Ask Mint | No point in early exit from Ulips

Ask Mint | No point in early exit from Ulips

The insurance business in India isn’t just growing, but also becoming more sophisticated in terms of product offerings. To help readers keep ahead of developments in this business, Mint features a Q&A on insurance every Monday.

What is a group pension scheme? Do life insurance companies offer such a scheme?

A group pension scheme is a product which an employer sets up for the benefit of his employees. All staff can become members. Most life insurance companies offer group superannuation products. A well-structured group superannuation plan helps create an irrevocable fund during the working lifetime of the employees for their pension benefits after retirement.

The employer can make a contribution of up to 15% of the basic salary of the employee towards this fund. The employee can also make voluntary contributions into the superannuation fund. Investments of up to Rs1 lakh per annum in group superannuation schemes by employers for each employee are exempt from the fringe benefit tax.

I invested in a unit-linked insurance plan (Ulip) a year ago. With the current fluctuations in the stock market, do you think I should switch to the secure fund or move over to traditional plans? Will this result in a loss for me?

Ulips are long-term investments products unlike most other financial products, which are short-term in nature. Your investment is just a year old and will not yield a high fund value in the current scenario.

Also, Ulips come with a surrender charge, which will impact your fund value. This is a penalty levied on the early surrender of a Ulip.

If we review the historical data for the Sensex, it can be clearly seen that the probability of losses reduces if you have invested for a long term.

Readers are welcome to write in with their queries to The questions will be answered by senior executives from leading insurance firms.

This week’s expert is T.R. Ramachandran, managing director and CEO, Aviva India.