It is an online tool which an intending customer can use to understand the expected maturity benefit before choosing a fund in ULIP. For this, they just need to enter their personal details, premium amount, the policy period, payment frequency and choose a fund.
What is Fund Value in ULIP and How to Calculate it?
What Is Fund Value in ULIP?
In a ULIP, your insurance company divides your premium amount between a market-based fund and the health insurance component. This fund can be a bucket of several investment instruments like company stocks, government securities, bonds, etc.
The fund value of ULIP refers to the aggregate existing market price of all the units of different investment instruments held on your policy portfolio. As the unit market value of stocks and bonds changes more or less every day, the fund’s market value also reflects the same.
How to Calculate Fund Value in ULIP?
The fund portfolio in ULIP shows how many units of the fund you hold. As you keep on paying your premium on a regular basis, you get more units of the fund.
To calculate the ULIP fund value on a given day, you need to multiply your fund's Net Asset Value (NAV) by units of the fund you hold. This NAV is the price of one unit of a fund.
Fund Value in ULIP = NAV x Number of Units Held by Individuals
Let's assume that on a given date, the number of fund units held by you is 450, and its NAV is ₹4000. Then, the fund value of ULIP held by you would be ₹4000 x 450 = ₹1,800,000.
How Can I Check ULIP Fund Value?
It is necessary to keep track of the movement of the fund value of ULIP from time to time. It can help you understand whether your fund value grows as per expectation. If your stock-based fund performs poorly, you can change it to a bond-based fund or vice versa.
Most insurance companies let their customers check their fund's performance from their dedicated websites or mobile applications. Else you can also contact the nearby physical office of your insurance company to know the current fund value of your ULIP.
Why Is Fund Value in ULIP Important?
Here are two major reasons why the ULIP fund value is important:
- Post-Retirement Financial Support: The fund value is the amount you will get after the end of your maturity period. So by choosing a policy term up to your retirement age, you can ensure it is easy to sail through when your income stops.
- Emergency Fund: Unlike other term insurance policies, you can withdraw up to a certain percentage of your present fund value of ULIP after the lock-in period. After this period, you can also surrender your ULIP and get accumulated fund value by paying a charge. This facility of ULIP lets you meet financial requirements during an emergency.
Why Should You Check the Fund Value in ULIP When Investing?
While investing in ULIP, you should ideally compare the values of different funds where your insurance company will keep a portion of your premium. It will help you choose a fund having a strong record of returns.
As a result, you can also understand whether the fund will perform well and what its projected growth rate would be like.
However, besides this fund value, you also should consider your risk capacity while selecting a fund for the ULIP. The funds that grow with a higher Compounded Annual Growth Rate (CAGR) may have a majority of stocks from small/mid-cap companies, but they are highly volatile. You can choose a fund that invests majorly in stable earning instruments like bonds and securities if you are a risk-averse person.
The fund value of ULIP is thus the aggregate market price of the fund at any point in time. It keeps on increasing as you pay your premiums over the years. Furthermore, the fund also accrues returns on investment over time.
You also need to track the growth of the value of your fund in order to ensure that it does not incur loss due to adverse market conditions. If it does, you can change the type of your fund to safeguard your earnings.
FAQs about Fund Value in ULIP
After the ULIP matures, you can raise your claim to your fund value from your insurance company. To get the amount, you will have to intimate your insurer, apply for the claim and submit all the necessary documents.
To calculate the returns, you will have to first subtract your initial NAV from your present NAV. Then, you will have to divide the result with your initial NAV. Following this, you need to multiply the results obtained after division with 100 to get the percentage of your returns. So, Returns = [(Present NAV - Initial NAV)/Initial NAV] x 100.
Sum assured value is the minimum guaranteed death benefit of a policy. On the other hand, fund value is the total value of the number of units held by policyholders at a given point in time. Fund value refers to the multiplication of number units with the net asset value of a unit at a given time.
Important Guides Related to ULIP Plans
- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.