How to Maximize your Returns by Investing in UTI ULIP?

ULIP is regarded as an investment instrument which provides combined services of protection and saving. An added benefit of ULIP over other investment tools is that it also provides cover for life risks. A ULIP is a two-way sword which protects you from the unexpected events in life as well as works as an investment option in the long-term. Being a provider of such services for 45 years, UTI Unit-Linked Insurance Plan is a great means of investment for all the investors looking for long-term capital gains. Moreover, UTI ULIP is considered as one of the cheapest investing instruments.

Insurance Component

UTI ULIP has got both the components of insurance and investment. The maturity of such plans can be chosen between a 10-year and a 15-year plan. However, unlike other ULIP plans, UTI ULIP is structured in a different way. Here are some important terms with which you can get started:

After selecting policy term, you have to select a Target Amount. This is the amount you would be paying during the entire duration of such a policy (as premium). Additionally, there is a personal accident cover up to Rs. 50,000 provided by UTI – which is regardless of the target amount. It simply means, for a 10-year term policy of ULIP, if your target amount is Rs. 15 lakh – the yearly premium would come down to 1.5 lakh.

The Target Amount is the cover provided for risks against life. UTI ULIP has two types of insurance covers:

• Fixed Insurance – Fixed Insurance is similar to all the ULIP plans out there. Under this, the target amount in the insurance premium and upon your death, that amount would be given back to you. There are different conditions for 6 months and one year. Under this, if there is a death within the 6 months of buying the policy you would be getting no insurance cover. Whereas, if the death occurs after 6 months and before completion of one year – you are eligible for receiving only half of the whole insurance premium.
• Declining Term – Declining term is a type of insurance taken for covering the payments against mortgages. Under this, as the duration of policy passes, the outstanding amount keeps decreasing. Hence, the yearly requirement of insurance reduces and you are required to pay a lesser amount.

Whether it’s a debt or equity investment, investors can build their long-term wealth with an added flexibility of being able to withdraw the investment as per their preference.

Investment Component

UTI ULIP is an investment of debt-oriented scheme, which means there is a 40:60 ratio between equity and debt. Under this, there is a maturity bonus clause. According to it, in a 10-year ULIP plan, you are eligible for a maturity bonus of 5% of the targeted amount. Whereas, in a 15-year plan you are eligible for such a bonus of 7.5% of the targeted amount.

• UTI ULIP offers tax benefit under Section 80C of the Income Tax Act.
• The debt to equity ratio is lower which ultimately leads to better returns.
• Along with investment protection, there is life insurance protection as well.
• The allocation to equity lets you generate market linked returns, while allocation to debt allows you to stabilize your portfolio
• You also get a life insurance cover up to a maximum of 15 lakh and a personal accident cover of Rs. 50,
• You can pay a premium even if the contribution is non received
• No requirement of going through medical examinations for insurance cover
• The flexibility of withdrawing money at a lower cost
• Option to terminate immediately.

The payable premium towards the policy, the cycle, modes to pay premium have undergone some changes to bring simplicity and effectiveness in the procedures. The main changes were in terms of the premium rates for different age limits. They have reduced from 30% to 50% according to the age of the investor.

• The premiums paid towards both the plans – Fixed Term and Declining Term would be the same.
• The instructed cycle for paying premiums would now be from 1^st October to 30^th The yearly rate for the subsequent year would be devised by LIC.
• The investor has to submit claims within one year of the death. However, if not, it should not be submitted any later than five years.

Plans Available	Existing and Direct Plans Both plans with 10-year and 15-year term options Declining Term or Fixed Term
Eligibility of Investors	Both Indian residents and non-residents are eligible. Can be bought in the name of spouse or child. For 10-year plan – investor must be between 12 and 55 and half years. For 15-year plan – investor must be between 12 and 50 and half years.
Personal Accident Cover	Can be availed up to Rs. 50000 regardless of the target amount and the investing options.
Load Structure	On Entry – Nil On Exit – 2% on premature withdrawal, nil if withdrawn on maturity.
Other Products	Micro Systematic Investment Plan (SIP) – Monthly and Quarterly Systematic Transfer Investment Plan – Can be bought anytime Systematic Withdrawal Plan – available after the policy gets matured.

Period	Returns in %	Rank
1 month	-3.4	2
3 months	-5.6	2
6 months	-3.51	2
1 year	1.3	2
2 years	5.7	3
3 years	6.9	2
5 years	10.2	2

A returns calculator can help you estimate how much your net returns would be and the worth of investment. With it, you are also able to calculate the number of premiums you would have to pay for such a policy. To calculate it you have to insert the name of ULIP in which you want to invest. After that, you need to select the duration for which you want to invest. You have to enter a realistic amount of paying premiums. You can choose the frequency among quarterly, monthly, or annual installments.

Applicable Charges

• Premium Allocation – This is subtracted from the upfront premium as a percentage before you are allocated the units. It is levied to cover the policy to issue expense, and the remaining amount is used to buy units.
• Policy Administration Charge – Such charges are subtracted by the company towards maintaining a policy. It is charged on a monthly basis and includes paperwork, informing about premium. It can go on through the entire course and can increase at a pre-defined rate.
• Fund Management Charge – A percentage is deducted towards maintaining the fund and is subtracted before arrival at the UTI ULIP NAV. It cannot be charged at more than 1.35% per year. Debt funds have a lower fee compared to the equity funds.
• Mortality Charges – Charged as to compensate the insurance company in case the insured is not alive up to a certain age.
• Surrender Charges – It is charged in case of partial or full premature withdrawal of units.

Q1. Is it compulsory to add a nominee?

It’s not compulsory but adding one gives you the benefits of claiming the investment by them in any unexpected events.

Q2. Are there any different rules for residents and non-residents?

The rules are the same for both residents and NRIs. You can nominate another resident or NRI.

Q3. If I have redeemed a part of the investment, how would it be distributed to the nominees?

If you have withdrawn your units partially or transferred to another, the remaining units would be allocated to the nominees.

Q4. If I have changed the names of nominees, who is eligible for claiming them?

The nominee whom you have added most recently would override all others and is eligible to get the claim benefit.