ULIP - Six things Ulip investors should keep in mind

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ULIP
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Six things Ulip Investors should Keep in Mind
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Ulips allow investors to change the investment
mix of their plans. You can change exposure to
equities if you think the market is favourable.
Of the estimated five million Ulip policyholders,
barely 20 per cent know about the switching
facility and less than 5 actually use it. This
is a pity as it gives Ulips an edge over mutual
funds. If you don't use it, you may be losing out
on a major benefit. WHEN TO USE IT The switching
decision will depend on a number of factors,
including the individual's own perception of the
market and his or her risk profile. The market
level is a good trigger. You could choose to
tweak your asset allocation with every 10 per
cent change. A mix of disciplined asset
allocation and deft switching can yield good
results for the proactive policyholder. WHAT IS
THE COST? The switching facility is free.
Earlier, there was a limit on the number of free
switches in a year, but now most Ulips allow
unlimited switching. You can do it by accessing
your policy online. Just log on to the insurance
company's website and change the investment mix
as desired. Alternatively, you can fill up a
switch request form and submit it to the
insurance company.
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VALUE AS TRIGGER Sophisticated investors can link
switching decisions to the PE (price to earnings)
ratio of the index. It is derived by dividing the
index level by earnings per share (EPS). The
Nifty EPS in April-June 2014-15 was Rs. 376. When
the Nifty was at 8,040 on 15 September, the PE
was 21.38, a little above its long-term average
of 18.5. The EPS changes as companies declare
their quarterly results. TAX EFFICIENCY The best
part about switching asset allocation of your
Ulip insurance policy is that it does not have
any tax implication. Since these are insurance
products, any long-term or short-term gains from
the transaction are tax-free. In a mutual fund,
only long-term gains from equity funds and
equity-oriented balanced funds are tax-free. All
other gains are taxable. Short-term gains from
equity funds are taxed at 15 per cent. source
http//articles.economictimes.indiatimes.com/2014-
09-22/news/54199081_1_asset-allocation-equity-fund
s-pe
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To know more on ULIP visit https//www.bajajallia
nz.com/Corp/ulip-plans/ulip.jsp
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