Before choosing to invest in a ULIP, you should know these 3 things: • There are some fees and charges • Know the funds that suit your investment strategy • ULIPs are beneficial in the long run. So you should have the discipline to stay invested throughout the policy tenure

You can always choose to invest more or your entire amount in debt funds to minimise the risk. Moreover, you can alter your investment strategy depending on the market scenario by switching between equity and debt funds. 

The major apprehension most policyholders have is - ‘What is my tax liability on ULIP maturity?’ Well, the best part about ULIP funds is that you can enjoy dual advantages - disciplined savings for the long term, and tax savings for the financial year (subject to prevailing tax laws). This makes a ULIP plan the best investment decision that you can ever make for your own future financial security along with risk protection for your family (upon the insured person’s untimely death). Let’s break it down further -

1. Tax deductions on premiums paid towards your ULIP scheme [under Sec 80C] For example, your annual premium is Rs. 1,20,000, you can claim the entire amount as a deduction, thereby reducing your taxable income (maximum limit = Rs. 1,50,000 deduction allowed under this section).
2. Tax-free maturity value [under Sec 10(10D)] For example, you invest Rs. 1,00,000 every year in a ULIP scheme for 10 years. Total Investment = Rs. 10,00,000. Let’s assume your fund grows to Rs. 16,00,000 at maturity. Under this section, Rs. 16,00,000 is completely tax-free (subject to certain premium conditions).
3. Switches between fund options are also tax-free.

Thus, ULIP funds are smart investment plans with double-savings-benefit rolled into just one single product (i.e. savings enabled for not just your future but also your present financial position), ensuring complete tax efficiency in the hands of the policyholder.

In return for the premium amount you pay (i.e. the portion of premium invested after deducting the life cover component and the policy charges as applicable) towards the equity, debt or balanced funds of your choice, you are offered “units” based on the prevailing Net Asset Value (NAV) of that fund. For example, suppose Rs. 1,00,000 is your annual premium. After charges, Rs. 95,000 is invested. If NAV of the chosen fund is Rs. 25, then here’s how you can calculate the units allotted. Number of units allotted under ULIP scheme: 95,000 ÷ 25 = 3,800 units. Based on the market performance, the NAV increases or decreases. Accordingly, your ULIP fund value also fluctuates. When you buy a ULIP plan online on Ageas Federal, you can easily track your investment, its NAV and regularly review your fund’s performance.

The full form of NAV is Net Asset Value. NAV is the price of each unit in the ULIP fund that you hold on any particular given day. Just like mutual funds, NAV represents the market value of the fund’s investments after deducting charges. Which means that when you invest, your money is used to buy units based on the NAV on that day. Over time, as the fund grows, the NAV also rises, in turn increasing your investment value.

Formula: NAV = (Market Value of Fund Assets – Charges) ÷ Number of Units Outstanding

Illustration: Let’s say your fund has assets worth Rs. 100 crore. After deducting charges, suppose the net value comes to around Rs. 99 crore. Now let’s assume that there are 10 crore units issued. The NAV is then calculated at Rs. 9.90 per unit.