Don’t you think Best investment & ULIPs are kind of oxymoron! I am sure you might have heard about several horror stories about investors being cheated by agents through ULIPs, and at the end of locking period the returns not even equal to the total investments made. But thankfully things have changed and this time for better. IRDA, the insurance regulator in India had modified certain rules which essentially meant cutting expenses of ULIPs. And adhering to this ICICI Prudential Ace is a new launch from ICICI Prudential stable.
Features:
Type I Ulip - Death benefit is higher of sum assured or fund value
Minimum premium - Rs 18,000 p.a.
Term - 10 to 30 years
7 Fund Options, Four are equity-based
No premium allocation charge in any year
Rs 60 of policy administration charge each month
Fund Management Charges on equity funds of 1.35 per cent of fund value
What makes this plan the best?
The major problem of all the ULIPs launched till date is their expenses. There were plans when 80% of your first premium was charged as Premium Allocation Charge. And this was used to reward the agent handsomely and which in turn promoted more misinformation and miss selling.
What makes Ace different is that it has no Policy allocation charge, a big relief for investors. This in turn controls majority portion of expenses.
The other beneficial features of the plan are:
Loyalty Additions: At the end of every five policy years, starting from the 10th policy year, on payment of all premiums
Additional allocation of units: More than 100% allocation to funds on premium payment from the sixth policy year to the end of the policy term
Benefit Illustration:
Age: 28 years
Sum Assured: Rs 500,000
Premium Payment Term: Rs 10 years
Amount of Premium: Rs 100,000 / year
For Gross Yield of 10% - The net yield is: 8.94% for 10 Years policy term, 9.03% for 15 years & 9.05% for 30 years
For more details on how to read/understand benefit illustration table click here.
Probably you may not have realized but ICICI Prudential Ace net yields are higher than any equity Mutual Fund. The expense of the policy comes to around 1.05% to 0.95% while for Mutual Funds its generally 1.5% to 2.25%.
Click here to see how ICICI Ace can beat Mutual Fund in returns!
Returns of the underlying Fund:
The total return on ULIPs depends on two factors - Retun the underlying fund generates & the expenses. As far as expenses are concerned ICICI Ace beats all the present ULIPs. But since ACE funds doesn't have a long trackrecord nothing can be said about the return the fund would generate.
Returns of the underlying Fund:
The total return on ULIPs depends on two factors - Retun the underlying fund generates & the expenses. As far as expenses are concerned ICICI Ace beats all the present ULIPs. But since ACE funds doesn't have a long trackrecord nothing can be said about the return the fund would generate.
To conclude:
I think it’s a very low cost product and seeing this it seems there would be tough competition for Mutual Funds in future. With expenses of just 1%, this seems to be good investment product.
But as far as insurance is concerned you would get just 5 times of your annual premium which would be generally inadequate for most people. So top up your insurance requirement by buying any Term Insurance. (To see term insurance premiums click here)
The other thing is the surrender charges for the policy is 0 after 5 years but to get its complete benefit you should be invested for at least 10 years.
For more details & product brochure check ICIC Prudential site here.
Good comparison. In fact ULIPs are designed for long term insurance product with dual purpose of risk cover and investment. So if one can remain invested for longer duration, ULIPs are at definite gain.
ReplyDeleteNegative side is LOW Insurance coverage in ULIP.
But I suggest small investors to go for Pure Term Insurance for their risk management (insurance) and ELSS for Tax Saving. Amount saved from economic pure term insurance will be a descent difference at investable funds and that, when invested in a diversified Mutual Fund, will give a good difference in long term.
@ Mukesh
ReplyDeleteI totally agree with your view. And you invest in ULIP or not, but for complete risk coverage most of us need term insurance.
But I feel ICICI ACE with its low cost has changed the game. ULIPS were a bad investment product due to their high expenses. But Ace has offered investors an option which has expenses of just 1% which is great.
Its just that if more companies come forward with such cheap ULIPS probably Finacial Advisors have to take a look and rethink their strategy about ULIPs.
Hi Amit,
ReplyDeleteICICI ACE is game changer in ULIP world...
Different insurers have different ULIPs. Each one of them have different investment options (like maximiser, balanced etc). Do you have comparison of the returns of all different fund options provided by different insurers?
Thx,
Ramkiran
ICICI will eat all your profit, & at last you will get NAV less than your principal amount. so stay away from ICICI pru policies, all policies has high admin charges. Its my personal experience.
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