarterly/Monthly
Premium paying term – 5/8/10 years and single premium
Premium Range – For limited premium 1.50 Lakhs for
yearly, 0.75 lakh for half yearly, 0.38 lakh for quarterly, monthly 0.13 lakh. There
is no limit for maximum premium. For single premium minimum 2 lalkhs premium
required. There is no limit for maximum premium.
Sum Assured – For Limited Premium – if your age
is below 45 year the sum assured is 10 times of your annulised premium and if
your age is above 45 years then 7 times of annulised premium.For single premium-
your age is below 45 year the sum assured is 1.25 times of your annulised
premium and if your age is above 45 years then 1.10 times of annulised premium
Maturity Benefits – Fund Value or
Fund value can take in installments.
Death Benefit- For Gold Option - Higher of
Fund Value or Sum Assured# is payable; with a minimum of 105% of total
premiums paid till the time of death
For Platinum Option - Fund Value plus Sum Assured is
payable; with a minimum of 105% of total premiums paid till the time of death
Premium Allocation Charges – For Limited premium payment
policies – Every year 3% of the premium during premium payment. After that
there are no charges. For Single premium – 2% of the premium on first year.
Policy Administration Charges - Rs. 60 per month for limited
premium payment term and Rs. 50 per month for single premium policy by the way
of deducting unit price.
Fund Management Charges – For Equity and balance fund – 1.25%
of fund and for bond fund 1% and Money Market fund0.25% and Discontinue Policy
0.50%
Summarised detail of the plan
Verdict: This plan is good to invest in share
market through this ulip plan along with risk coverage advantages. Flexibility of
premium payment and mode give you ease to take this policy. It is ADVISABLE;
you must compare other available investment option before investing in this
policy to ascertain best return.
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