ICICI Prudential Life Insurance Co. Ltd has launched one of the cheapest unit-linked insurance policy (Ulip) available in the market.
Its new policy, called ICICI Pru Ace, does not have a premium allocation charge, which gets deducted from the premium in case of other Ulips.
A zero premium allocation charge means that ICICI Pru Ace will invest a larger portion of your premium in the market. Sample this: For a 30-year-old male investing Rs1 lakh every year for a term of 20 years, the plan will return Rs54.74 lakh assuming the fund grows at 10%. This is a return of 9% after accounting for all other costs.
The new Ulip charges a policy administration charge of Rs60 per month, apart from the mortality charges. It has a fund management charge ranging between 0.75% and 1.35% of the fund value.
You have two ways to invest your money through this Ulip. The first is fixed allocation, where you choose the funds in which the plan will invest. Here, you have a choice of eight funds that range from pure equity to pre debt funds.
The second option is called the trigger portfolio strategy that works on the principal of buy low, sell high. This strategy is basically a capital guarantee feature that maintains a constant equity-debt ratio of 75:25. So, every time the stock market surges, your portfolio allocation will be readjusted to maintain the 75:25 ratio. This means that your fund will shift more towards the debt allocation by selling high. Similarly, every time the stock market goes down, the funds would move towards equity to buy low.
A 15% downward or upward movement will trigger the portfolio allocation.
To encourage you to stick through the term, the Ulip also offers loyalty additions after the 10th year, which will be disbursed every five years. The loyalty additions would be equal to 2.5% of the fund value. However, miss a single premium, and you wouldn’t get the loyalty additions.
Another attractive feature is that the insurer will contribute 2% of the premium to your instalment after the sixth year.
You need to pay a minimum regular premium of Rs18,000. The term is 10-30 years.
deepti.bh@livemint.com