I want to buy an Ulip. Please tell me how to read the benefit illustration. What are the charges I should look out for?
Sushil Mehta, Surat
A unit linked insurance plan invests your money in stock market; debt, equity and other market securities. A risk-taking investor would typically select a fund with a high equity component, while a risk-averse investor would opt for a debt-heavy one. The insurer generally provides the investor with a benefit illustration to give an overview of the entire scheme. Before going through the illustration one should first carefully read the assumptions on the basis of which the returns have been projected. The illustration explains how the money grows and the charges levied in the scheme. As per IRDA guidelines, in ULIP illustrations, the insurers are required to project returns at two levels namely 4 per cent and 8 per cent return. The return shown in the illustration does not in any way guarantee the return on investment. About charges – Ulips have several charges that you need to look into and also the service tax that one needs to pay on the premium.
