An understanding of Fund value under ULIP
“Fund Value” under ULIPs can be defined as the accumulated amount promised as the minimum death benefit. And available under the ULIP plan. “Fund Value” can also be defined as the corpus which a policyholder chooses to invest in the scheme.
Know more about: ULIP Plans
How is this fund value calculated?
A portion of the premium that you pay towards ULIP can be used to meet all charges. Though, some charges i.e. like premium allocation charges are deducted on face as a certain percentage of the premium, and charges like fund management charge, mortality charge and administration charges are deducted post your money is invested and built into a corpus. The charges are subtracted at the present net asset value.
Now, what is net asset value?
This is similar to how it looks in a mutual fund case. An investor purchases units at a pre-determined price. Under an ULIP plan too, the units are bought using the amount that was charged as premium for the policy. The price measured per unit can be called net asset value aka NAV of the unit.
Net asset value can be calculated by dividing the total value of the assets by the number of units. However, the value of the assets changes every time depending on their performance and conditions in the stock market, thereby changing the NAV on a daily basis. This parameter again is a measure of performance.
What is the amount of the fund value?
Under a ULIP, the units are allotted from the premium that’s paid at the current NAV. So, for example if your Net Asset Value is Rs100 and you have invested Rs.1000, then your allotted nber of units will be 10. All other charges will be deducted from this investment. (after premium allocation charge has been deducted)
So, let’s say if all charges total up to 200, then 2 units will be used to make up for this cost. And only 8 units will lead to your investment corpus. And this is the actual value of your fund after all costs have been taken into account.
Also read: Understand the Concept of ULIP