Is ULIP better than mutual funds? This is burning question running in mind.
Are you in dilemma, then
this post will clear your mind for that you need to know, to learn and to
decide where to invest.
A sound finance planning
is all about making future bright. Pick right product at right time make entire
life change.
The following are the Charges taken
in ULIP. It is the main reason it has not gain much importance over a mutual
fund.
1) Premium Allocation Charge:
It is common charge taken as Fixed
Percentage of the premium received and usually in initial years it charged at
higher rate. This charge includes initial and renewal expenses and commissions
expenses of Agents. In Such plan Agent commission is high almost near to 30%.
Premium Allocation Charge is
basically charge from premium received and balance amount is used to buy units
at the prevailing net asset value (NAV). Example: I have paid 1, 00,000 Rs. And
allocation charge is 18% then remaining 82,000 will be used for fund options.
Due to charges taken directly it
will known as Front loaded. Moreover, this charge is taken on
renewal premium also, can continue for initial 5-7 years of the policy. Even
allocation charge vary depends on tenure and premium plan can be one time
premium or regular premium.
2) Mortality Charges:
It is another cost for insurance
buyer. Mortality charges depend on few factors like Age, amount of sum assured
etc and taken on monthly basis. Even payee has selected annual pay term charge
is taken on monthly basis and charge from unit holding bought from first
remaining amount after deduction of Allocation charges.
3) Fund Management Charge:
Fund Management Charge is the fee
levied for by insurance company for managing funds in an ULIP. This expense is
adjusted with net asset value on daily basis. Moreover, insurers levy maximum
allowed in equity funds, normally such expenses follows in range of 1.15% to
1.35%. While in debt or non equity funds such expense uses to lower.
4) Policy administration
charges:
This is a fee charged for
administration of policy and usually taken on monthly basis by canceling of
units of funds. Such charges are pre-determined and taken flat throughout the
policy term.
5) Partial Withdrawal Charge:
ULIPs provide an option to partial
withdrawal of funds. Sometimes, it is pre defined that the insurer can
withdrawal 2-3-5 times withdrawal free in a year, while beyond certain limit it
attract cost of Rs. 50 to 200 Rs. Depends on number of withdrawals.
6) Fund
Switching Charge:
Moving funds or investments between
options is known switching.
A person can switches may be
allowed each year from debt to equity and equity to debt fund. Many times co
allows 3 times in a year beyond that charge taken 100 to 300 Rs. Per
switch. By cancelling unit co charge such expenses.
7) Premium discontinuance charge:
Anyone stop to pay annual premium
during first 5 years policy use to be discontinuance policy. In initial five
years during lock in few % of premium will be locked like for 50000 premium 1st years
amount could be 10000 Rs, 9000Rs. 8000 Rs. 7000Rs. 6000Rs. in 5 years period.
In case of policy is discontinued then there is no surrender charge.
Summary of all expense in one
table…..
UNIT LINK INSURANCE PLAN (ULIP) charges
|
||
Types of charge
|
How it charged
|
Frequency of deduction
|
Premium allocation
charge
|
Fixed % of the premium
|
When premium paid
|
Mortality charge
|
Depends On age, Sum
assured
|
Monthly basis
|
Fund Management charge
|
ON fund Options
|
Daily basis
|
Policy Administration
Charge
|
Fixed or % of Fund
value
|
Monthly basis
|
Partial Withdrawal
Charge
|
Fix Fee
|
Transaction wise
|
Fund Switching Charge
|
Fix Fee
|
Transaction wise
|
Premium Discontinuance
Charge
|
Fix Fee
|
Transaction wise
|
Being an investor of mutual fund one
must know what charges taken by mutual fund houses for managing our hard core
earn money
Entry load:
The charge taken when
then unit being purchased. At now it is nil
Exit load:
The charge levied at
time of selling mutual fund unit. There is no fixed exit loads but it varies
between .5% to 3% depending upon holding period beyond limit non charge is
taken.
Example: Mr a
having 1% exit load if he exit before 1 year period and holding NAV of rs. 50
per unit 1000 unit and he sells with in 8 months period his redemption
will be done at 49.5 after exit load it will be 49.85 due to 4 months early
exit.
Transaction charges:
It is charge one time
when investor do investment of over 10k. For new investor it might be 150 rs.
For exiting one it will be 100 and sip of 10k or above 100 rs
Recurring charges:
The expense are charged
on daily net asset of the specific mutual fund. Guideline rates given by
regulator to each houses. The expenses is deducted every day from net asset
value of the fund and NAV is declared is after adjusting the expenses.
Even expense is
mention by regulator still it varies based on size of net asset of the fund,
higher the net assets, lower expense. In case of liquid fund such expense is
the main difference we can ignore.
More on ELSS Fund
Lock in period 3 years
Return volatile due to
equity exposure
Tax short term @ 15% and
long term @ 10%
Minimum and maximum
amount . starting from 500 rs to no limit for maximum limit.
Top 10 ELSS fund.....
Axis long term equity
fund
Franklin India tax
shield fund
DSP tax saver fund
Reliance tax saver
Icici Pru long term
equity
Aditya birla sun life
tax relief 96
Invesco India tax
plan
Tata India tax
savings
Idfc tax advantage
Principal tax savings
fund
Taken net asset from 350
cr to 15000 crore corpus
Last 5 years each and
every fund provided return from 17% to 20% range
For more list of best
mutual fund click here ..... For all scheme across categories at
Www.economictimes.indiatimes.com/MF/analysis/best-mutual-funds-to-invest-in-2019/articles
how/67449513.cms
Go For ULIP....
Long term investment
Low to high risk appetite
Want life cover with investment
For tax saving plan
Go For Mutual funds.....
Want to invest for short or medium to long term
When risk capacity is medium yo high
When you want liquidity at high
When you have term plan with sufficient amount to protect family
Summary:
Either you buy online ULIP plan to save agent commission and many expense with complete information
Second you buy term plan covering 10-15 times your annual income say you are earning 5 lakh buy term plan worth 50-70 lakh and start investing in mutual fund which provide you investment opportunity in short span also.
Even if you plan for tax kindly invest in ELSS to claim tax credit.
Derivativelearn
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