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How to get an estimate of your ULIP policy

Nov 11, 2019 | 8 months ago | Read Time: 3 minutes | By iKnowledge Team

Investments can be beneficial for the long run; the returns that you gain from them can be used to achieve long or short-term goals. It is very important that you choose your investment option wisely, as some options can provide you with high returns in a short time but can be risky and affect your invested capital. To keep yourself and your investment secure, you can opt for ULIP funds.

ULIP fund is a combination of insurance and investment, thus, it is also called as a hybrid fund. The premium deposited by a policyholder in ULIP funds is divided into two parts. The small proportion of divided premium is kept as insurance premium, and the rest is invested in market linked funds. ULIP funds can be a great source of investment for people aiming for faster wealth accumulation. However, it is important for an individual to first understand how it works. Moreover, there are several other factors that come into play regarding the growth of the funds.

There are times in life when you face financial crisis and are forced to reconsider your financial options. In such conditions, people who have policies and other financial instruments, either liquidate them or take a loan, keeping them as collateral. To get the right amount of loan or right valuation for your policy, you need to know the surrender value. To determine the surrender value of a ULIP fund, you need to consider the following points.

  1. Mortality charge: The mortality fund or the cost of insurance is an amount deducted from your premiums. The amount is very minimal and is usually paid at the end of the policy as ‘Life Fund’. For instance, if you are paying an amount of INR 10000 as premium per annum, the mortality charge will be around INR 200. When you surrender a ULIP fund, the policy contract ends, and the policy provider or loan shark will give you the amount after the deduction of mortality charge from the number of premiums paid.
  2. Management charge: When opening a ULIP fund’s account, you can ask the policy provider about the management charge, as this is the second most important deduction from your deposited premium. The management charge usually falls around 0.5 to 2 percent of the premium paid. The management charges are deducted for the provision of a fund manager who makes sure your investment fetches good returns.
  3. Duration of the policy: The longer you pay the premiums, the valuation of your policy increases simultaneously. If you have paid the premiums for 10 years regularly, then the base amount of your policy would be the number of premiums deducted with the mortality and management charges. However, this would just be a rough estimate, as you might need the ratio of insurance versus investment.
  4. Ratio of investment: This is the final step in determining an approximate surrender value of a ULIP policy. The investment-to-insurance ratio determines the allocation of the premium amount for insurance and unit linked funds. This ratio also shows the amount of insurance the company keeps in reserve for you. Once you have the above mentioned factors and the investment-to-insurance ratio, you can use the above mentioned formula and subtract the final figure with the investment amount, and the remainder will give you the estimate for your ULIP surrender value.

Without these factors, there is no way to get the surrender value of a ULIP fund. Also, these details might not be mentioned in your policy documents. You would have to ask your insurance provider for the same. To know about Aegon Life’s life insurance products like term insurance and other products, visit our home page.


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