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Premium
In case of:
ULIP,
you pay a minimum premium of Rs 10,000 per annum irrespective of age and term of
the policy. Premiums levels can be either reduced or increased if premiums have
been paid regularly for three years and the unit fund value is at least Rs
15,000. The flexibility of increasing premium contributions in an existing
account helps policyholders manage their cash flows.
In normal/traditional
endowment plans the premium is calculated on the basis of age and the term and
the amount you pay, as premium remains the same for the full term. The minimum
premium is Rs 1,500 annually.
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Sum assured
The sum assured depends on
your age and the cover you take in case of ULIP. Depending on your age at entry,
you may choose between 3 levels of cover - low, medium or high.
In the traditional plan, the
sum assured is calculated by age and term of the policy to which premium factor
is applied.
Top-ups
Apart from your regular
contributions, in case of ULIP, you can also make additional payments to
increase the savings component. These top-ups do not affect the sum assured.
Normal endowment policy does not offer you these benefits.
Investment
You choose the fund where
you want to invest your money. HDFC offers a choice of five funds - liquid,
defensive, secure managed, secure defensive and growth. The Liquid Fund is the
least risky with investments in bank deposits and short-term money market
instruments. Growth Fund is the riskiest with an investment of up to 100% in
equities.
In traditional insurance
plans your money is invested keeping in view the IRDA specification i.e. minimum
85% in debt with the balance in equities.
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Charges?
As is the case with
unit-linked plans, this plan, too, imposes charges, on both the funds invested
by the policyholder and by cancellation of units. These charges vary depending
on the kind of premium payment option chosen (single or regular).
Other charges include a fund
management charge of 0.80% of the fund value per annum, apart from a flat fee of
Rs 15 per month deducted by cancellation of units
In case of
ULIP, for the
first 2 years the investment content rate is 73% of the premium and for the
remaining years 99%. Risk cover charges (for death sum assured, critical
illness, accidental death) are charged for cancelling units on each monthly
charge date, based on the person's age at that time.
In traditional plans, the
charges are not disclosed. There is an annual fee of Rs 150 for regular premium
policies and Rs 300 for single premium ones.
Returns
In case of
ULIP, in an
eventuality you receive the sum assured or fund value whichever is higher and on
maturity the fund value. In normal endowment plan, in either case you receive
the same benefit i.e. the sum assured and vested bonus.
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In case you stop paying
premiums?
If this is in the first 3
years then in case of ULIP, on cancellation of the policy before paying regular
premium for 3 years, there is a charge of 25% of the outstanding premiums due
during this 3-year period. In case of normal endowment the policy lapses and
nothing is paid back
If you stop paying premiums
after 3 years, in ULIP you have the option to make policy paid up, provided the
policy has accumulated sufficient policy value. At present this amount is Rs
15,000. If the fund value of a paid up policy falls below Rs 15,000 then the
policy is cancelled and the fund value is returned to you. The risk cover
continues for the sum assured even though the policy has reached the paid up
status.
In traditional plan the
policy becomes a paid up policy.
Medicals
In both the plans the norms
for medicals are similar i.e. medicals are compulsory
A unit linked
product will have costs across five sub-heads:
Upfront costs. This is a percentage of your first premium that is
deducted before the money is deployed. These costs can continue over the life of
the product or terminate in a few years.
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Regular charges. These include the annual asset management charges for
managing your money and could include a per month charge towards the insurance
part of the policy.
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Switching costs. To switch, from one scheme within a plan to another, may
carry a charge.
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Exit costs. If you exit before a certain time period you may pay a heavy
charge for that.
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Other administration costs. Some periodic costs can be loaded under this
head as well.
On the plus side
insurance gets tax breaks. Insurance premium gives you a tax rebate and the
insurance lump sums are tax free
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