ULIP: Flexible, but with high charges

Tata AIG Life Insurance Company has recently launched two unit-linked products (ULIPs) —‘Tata AIG Life Insurance InvestAssure Gold Supreme’ and ‘Tata AIG Life Insurance InvestAssure Maximizer’. The premium payment term of only five or seven years for a policy term of 20 to 40 years is strange, considering that life insurance products are supposed to be long-term, systematic savings. 

The mortality rates on offer are among the lowest in the industry. The plans offer loyalty additions of 0.25% of the regular premium fund value, paid every five years—starting from the 10th anniversary of the policy. They offer flexibility to choose from seven fund options for enhanced investmentopportunities or allow the insurer to invest on your behalf by offering portfolio strategies of systematic money allocation & regular transfer (SMART) or automatic asset allocation (AAA). 

The plans offer optional riders of accidental death benefit and a critical illness rider. The total of premium allocation and policy administration charge (PAC) is on the higher side compared to other ULIPs introduced after September 2010. The premium allocation charge (PAC) is 5% for first to third years and 4% for the fourth year to the premium payment term. The monthly PAC is 0.25% for a premium band of Rs48,000 to Rs1,19,999 and 0.15% for Rs1,20,000 and above. The PAC can be increased by 5% (compounded annually) and it will continue till the end of the policy term. InvestAssure Maximizer offers the choice of two life cover options—premium life cover (death benefit is the combination of sum assured and fund value) and standard life cover (death benefit is higher of sum assured or fund value). The premium life cover will entail more funds going towards mortality charges. This plan also offers flexibility to increase/decrease the basic sum assured from the next policy anniversary.