The Hindu Business Line : Max Life Maker

ULIPs can be described as unbundled products that allow investors to distinguish between risk cover and investments. The expense level for ULIPs usually tends to be quite high for the first few years, compared to mutual funds, reducing the deployment of premium for investment purposes.

Insurance products are meant for long-term investment and recent guidelines for ULIPs from the Insurance Regulatory and Development Agency have imparted greater transparency to these products.

Max New York Life Insurance has launched a new ULIP product — Max Life Maker Premium Investment Plan.

A look at its salient features: Death: The life-insurance risk cover provides either the sum assured or the fund value (based on the prevailing NAV), whichever is higher.

Disability: The Personal Accident Benefit rider, which is an additional option, provides a lumpsum equal to the sum assured, if the policyholder diesor suffers total and permanent disability after an accident.

Disease: Dread Disease rider, also an option, provides a lump-sum if the policyholder is diagnosed with any of the 10 dreaded diseases covered by the policy or on his/her undergoing the surgery covered. There is a cap on this rider; the sum assured cannot exceed the sum assured of the base plan.

Maturity benefit: On maturity, the policyholder will receive the fund value or value of units based on the prevailing NAV. If the policyholder does not want to opt for maturity, due to adverse market conditions, he can choose to defer the exit by up to five years, by opting for the settlement option.

Loyalty: Max New York will allocate loyalty units (free) to the policyholder on the ninth policy anniversary and on every third anniversary thereafter. These units will be equal to 0.75 per cent of the fund value in the immediately preceding 36-month anniversary of the account.

Partial withdrawal: Withdrawal is allowed to the extent of 20 per cent of your fund value as on previous policy anniversary, once the policy completes three years. Surrenders: Full surrenders are possible only after the completion of three years.

Flexibility to choose the insurance cover: Depending on one's requirements, one can choose the sum assured. Since the risk cover and investments are both part of the premium paid, they will not change whether the sum assured is high or low.

Premium payment term: The policyholder has the flexibility to choose the premium payment term. He can opt for regular premias till maturity or choose to limit premia payments to five, 10 or 15 years. The policy term can be chosen from 10 years to 30 years, subject to a maximum age of 75.

Flexible investment: A key advantage with ULIPs is that one can choose from plans with varying risk profiles based on one's risk appetite. Investors can choose from five options — Secure, Conservative, Balanced, Growth and Super Growth.

Switch and redirection: Under this plan, the insurance company allows six free switches between plans, every year. Redirection of premium is possible during the renewal.

Comment: In practice, insurance companies say that a very small number of policyholders use the switch option. But switches and redirection can offer big advantages for investors looking to maximising returns and protecting their portfolio value.

In eventful years for equity or debt markets, policyholders can use the switch option to retain gains by booking profit, or reduce risk by transferring money to the debt option. Redirection will come in handy at the time of paying renewal premium as investors can change their selection between the five investment plans based on the market conditions.

(This column is intended to acquaint investors with features of new insurance products and is not a recommendation to invest. Investors are advised to compare each product with similar ones already available before making a decision.)

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