Unit Linked Insurance Plans or ULIPs have always been the first preference of retail investors with low risk appetite. While all investment instruments have some pros and cons, ULIPs are considered among the best in terms of costs, returns, safety, transparency, flexibility and taxability of income. Post 2010, ULIPs got improved over the years. Now, ULIPs are offered by almost all insurance providers in India.
Edelweiss Tokio Life Insurance has recently launched their latest ULIP product – Wealth Ultima. It is a type-1 ULIP product. Let us first discuss the difference between Type-1 and type-2 ULIP products. The main difference lies in the maturity benefits offered by the plans. Under type-1 ULIPs, the policyholder receives either the fund value or the maturity sum assured (whichever is higher). On the other hand, under Type-2 ULIPs, the policyholder receives both the fund value and the sum assured.
Now, let’s have a look at the various features and benefits offered under Edelweiss tokio Wealth Ultima Plan.
- The best feature of Wealth Ultima plan is that it helps you grow your hard-earned money with the power of three – SMP (systematic Money Plan), STP (Systematic Transfer Plan) and SWP (Systematic withdrawal Plan).
- If you Opt for the Little Champ Option, the plan will help you take care of your child’s financial needs for future. Under this, you (parent) will be the policyholder and your child will be the insured. The plan also has the waiver of premium option. In case you die during the policy tenure, your insurer will invest on your behalf and all your future premiums will be waived off.
- You can choose from five fund options, three of which are equities.
- At the time of the maturity, your child will receive the higher of the fund value or the sum assured.
- The plan offers two investment options. The investors can choose one depending on his or her risk appetite. The two options include systematic Transfer Plan and Self-managed Strategy.
- Self-managed strategy is ideal for those who are aware of the intricacies of market timing. Successful market timing requires patience and a lot of time. However, if you are not confident about asset allocation on your own, it is advisable to go for Systematic Transfer Plan. Under this option, you can choose from two options – 1. Life Stage and Duration based STP and 2. Profile target Based STP.
- At the time of maturity, you will receive three additional bonuses to enhance your fund value- loyalty additions, Guaranteed Additions and booster additions.
- Loyalty additions encourage an investor to stay invested till the end of the policy term. In other words, this bonus is paid as a form of reward for paying your premiums regularly till the end of the policy tenure.
- Guaranteed Additions are also paid as a form of reward for staying invested till the end.
- Booster additions ensure effective growth for your fund value.
Let’s now briefly discuss the several benefits offered by the plan. The maturity benefits are offered in both lump sum and instalments. There are two types of death benefits available – one in which the highest of the fund value or the sum assured or 105% of total premiums paid is offered as the death benefit. In the other, the highest of the top-up fund value or top-up sum assured and 105% of total premiums paid are offered as the death benefit. Moreover, one of the most important benefits of investing in ULIPs is that it offers income Tax exemption up to Rs. 150000/-
How Does Edelweiss tokio Wealth Ultima Plan Work?
The structure of this new ULIP is very comprehensible. The premiums you pay get invested in the funds of your choice, after a certain amount of deduction of charges. There are some one-time charges while some charges are deducted every year. For example, the charge for premium allocation is deducted from the premium every year. However, the percentage of deduction keeps changing. For example, in the first year, it is 6%, from the second year till the fifth year, it is 4 %, and thereafter no charges are deducted till the end. Other charges include the fund management charge, which is 1.35% and mortality charge that depends on factors such as your age at the time of entry etc. For the first five years, the policy administration charge is 1.65% of the annual premium.
Let’s take an example to make it sound clearer. Say you are a 35 years old and you have bought a ULIP plan for a life cover of 20 years. So, for twenty years, the amount of premium you will have to pay will be Rs.43.50 lakh and you will get a return of at least 6.93% on your invested asset.
Should You Buy It or Not
The structure of this plan includes investment strategies such as systematic Money Plan, Systematic Transfer and Systematic Withdrawals, which are ideal for customers who are confident enough to invest on their own without the help of a financial advisor. However, if you want a high level of flexibility, ULIPs are not ideal for you. But, this product is one of the most cost-effective ULIP as the loyalty additions help reduce the overall cost or charge of the plans. However, one thing you should keep in mind that is, ULIPs are front-loaded bundled products, so portability will be a challenge. Understanding the plan thoroughly before understanding is also very important. Though ULIPs are quite transparent in structure, but going through the fine prints of the plan carefully is required to decide whether you should buy this plan or not.
Please leave us a comment in case you have any query related to Edelweiss Tokio Wealth Ultima plan, we will be pleased to help you out.
You may also like to read: Are ULIPs the Best Tax-saving Investment Options?