With the stock markets recovering, is it advisable to invest in Ulips for a longer time period despite higher charges?
Anjan Sen
The approach to savings-linked insurance products has to be driven by risk appetite and investment objective. If you are willing to take calculated risks, Ulips are an attractive option. As an asset class, equity has historically offered high returns and Ulips afford you professionally-managed exposure to equity and debt. Ulips are designed to benefit the investor in the long term. Current regulations make Ulips transparent and you can know where your money is being invested and what charges you are paying.
I bought a Ulip five years ago. I want to redeem the money now. Do I have to pay any tax on the redeemed amount?
Pramod Arora
You can redeem your investment without paying any tax. However, it is advisable not to redeem it unless you have compelling reasons. You will be better of staying invested as the charges are negligible after the initial few years and the compounding affect swells up the corpus over time.
How would I know where my insurance fund manager is investing and how are the returns calculated?
L V Rao
You can know the investment pattern and fund performance from the fund factsheet, which is normally available on the insurer?s website. You can get details on aspects like the investment philosophy and the method in the product brochure, while the benefit illustration shared with you at the time of purchase should show a calculation based on 6% and 10% assumed rate of on return in your specific case.
Can I take a joint term plan with my wife and make my daughter the beneficiary?
Romit Kuruvella
Yes, you can. Joint covers normally come with reduced mortality charges as the calculation gets impacted by the lower mortality risk of the younger life. There are several types of joint cover plans available such as ones that offer partial or full payout at the first death, payout on the second death only, etc. So, explore offerings from different insurers to arrive at a plan that best suits your needs.
I am told insurance companies can now invest in corporate default swaps. How will policy holders benefit?
Suman Saighal
Irda recently allowed insurers to deal in credit default swaps as users or buyers. A credit default swap is an arrangement whereby the seller of the CDS agrees to compensate the buyer in case of an adverse credit event like a default. The move will help insurers better hedge their credit risks and ensure stronger protection of policyholder interests.
The author is executive vice-president, Kotak Mahindra Old Mutual Life Insurance
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