<div><em>Many insurers are launching Ulips targeted at HNIs. Does paying high premium comes with additional benefits? <strong>Sunil Dhawan</strong> explores</em></div><div> </div><div>Max Life Insurance, one of India’s leading life insurers, has recently launched ‘Max Life Platinum Wealth Plan’ – a unit linked insurance plan (Ulip) targeted at High Net worth (HNI) Individuals. ICICI Prudential, the largest private life insurer too has similar offering for HNI’s – Elite Life II and Elite Wealth II.</div><div> </div><div>The minimum premium amount is such HNI specific Ulips is typically Rs 2 lakh and upwards. In Elite Wealth II, minimum is Rs 5 lakh annually. </div><div> </div><div>The costing in HNI-Ulips compared to ULIPS available for Non-HNI is certainly in favour of HNI’s. Instead of the mandatory cost of 2.25 per cent (excluding mortality charges) as set by IRDAI, HNI-Ulips are charging around 1.5 per cent or lesser even after including mortality charges. A charge of 1.5 per cent certainly something that can give mutual funds run for money as the expense ratio in MF is around 2.25 per cent.</div><div> </div><div>As far as the structure of HNI-Ulips is concerned, they aren’t much different from non-HNI Ulips. The charges could be low in them but one distinguishing feature in HNI-Ulips is the presence of Guaranteed Loyalty Additions and Guaranteed Wealth Boosters to further enhance the maturity fund value. Such products may boast of ‘flexibility’ and customization’ to attract HNI’s, however most of such flexibilities are always a part of Non-HNI Ulips.</div><div> </div><div>The litmus test: With costs under caps, a look at the fund value on maturity would give an idea how costly a plan is. We ran the numbers for someone age 35, term of 20 years and annual premium of Rs 2 lakh keeping the sum assured at Rs 20 lakh. Here are the maturity fund values at an assumed growth of 8 per cent:<br> </div><div><strong>Max Life Platinum Wealth Plan</strong> – Rs 86.84 lakh</div><div><strong>ICICI Pru - Elite Life II and Elite Wealth II</strong> – Rs 86.50 lakh</div><div><strong>ICICI Pru Smart Life – (Non-HNI)</strong> – Rs 79 lakh</div><div> </div><div>Watch outs: Importantly, running the plan till maturity will yield such results. Any exit before maturity will adversely affect the maturity values. This is because most ‘guaranteed or loyalty additions and wealth boosters in terms of additional units happens both after 10 years and on maturity.</div><div> </div><div>Some common features: In all plans, the minimum life cover is ten times of premium. There are various fund options available in them. Important will be the choice of premium paying term. Usually, there is single pay or premium can be paid for limited term of 5/7 years for a plan term of 10, 15, 20 years term. Choose as per availability and affordability of funds.</div><div> </div><div>All such plans would offer 5-7-10 fund options across equity, debt asset classes. Further, there would be options of Systematic Transfer Plan or Dynamic Fund Allocation strategy, to protect investments against market volatility. </div><div> </div><div>What to do: If your goals are long term and at least ten years away, choose Ulips. Within them, if the premium or inevstible amount annually is Rs 2 lakh upwards, choose HNI-Ulips. Be invested across equity funds, choose monthly frequency to pay premiums, and run the plan till maturity. The costing in them is better than otherwise. In some plan there could be no administration charge after five years. However, rather than comparing individual charges, compare the fund values based on your age, term and other parameters before you zero-in. And finally, choose the plan whose fund performance is consistent over long period.</div><div> </div>
