If you find a cheaper Ulip, We’ll pay you Rs. 1000”—that’s what the latest unit-linked insurance plan (Ulip), Invest Maximiser, by AEGON Religare Life Insurance claims. The plan probably has the lowest costs as the difference between the assumed gross return and the net return after costs is much lower than the prescribed limit of 2.25 per cent.

Features. The plan allows a fixed term of 25 years and the life cover is restricted to five times of the premium. Post-charges, the premium may be invested in any of the five fund options. The plan allows you to increase the premium amount any time during the policy subject to certain conditions.

A unique feature is that the plan allows periodical redemption of units directly credited to the bank account through its systematic partial withdrawal facility.

One can attach the ADDD (accidental death, dismemberment or disability) rider wherein the benefit is paid under any of the following circumstances: accidental death, accidental dismemberment or permanent total disability due to an accident. This costs Rs 135 per annum per lakh of rider sum assured. The rider can be added or removed anytime during the policy.

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Features

Death Benefit	Higher of the fund value or the sum assured
Maturity Benefit	Fund value to policyholder
Min. Annualised Premium	Rs 12,000
Basic Sum Assured	5 times premium paid
Term	25 years
Premium Paying Term	Equal to policy term
Entry Age	90 days to 50 years
Additions	Starting 10th year and every 3rd year, units equivalent to 1.5% of AMFV1 of last 36 months added

¹AMFV is average month end fund value

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Charges

Premium Allocation	5% in the first year. 2% from year two to year four. Nil from fifth year onwards
Policy Administration	Rs 40 per month for 2009, 2010a
Fund Management	See Fund Options
Surrender	Nil after fourth year
Partial Withdrawal	Nil for four withdrawals each year; Rs 200 after this. No charge for systematic partial withdrawal
Switching	Nil for 12 times each year. Rs 500 maximum per switch after this

^a 5% compound increase each year from 1 Jan 2011

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Fund Options

Option	Composition (%)	FMC* (%)
Secure	60-100% in debt	1.00
Debt	60-100% in debt	1.10
Balanced	30-70% in equity	1.25
Enhanced equity	75-100% in equity	1.25

*Fund management charge

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Performance Report

	Returns (%)
	Enhanced Equity	S&P Nifty
6 months	60-100% in debt	1.00
Debt	60-100% in debt	1.10

As on 30 September, 2009

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Restrictions. The term is fixed at 25 years. But, it is possible to surrender the plan and exit anytime after the fourth year at nil surrender cost. Life cover is fixed at five times premium; it cannot be increased. This makes it more of an investment plan. One should ensure adequate cover otherwise.

This is a great long-term savings and protection plan for middle class India.”Yateesh Srivastava, Chief Marketing Officer, AEGON Religare Life Insurance

Fund performance. As of 31 August 2009, the Enhanced Equity Fund had 98 per cent in equity with 48.76 per cent in finance, industry and energy sectors. Even though the fund does not have a long track record, the returns (see Performance Report) consistently beat the market so far.

Ensure these. Be invested in the higher-equity fund options such as Enhanced Equity or Balanced Fund till about three years from maturity. Thereafter, you may shift towards the less volatile fund options like Secure or Debt.

Premiums have to be paid for the entire term. If premiums are not paid after three years, the policy does not lapse for the next five years. But revival needs paying all the unpaid premiums.

What to do. Be clear that it is more of an investment plan as there is a limit to the cover it provides. The net effect of all the costs in a Ulip with over 10 per cent growth rate as measured by the reduction in yield appears well below the cap imposed by the regulator. This indicates the low costing of the product. Although full exit at no charge is allowed from the fourth year, stay in it for at least 10 years.