2. Today's Points For Discussion
• ULIP an overview
• Charges in ULIP Plans LIC and other Life Insurers-
Comparison
• ULIP vs Mutual Fund-Comparison
3. Financial Products
Insurance
Conventional ULIP
Conventional Plans: Financial protection against loss/damage to
life arising due to illness, accident and/or death.
Unit Linked Insurance Plan : ULIP is a product offered by
Insurance Companies that gives investors the benefit of both
insurance and investment under a single integrated plan.
3
4. Some Investment Goals
• Retirement Planning
• Children’s Education
• House Purchase
• Marriage of Children
• Any Other Important event one may wish to save for
4
5. ULIP-General Aspects
• Unit Linked Insurance Policy
• It is of recent Origin in Indian Insurance Market
• First of this kind issued by LIC of India
• Bima Plus was the first ULIP Policy issued by an Insurance Co
in India
• ULIP is a combination of term assurance and endowment
Policy with better returns
5
6. ULIP-General Aspects
• This Policy is designed as a Non Participating Policy
• Mix of Insurance along with Investment
• Provides wealth Creation along with Life Cover
• Performance of this Policy is linked to Capital Markets in
India
7. ULIP-General Aspects
• The risk premium depends upon the age of the individual
• Death Risk coverage is available
• Medical Insurance is available
• Riders can be annexed
• Good tool for personal financial planning
• This can be used to maximize wealth with risk coverage
8. How ULIP works ?
• A portion of investment goes towards providing Life
Insurance
• Rest goes in to investment in equity, debt or both
• Fund Managers manage the investments
• Policy Holder can switch his investment between debt &
equity based on his risk appetite
9. Lock in Period
• Earlier it was 3 years
• In 2010 IRDAI brought changes to increase it to 5 years
• Since ULIPs provide Insurance cover as well as Investment
benefit, the policy should be held for longer duration.
10. Uniqueness of ULIPs
• Life Cover
• Investment Benefit
• Income Tax benefit—Both under section 80 C and Section
10 (10 D) of Income Tax Act.
• In case of Annual Premium over Rs 2.5 lakhs then maturity
is taxable
• Finance Long Term Goals
• Flexibility of a portfolio switch
11. Glossaries in ULIP
1) Allocation
2) Charges
3) Fund Value
4) Net Asset Value (NAV)
5) Redemptions
6) Surrender
7) Switching
8) Top-Up Premium
9) Unit Account
12. Glossaries in ULIP-Types of Charges
2)The different types of Charges in ULIP are:
• A)Allocation charges
• B)Mortality charges
• C)Other charges
• D)Policy administration charges
• E)Fund Management Charges
13. Glossaries in ULIP-Types of Charges
• F)Switching charges
• G)Discontinuation charges
• These charges are cost to the policy holders. Some are
deducted from the premium and while others are adjusted
from the investment assets during calculation of NAV.
14. Glossaries in ULIP (Continued)
Example: Plan: 935; Premium: 20000/-; NAV: 10.0108; Fund: Growth Fund
Amount (Rs) Units
Premium 20000
(-) Allocation charges(7.5%) 1500
(-) GST @18% on Allocation charges 270
Gross units (Units = 18230 ÷ 10.0108 ) 18230 1821.033
Policy Administration charges 70
(-) GST @18% on Pol. Admin charges 12.6
Total Deduction 82.6 (-) 8.251
Net Units allotted (1821.033 – 8.251) 1812.782
Unit Fund 18147.4
Non-Unit Fund 1852.6
14
15. Fund Types in ULIPs
⮚BOND FUND
⮚ SECURED/ DEBT FUND
⮚ BALANCED FUND
⮚ GROWTH/RISK FUND
⮚ DISCONTINUED POLICY FUND
16. Investment Pattern vis-à-vis Fund Type
Fund
Type
Investment in
Govt / Govt
Guaranteed
securities/
Corporate
Debt
Short term
Debt
Investments,
MMI
including
Government
Securities
Investment
in Listed
Equity
Shares
Details and objectives of the
fund for risk/return
Bond
Fund
Not less
than 60%
Not more
than 40%
NIL Low Risk
Secured
Fund
Not less
than 45%
Not more
than 40%
Not less than
15% & Not more
than 55%
Steady Income - Low
to Medium Risk
Balanced
Fund
Not less
than 30%
Not more
than 40%
Not less than
30% & Not more
than 70%
Balanced Income and
Growth - Medium
Risk 16
17. Investment Pattern vis-à-vis Fund Type
Fund
Type
Investment in
Govt / Govt
Guaranteed
securities/
Corporate
Debt
Short term Debt
Investments,
MMI including
Government
Securities
Investment
in Listed
Equity
Shares
Details and
objectives of
the fund for
risk/return
Growth
Fund
Not less than
20%
Not more
than 40%
Not less than
40% & Not
more than 80%
Long term
Capital growth
– High Risk
Discontinu
ed Policy
Fund
60% to 100% 0% to 40%
17
18. Inflow & Outflow from Non-unit Fund
Inflow to Non-Unit Fund :
1) Allocation Charges.
2) Mortality Charges.
3) Policy administration Charges.
4) Switching Charges.
5) Surrender Charges.
6) Misc. Charges.
7) Fund Management Charges.
Outflows from Non-Unit Fund :
1) Policy Stamps.
2) Medical Fees.
3) Commission Payment.
4) Death Claim Payments.
5) Guaranteed Liability
Payments.
6) Refund of Recoveries.
18
26. Charges for New Endowment Plus
Charges Base & Method Frequency %
Premium Allocation Charge Adjusted from premium 1 Year
2-5 Year
Thereafter
7.5
5.0
3.0
Policy administration charge X=(Installment
premium*Factor K)
Yly=1;Hly=1.6;Qly=2.6
and Mthly=7
Adjusted by diluting
units
1st Year
2nd year
3rd year
4th year
5th year
6th year
7th year onwards
0.35*X or Rs. 100 whichever is
less
0.25*X or Rs. 70 whichever is
less
2nd year charge*1.03
3rd year charge*1.03
4th year charge*1.03
Rs.52.17
52.17escalating by 3% every
year
Fund Management Charges % of Unit Fund Daily 0.70
26
27. Charges
Charges Base & Method Frequency Amount
Switching Charge Adjusted by
diluting units
Every switch in
excess of 4
Rs.100
Misc. Charge Adjusted by
diluting units
As and when there
is mode change
Rs.50
Partial
Withdrawal
Charge
Adjusted by
diluting units
As and when there
is partial
withdrawal
Rs.100
27
28. Charges (Insurance)
Base & Method Frequency Amount
Mortality Charge Adjusted by
diluting units
Every month Arrived based on Sum at Risk which
is difference of the SA & Fund value
as on the date of deduction & will be
deducted if the difference is
positive.
Accident Benefit
Charge
Adjusted by
diluting units
Every month Arrived based on policyholder
requirement but not exceeding S.A
or maximum 1Cr. Taking all policies
of the policyholder into
consideration.
GST To be levied from
time to time on all
charges
18% of all charges.
28
29. USPs of LIC’s New Endowment Plus
• Offers the dual benefits of investment and insurance
in a single package
• Very flexible and transparent structure
• Available from lives aged 90 days
• Minimum ticket size available in the market which
helps in SIP kind of smaller monthly investments
• Switching option gives the opportunity to adjust
investment as per requirement
• Can withdraw the portion of investment in
emergencies
29
30. USPs of LIC’s New Endowment Plus
• Four investment funds available
• Charges are comparatively lower
• Least FMC in the market. FMC has greater
effect on Fund Growth.
• Tax Benefit available
• Better Tax benefit after application of LTCG on
mutual fund investments
31. New Endowment Plus(Cont.)
• CEIS REBATE –THERE WILL BE NO PREMIUM ALLOCATION
CHARGE.
• HENCE ONLY FMC CHARGE OF 0.7% WHICH WILL BE
SUBSTANTIALLY LESS THAN 2.25-2.75 % CHARGED BY MF.
• SO EXPENSES WILL BE LESS IN ULIP FOR STAFF
• Commission – 1st year -7 % including bonus
2nd & 3rd year – 3.5 %
4th Year – 2.5 %
31
33. Key Features
• Available for sale - Offline as well as Online
• Minimum Premium – Rs 1,00,000
• Maximum Premium – No Limit
• Guaranteed Addition as % of Single Premium added to the Unit
Fund on completion of specific duration :
End of Policy Year Guaranteed Additions
6 3%
10 4%
15 5%
20 6%
25 7%
34. Benefits
Death Benefit :
Higher of :
•Basic Sum Assured; or
•Policyholder’s Unit Fund Value Where Basic
Sum Assured (BSA) :
•Option 1 = 1.25 times of Single Premium
•Option 2 = 10 times of Single Premium
35. Benefits
•Maturity Benefit :
⮚Policyholder’s Unit Fund Value
•Options :
•LIC’s Linked Accidental Death Benefit Rider
•Switching of fund ( 4 free switches in a Policy Year)
•Partial Withdrawal Option from 6th year
•Option to receive Death benefits in installments
36. Partial Withdrawal
Year of Withdrawal Maximum withdrawal as % of Unit
Fund
6th to 10th year 15%
11th to 15th year 20%
16th to 20th year 25%
21st to 25th year 30%
Provided Minimum Balance in the Fund
should be equal to Single Premium Paid.
37. Eligibility
Option 1 Option 2
Basic Sum Assured 1.25 times SP 10 times SP
Minimum Age at Entry 90 days 90 days
Maximum Age at Entry 70 years 35 years
Policy Term 10 to 25 years Varies as per age at entry:
Age at entry Term
up to 25 years 10 to 25 years
26 to 30 years 10 to 20 years
31 to 35 years 10 years
Minimum Maturity Age 18 years 18 years
Maximum Maturity Age 85 years 50 years
38. Charging Structure
⮚ No Policy Administration Charges
• Offline Sale- 3.30% of Prem.
• Online Sale – 1.50% of Prem.
Premium Allocation
Charge
• Levied till Policyholders Fund Value is less than Basic Sum
Assured
Mortality Charge
• 1.35 % p.a. of Unit Fund for all fund Types under Inforce Policy
• 0.50% p.a. of Unit Fund for Discontinued Policy Fund
Fund Management
Charge
39. LIC’s SIIP (Plan No. 852) –
Unit Linked ,Individual Life Insurance
Plan
40. Key Features
• Available for sale - Offline as well as Online
• Minimum Premium: Yly. – Rs 40,000, Hly. – Rs 22,000, Qly. – Rs
12,000, Mthly. – Rs 4,000
• Maximum Premium – No Limit
• Under an Inforce policy, Guaranteed Additions as % of Annualized
Premium added to the Unit Fund on completion of specific duration :
End of Policy Year Guaranteed Additions
6 5%
10 10%
15 15%
20 20%
25 25%
41. Benefits
Death Benefit :
Highest of :
•Basic Sum Assured; or
•Policyholder’s Unit Fund Value; or
•105% of Total Premium received Basic Sum Assured
(BSA) :
•Age at entry < 55 years = 10 times of Annualised
Premium
•Age at entry >=55 years = 7 times of Annualised
Premium
42. Benefits
•Maturity Benefit :
⮚Policyholder’s Unit Fund Value + Refund of total Mortality
Charges
⮚Options :
•LIC’s Linked Accidental Death Benefit Rider
•Switching of fund ( 4 free switches in a Policy Year)
•Partial Withdrawal Option from 6th year
•Option to receive Death benefits in installments
43. Partial Withdrawal
Year of Withdrawal Maximum Withdrawal as a % of Unit
Fund
6th to 10th year 20%
11th to 15th year 25%
16th to 20th year 30%
21st to 25th year 35%
Minimum Balance in the Fund should be
equal to 3 annualised premium.
44. Charging Structure
⮚ No Policy Administration Charges
Premium Allocation
Charge
• Levied till Unit Fund Value is less
than Risk Cover
• Refund of total mortality charges
on maturity
Mortality Charge
• 1.35 % p.a. of Unit Fund for all fund
Types under Inforce Policy
• 0.50% p.a. of Unit Fund for
Discontinued Policy Fund
Fund Management
Charge
Year Offline Sale Online Sale
1st Year 8.00% 3.00%
2nd to 5th Year 5.50% 2.00%
Thereafter 3.00% 1.00%
45. Commission Structure
Policy Year Premium Band ( Rs)
40,000 to 74,000
Premium Band ( Rs)
>= 75,000
1st Year
2.50 % 4.00%
2nd & 3rd Year
3.50% 4.50%
Thereafter ( except last year)
4.50% 4.50%
Last Year
4.50% 7.00%
48. Comparative Mortality Charges
Age Mortality Premium per 1000 Sum Assured
LIC SIIP & Nivesh
Plus
SBI(Smart Wealth
Builder)
HDFC Capital
Shield
20 1.11 1.08 1.15
30 1.32 1.28 1.37
40 2.25 2.26 2.34
50 6.18 6.26 6.43
60 14.42 14.38 14.99
70 32.32 32.41 33.61
49. CHARGES IN ULIP PLANS (continued)
LIC PRIVATE
PREMIUM
ALLOCATION
CHARGE
• Premium Allocation Charges which ranges from
7.5 %( 1st yr),
5 % (2nd yr to 4th yr) and
3 %( from year 5onwards)
For SIIP @8%,5.5%&3% and Nivesh @3.3%
Commission –1st year -7 % including bonus 2 & 3year
– 3.5 % 4 th Year – 2.5%
(COMMISSION TO AGENTS IS PAID OUT OF
PREMIUM ALLOCATION CHARGES )
FOR ALL LIC EMPLOYEES THIS EXPENSE IS
ZERO. HENCE FOR THEM ULIP EXPENSES
BECOME LESS AS COMPARED TO MF (SINCE
FMC CHARGES OF MF IS 2.25-2.75 % AS
COMPARED TO 0.7 %to1.35% BY LIC).
It varies from each
company to company. No
definite trend.
Overall out of all ulip
expenses this charge
constitutes highest
expenses.
IRDA allows maximum
charges upto12.5%
49
50. Comparative Premium Allocation Charges
PREMIUM ALLOCATION CHARGES
PREMIUM YEAR LIC’S SIIP SBI(Smart Wealth
Builder)
HDFC (Capital
Shield)
1st YEAR 8.00% 9.00% 9.00%
2ND YEAR 5.50% 6.50% 7.00%
3rd YEAR 5.50% 6.50% 7.00%
4TH YEAR 5.50% 6.00% 6.00%
5TH YEAR 5.50% 6.00% 6.00%
THEREAFTER 3.00% 3.50% TO 3.00% N.A
51. CHARGES IN ULIP PLANS
LIC PRIVATE
Policy administration
charge
IT VARIES FROM RS 52.17 TO
RS 100 PER MONTH
DEPENDING UPON TERM.
For SIIP PLUS &Nivesh plus-NIL
It varies from each
company to company.
No definite trend
BUT FEW ARE
CHARGING EVEN RS
500 PER MONTH
GST AT 18 % AT ALL CHARGES AT 18 % AT ALL CHARGES
51
52. Comparative Policy Administration Charges
Policy Administration Charges
PREMIUM YEAR LIC’S SIIP SBI(SMART
WEALTH)
HDFC(CAPITAL
SHIELD)
1ST TO 5TH YEAR NIL NIL NIL
THEREAFTER NIL Rs 60.00 per
month
0.39% of Annualised
premium inflating
@5%subject to max.
charge of Rs 500.00
55. In ULIPs the Policyholder gets an insurance cover from minimum 10
times the Annual premium to a maximum amount determined by
the company. This is one of the key points of differentiation
between ULIPs and Mutual Funds.
55
56. However the same
cannot be purchased
with Mutual Funds
ADD-ON
COVERS - In
ULIPs, there
are additional
benefits like
Critical Illness
cover and
Accidental
Benefits can be
purchased
along with
ULIPs
56
57. Tax Benefit on Premiums paid - There are no Tax Benefits
under the regular Mutual Funds. Only ELSS (Equity linked
Savings Scheme) provides tax benefit under section 80C.
Whereas all ULIPs provide tax benefit under section 80C
57
58. Tax exemption on Maturity - Maturity Benefit of ULIP is also tax
free under section 10(10)D provided the investment is kept for a
period of 5 years and Sum Assured is minimum 10 times the annual
premium in all those years. The maturity benefit is never tax free
for Mutual Funds. It always becomes taxable in the hands of the
investor
58
59. Great Tax Benefits
Whether equity or debt, from a long term point of view, ULIPs
offer great tax benefits
• 80C benefits on premiums paid
• Tax-free returns on maturity
Maturity proceeds of policies with annual premium over Rs
2.5 lakh will be taxable.
Death claim non taxable.
59
60. Great Tax Benefits
• Tax benefits across asset classes - whether you
invest in equity, debt or balanced funds
• No tax on switching between different funds within
the ULIP,
• Ideal for long-term investment because of the in-
built lock-in
61. Capital Gains Tax
ULIPs
• No Capital Gain Taxes(Provided annual premium <Rs 2.5
lakh)
Mutual Fund: Equity Fund and Equity Oriented Fund
• Long Term Capital Gain if holding > 12 Months:- 10% After
deducting Rs 1,00,000 gain
• Short Term Capital Gain:- 15% tax, no matter which tax
bracket You belong
• Dividend is taxable at tax slab rate
62. Capital Gains Tax(Continued)
Mutual Fund: Debt Fund
• Long Term Capital Gain if holding > 36 Months:- Tax is 20%
with Indexation benefit
• Short Term Capital Gain:- Taxable at Slab rate
• Income Distribution is taxable at slab rate
63. Loyalty Additions - In some ULIPs,
there are Loyalty Units additions. It
means the insurance company pays
the policyholder some additional units
for continuing to pay the premiums
for a long time.
However, there is no
such facility that is
available with Mutual
Funds
63
64. ULIP: Alternating
between funds is
permitted and not
subject to taxation
Switching is permitted between
schemes of the same MF house.
But treated as a redemption and
the resulting capital gains are
taxable
64
65. Key Difference between traditional Life Insurance Plans, ULIP
and Mutual Funds…
Parameters Unit Linked Insurance Plan (Equity ULIP)
Diversified Equity Mutual
Fund (MF)
ELSS
Purpose Insurance cover + Investment Benefits Investment Benefits
Investment
Benefits
Return on
Investment
Variable as it is linked to Equity( 40%-80 %
IN EQUITY) HENCE yield can be compared
with their balanced funds
Variable as it is linked to
Equity(MOSTLY 100 % IN
EQUITY)
Variable as it
is linked to
Equity
Regulatory Body IRDA SEBI SEBI
When to Consider
Protection Against Mishaps + Better than
nominal returns in Long Term
High Returns in Long Term
High Returns
in Long Term
How money
(Premium) gets
Utilized
Premium = Expense + Towards Insurance
Cover + Towards Equity ,
Debt and Money Mkt instruments
Money = Expense +
Towards stocks
Money =
Expense +
Towards
stocks
Key Difference between, ULIP and Mutual Funds
65
66. Key Difference between, ULIP and Mutual Funds
Parameters
Unit Linked Insurance Plan
(Equity ULIP)
Diversified Equity Mutual
Fund (MF)
ELSS (Equity Linked Saving
Scheme)
Tax Benefit Yes U/s 80C & 10(10)D Nil
ELSS U/s 80C) but
switching not allowed in
ELSS
Investment
Portfolio
Transparent
Declared on Monthly basis
Declared on Quarterly
Basis . So Portfolio
Tracking is Possible
Declared on Quarterly
Basis So Portfolio
Tracking is Possible
Lock-in Period Yes (min 5 years) No
Yes (min 3 years)If one
opts for SIPs then
proportionate increase
in 3 yrs reckoning from
SIP date
66
67. Key Difference between, ULIP and Mutual Funds
Parameters
Unit Linked Insurance Plan
(Equity ULIP)
Diversified Equity Mutual
Fund (MF)
ELSS
Which is Better (in terms of
safety)
Investment risk is borne by
Investor
Investment risk is borne by
Investor
Investment risk is borne by
Investor
Which is Better (as a
Insurance Plan)
BEST (as it combines benefits
of insurance, tax savings and
investment)
Not Suitable
Not Suitable
Which is Better (as a
Investment Plan)
Best since returns over 5 yrs
in equity is less volatile with
higher element of consistency
More likely to be volatile in
nature over 2-3 yrs Your risk appetite
SIP Yes Yes
Yes
67
68. ULIPs Vs Mutual Fund - Fund Philosophy
ULIPS Mutual Funds
Investments horizons are long term Investment horizons are short term
During bear rally stocks can be
cherry picked
During Bear rally stocks cannot be
picked on account of redemption
pressure
Stable returns
No redemption pressure on account
of lock in of funds
Volatile returns
Redemption pressure when stock
markets are down
Value investing with long term
investment strategy
Short term focus on returns
69. ULIPs Vs Mutual Fund - Fund Philosophy
Limited number of fund options will
ensure bigger corpus in long term
• Numerous fund options on account of
IPO strategy
will result in smaller corpus
Long term investment vehicle with a
potential to generate long term return
with option of withdrawals for
emergencies and periodical cash flow
needs.
Short period investment vehicle with low
potential to generate long term returns
because of high Cost of Rebalancing
the portfolio.
Investment manager is not constrained
by large withdrawals since there are no
corporate investors.
Fund managers runs the risk of huge
withdrawals & his fund management
strategies are short term.
70. ULIP Vs Mutual Fund Charges
ULIPs
• Maximum FMC allowed under ULIPs 1.35% pa.
• Maximum RIY limit under ULIPs for 15 years
term at maturity is 2.25%. Insurance
companies are allowed to charge maximum
2.25% for all of its expenses.
• Explicit Mortality charges are to provide the
death benefit cover
Mutual Fund
• Majority of expenses pertains to Fund
Management which is almost double as
compared to ULIPs (with an assumption of
2.25%-2.75 % expense)
• Under ELSS: Majority of expenses pertains
to Fund Management which is quite high
as compared to ULIPs
Kya Mutual Fund Sahi Hai? 70
71. The plans available today are competitively priced. Restricted
overall charges in ULIP (Reduction in yield for term above
10 years shall not be more than 2.25% and less than or
equal to 10 years shall not be more than 3 %)
Due to advantage of long-term investment in ULIP, compound
interest will play decisive role in ULIP and help score over mutual
fund and significant corpus will be created for younger people.
Studies have clearly shown BSE100 offers maximum probability of
beating risk free rate of return of 8% over 7-10 years for which
ULIPs could be the best vehicle in that time horizon of 7-10 years.
71
72. Opportunities For Selling ULIPs
Average yearly inflow per SIP
❖In 2017 -2018 = Rs 36,000/=
❖In 2018 -2019 = Rs 38,400/=
❖In 2019-2020 = Rs 33,200/=
❖In 2020-21 = Rs 25,828/=
Inflow from T30 / B30 cities
T30 B30
Equities 32% 68%
Non equities 61% 39%
Source--amfiindia.com(May 2021 data)
73. Points to ponder
• How many agents, who earlier sold ULIPs, are still in our
books?
• Were they educated in selling of ULIPs?
• Was there any wrong selling?
• What type of Agents can be trained to sell ULIP?
73
74. Better Commission Earnings in ULIP
Average Performer Non linked regular
premium policy
ULIP NSP-
SIIP
ULIP SP-NIVESH PLUS
Rate of
Commission
35% 4% 2%
Average Premium
per policy(Rs)
13,000 (Yearly) 10,000(Monthly) 3,00,000
Absolute FY
Commission(Rs)
4550 4800 6000
Average Policy Per
Agent per annum
17 25 25
Average Annual
Commission (Rs)
77,350 1,20,000 1,50,000
75. In a nutshell
• Younger generation requires equity investment as well as life cover
• LICI ULIP product is not only better from other ULIPs but also it is
better than Mutual fund
• Train your distribution channel to understand the product and sell it
to the target customer
• Customers must have basic knowledge of financial market
• Justify our ULIP product with better performance 75
77. Outstanding ULIP Maturity as on
16.6.2021-
No-3,19,218
Amount-Rs 33,46,21,48,885.00
ULIP Maturity from 1.7.2021 to
31.3.2022(Projected)
No-1,01,698
Amount-Rs 1322,46,97,570.28 Source-CADW
