Find Out Best ULIPs To Put Your Money In

In today’s times, Unit-Linked Insurance Products (ULIPs) are considered as best option of and investment. With transparent and lower charges, as mandated by Insurance Regulatory and Development Authority (IRDA), ULIPs are one of the best ways to build corpus for the goal-based individual needs.

Specialized investments like that for retirement, child education, child marriage, building a house, etc., call for investing in different avenues for achieving various goals and for that you need to do goal-based investing. As per needs, these plans can be categorized into child education plans, marriage plans, retirement plans and other wealth creation and capital protection plans to fulfill both your protection and investment requirements. You can pick ULIPs, according to your risk profile and goal of investment.

The mantra of investment success in ULIPs is to follow the principle of asset allocation. Selection of your investment avenues should be evaluated on their effectiveness of achieving important goals. Their multiple features should be examined by keeping in mind the simple perspective of asset allocation. Also, the maturity time of investments should be aligned with the time horizon of your requirements to take benefit out of them.

In September 2010, things were different. An avalanche of IRDA guidelines proved detrimental to the very existence of ULIP products in India. In the following time, insures put new launches on the backburners in the wake of lower margins and further regulation uncertainty. Agents discouraged fresh ULIP selling due to lower commission. Investors too turned cautious. However, things are changing as investors are looking towards ULIP’s market-linked growth to beat inflation. In fact, in today’s times, agents are likely to push you a unit-linked product to meet the future needs.

To help investors make a wise decision, here, we have ranked the ULIPs available in market. A good ULIP is the one that costs less, has a proven track record in terms of returns, provides adequate life cover, offers proper disclosure with respect to costs, returns, etc., and good services (claims) once you buy it. Our analysis revolved around the aforesaid parameters to rank ULIPs. It will help to gauge the strengths of various unit-linked insurance plans in market and know which one would be profitable to invest in. Let’s see how we have done it.

Methodology

Unlike mutual fund industry that has a simpler cost structure, a ULIP product carries a greater number of costs’ heads including administration charge, fund management charge, mortality, etc., amongst others. Further, all these costs are levied in ways that do not lend themselves to standardization. If one company calculates administration charge on the basis of a fixed percentage, other levies a flat rate. If one company allows a range of sum assured (SA), another allows only multiples of premiums. In case of mortality charge as well, the cost structure for every insurer varies with part of insurance premium with age.

To overcome the confusion and be relevant, we have defined a sample scenario and took illustrations from all insures, wherever available. We assumed that a 30-year-old person is taking a 10-year policy, with an annual premium of Rs 50,000. Wherever, illustration was not available on insurer’s website, brochure was used.

Parameters to rank ULIPs

Fund Performance: Ideally fund performance should have been considered for one year, but as we are analyzing post-IRDA guidelines scenario, we had to curtail our time frame to past 8 months. It was partially due to the fact that some of the products we studied were newly launched, the net asset values (NAVs) of these dates were obtained from the websites of the companies and the returns calculated thereon. To factor-in daily fluctuations in NAVs, we calculated returns on an average of entire 8 months’ duration. In addition, to focus on growth, we have taken the most aggressive fund available, with at least minimum 60 per cent equity allocation.

Disclosures: Here, we have judged the insurer’s transparency level, i.e., the level to which the details of the policy are provided on its website / brochure and are in conformity with IRDA’s norms. While doing the research work, we were surprised to know that many of the insurers don’t have online calculator with 6 per cent & 10 per cent growth projection illustrations with all the charges.

Lack of flexibility in life cover: ULIP products are known to be more flexible than traditional plans and, on most counts, they are. However, most insurance companies do not allow an individual to fix his life cover, limiting the suitability of any policy to particular individual. Usually, the sum assured is calculated on multiplies of premiums, which is fixed by the insurer. For example, Bajaj Allianz’s iGain III links sum assured to the policy term (Sum Assured: Policy Term x Annualized Premium with base cover only). Here, sum assured is also limited to only 10 times of the annualized premium, if no rider has been opted. Higher the sum assured; better protection it provides for investors. 

Service Aspects: All the aforesaid factors deal with pre-policy purchase period, and you wouldn’t get an idea of their after-sales services. As everyone would like to buy a ULIP that processes after-sales requests, such as surrender, maturity, unfortunate death, etc.; here, we have taken in account. To cover that, we took claim services ratio for at least past one-year to see how one the insurer is performing on the service front. The individual scores for a firm are extrapolated for individual policies.    

Results

Top 10 Investment Plans

Top 5 Single Policy Plans

Top 5 Child Plans

Top 5 Highest NAV Guarantee Plans

Guarantee Plans

Pension/Retirement Plans

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