HDFC Ulips

8/4/2019 HDFC Ulips

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HDFC STANDARD LIFE INSURANCE, BANGALORE

4.1 Introduction to ULIP:

In India, ULIP insurance policies are on the top in the popularity chart

because it offers more Benefits than traditional life insurance plans. There are

many benefits are available such as higher returns on investment, partial

withdrawal, flexibility to choose life cover, wider fund options, top up facility,

free switches, tax benefits, active you are looking for long term investment and

better returns, ULIP is a right option to Achieve your goal. But, you may find

difficulties while purchasing the ULIP, because there are single and regular

premium option. You have to choose the right option for you. In single premium

ULIP, you need to pay a single payment and you will enjoy the benefits

throughout the policy term. In case of regular premium, you need to pay

premium on regular basis, it can be paid by annual, half annual, quarterly and

monthly mode. In terms of investment, both products offer similar options like

equity, debt and liquid. Under regular premium option you may ask for

commitment to pay more. But, under single premium product nobody will ask

you to pay more as a matter of commitment. In the initial years of ULIP, single

premium product offer better returns than regular premium product. But, its

balance power shifts down latter. But this is not in effect; the product is sold

very aggressively due to IRDA norms. Regular premium ULIP products are also

good in various factors such as affordability, tax benefit and large return.

There are also ULIP charges to consider than single and regular premium.It is also important to take a overview of different charges are under ULIP plans.

It includes premium allocation

M.L.A ACADEMY OF HIGHER LEARNING

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Charge, risk cover charges, policy administration charges, fund management

charges, service tax charge, miscellaneous charge, etc. At the end, ULIP is a

good mixture of life cover and investment. But don't buy it for investment

purpose only; there are another good options available for the investment. Unit

linked insurance plan (ULIP) is a life insurance solution that provides the client

with the benefits of protection and flexibility in investment.

WHAT IS ULIP?

ULIP stands for Unit Linked Insurance Plans. As we know that insurance is for

protecting our life from the any uncertain events like death or accident. The

purpose of the normal insurance plan is just protecting the life but not ensuring

any savings for the future. Many people wanted plan which gives protection also

gives the returns for their investment. So, insurance companies come up with the

ULIP plan where the premium about is invested in the share market and returns

better income on the maturity period. Unit-linked insurance plans, ULIPs, are

distinct from the more familiar ‘with profits’ policies sold for decades by the

Life Insurance Corporation. ‘With profits’ policies are called so because

investment gains (profits) are distributed to policyholders in the form of a bonus

announced every year. ULIPs also serve the same function of providing

insurance protection against death and provision of long-term savings, but they

are structured differently. In ‘with profits’ policies, the insurance company

credits the premium to a common pool called the ‘life fund,’ after setting aside

funds for the risk premium on life insurance and management expenses. Every

year, the insurer calculates how much has to be paid to settle death and maturity


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claims. The surplus in the life fund left after meeting these liabilities is credited

to policyholders’ accounts in the form of a bonus. In a ULIP too, the insurer

deducts charges towards life insurance (mortality charges), administration

charges and fund management charges. The rest of the premium is used to invest

in a fund that invests money in stocks or bonds. The policyholder’s share in the

fund is represented by the number of units. The value of the unit is determined

by the total value of all the investments made by the fund divided by the number

of units. If the insurance company offers a range of funds, the insured can direct

the company to invest in the fund of his choice. Insurers usually offer three

choices an equity (growth) fund, balanced fund and a fund which invests in

bonds. In both ‘with profits’ policies as well as unit-linked policies, a large part

of the first year premium goes towards paying the agents’ commissions.

4.2 CHARGES UNDER ULIP

1. Contribution Related Charges

These are the charges that are represented as a percentage of the regular or

single contribution paid. In case of a regular contribution plan, it is usually high

in the first year to pay for the distribution cost. This charge pays for the issuance

and for distribution commissions. This charge is running for the policy.

2. Administrative Charges


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These are charges that are levied for the administration of the policy and the

related cost of Administration of the insurance company, itself. They are more

related to the cost like IT, operational, etc cost of continuing the policy.

3. Fund Management Charges

These are the charges for buying and selling debt and equity. These are the

charges are adjusted in NAV itself.

4. Mortality Charges

This covers the cost of providing life protection for the insured and may be paid

once at the start of the policy for a recurrent manner for example this charges

Levied to provide the insurance cover under the plan. Normally these charges

are one year charges as per the age of the holder.

5. Rider charges

Rider charges are similar in nature to the mortality charges as they are levied to

pay for the other protection benefits that the policy holder has chosen for- like

the critical illness benefit Or the accident benefit, etc.

4.3 BENEFITS OF UNIT LINKED PLAN


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ULIP distinguishes itself through the multiple benefits that it provides to the

consumer. The plan is a one stop solution providing:

1. Life protection.

2. Investment and Savings.

Market linked fund based on risk profile.

Switch option.

Premium redirection.

Automatic transfer plan (ATP).

3. Flexibility of cover continuance.

4. Transparency.

5. Extra protection with riders.

Death due to accident

Disability

Critical illness

6. Liquidity

During the term partial withdrawals

At Maturity.

7. Tax planning.

4.4 HOW TO SELECT THE RIGHT ULIP


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For a product capable of adding significant value to investors' portfolios,

ULIPs have far too many critics. We at Personal have interacted with a number

of investors who were very disillusioned with their ULIPs investments; often the

disappointment stemmed from poor and inappropriate selection. We present a 5-

step investment strategy that will guide investors in the selection process and

enable them to choose the right ULIP.

1. Understand the Concept of ULIPs

Do as much homework as possible before investing in an ULIP. This way

you will be fully aware of what you are getting into and make an informed

decision. More importantly, it will ensure that you are not faced with any

unpleasant surprises at a later stage. Our experience suggests that investors on

most occasions fail to realize what they are getting into and unscrupulous agents

should get a lot of 'credit' for the same. Gather information on ULIPs, the

various options available and understand their working. Read ULIP-related

information available on financial Web sites, newspapers and sales literature

circulated by insurance companies.

2. Focus On Your Need And Risk Profile.

Identify a plan that is best suited for you (in terms of allocation of money

between equity and debt instruments). Your risk appetite should be the deciding

Criterion in choosing the plan. As a result if you have a high risk appetite, then

an aggressive investment option with a higher equity component is likely to be

more suited. Similarly your existing investment portfolio and the equity-debt

allocation therein also need to be given due importance before selecting a plan.

3. Compare ULIP Products from Various Insurance Companies


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Compare products offered by various insurance companies on parameters

like expenses, Premium payments and performance among others. For example,

information on premium payments will help you get a better picture of the

minimum outlay since ULIPs work on premium payments as opposed to sum

assured in the case of conventional insurance products. Compare the ULIPs'

performance i.e. find out how the debt, equity and balanced schemes are

performing; also study the portfolios of various plans. Expenses are a significant

factor in ULIPs, hence an assessment on this parameter is warranted as well.

Enquire about the top-up facility offered by ULIPs i.e. additional lump sum

investments which can be made to enhance the policy's savings portion. This

option enables policyholders to increase the premium amounts, thereby

providing presenting an opportunity to gainfully invest any surplus funds

available. Find out about the number of times you can make free switches (i.e.

change the asset allocation of your ULIP account) from one investment plan to

another. Some insurance companies offer multiple free switches every year

while others do so only after the completion of a stipulated period.

4. Go for an Experienced Insurance Advisor

Select an advisor, who is not only conversant with the functioning of debt and

equity markets, but also independent and unbiased. Ask for references of clients

he has serviced earlier and Cross-check his service standards. When your agent

recommends a ULIP from a given company, put forth some product-related

questions to test him and also ask him why the products from other insurers

should not be considered. Insurance advice at all times must be unbiased and

independent; also your agent must be willing to inform you about the pros and

cons of buying a particular plan. His job should not be restricted to doing paper

work like filling forms and delivering receipts; instead he should keep track of

your plan and offer you advice on a regular basis.


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5. Does Your ULIP Offer A Minimum Guarantee?

In a market-linked product, protecting the investment's downside can be a huge

advantage. Find out if the ULIP you are considering offers a minimum

guarantee and what costs have to be borne for the same

4.5 ARE ULIPS SIMILAR TO MUTUAL FUNDS?

In structure, yes; in objective, no. Because of the high first-year charges, mutual

funds are a better option if you have a five-year horizon. But if you have a

horizon of 10 years or more, then ULIPs have an edge. To explain this further a

ULIP has high first-year charges towards acquisition (including agents’

commissions). As a result, they find it difficult to outperform mutual funds in

the first five years. But in the long-term, ULIP managers have several

advantages over mutual fund managers. Since policyholder premiums come at

regular intervals, investments can be planned out more evenly. Mutual fund

managers cannot take a similar long-term view because they have bulk investors

who can move money in and out of schemes at short notice.

4.6 WHY DO INSURERS PREFER ULIPS?


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Insurers love ULIPs for several reasons. Most important of all, insurers can sell

these policies with less capital of their own than what would be required if they

sold traditional policies. In traditional ‘with profits’ policies, the insurance

company bears the investment risk to the extent of the assured amount. In

ULIPs, the policyholder bears most of the investment risk. Since ULIPs are

devised to mobilize savings, they give insurance companies an opportunity to

get a large chunk of the asset management business, which has been traditionally

dominated by mutual funds.

Advantages

1. The accretion to the fund invested can be checked on daily basis unlike the

traditions Policies.

2. There is lot more flexibility like partial withdrawal, switching, redirection,

early withdrawal, Sum Assured reduction, top up contribution, etc.

3. He gets a life cover at a nominal cost unlike mutual funds,

6. Almost all companies provide riders like accidental death and

disability/dismemberment riders, critical illness rider, hospital cash benefit rider,

income loss rider, etc

7. Stages in one life like education of children, marriage, and retirement needs

can be soundly planned by the help of ULIPs.

8. Tax advantages are also offered by the ULIPs.

Disadvantages


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1. Investors find it difficult to understand the nuances of capital market and

therefore go by the heard mentality. i.e., they invest because their friends and

family is investing without understanding how ULIPS are designed.

2. ULIPS are attractive for risk taking people and less attractive for risk adverse

people.

3. Some consider taking term insurance and a mutual fund as a combination to

beat the ULIP.

4. Some consider charges levied exorbitant and not commensurate to the returns

offered.

5. The complicated design of the polices make them less aware of the product

features and chances of misspelling by agents are very high.

4.7 ULIP AND MUTUAL FUNDS DIFFERENCE?

In structure both ULIP and Mutual Funds looks similar. But, in objective they

are different Because of the high first-year charges, mutual funds are a better

option if you have a five-year Horizon. But if you have a horizon of 10 years or

more, then ULIPs have an edge. To explain this further a ULIP has high first-

year charges towards acquisition (including agents’ commissions). As a result,

they find it difficult to outperform mutual funds in the first five years. But in the

long-term, ULIP managers have several advantages over mutual fund managers.

Since policyholder premiums come at regular intervals, investments can be

planned out more evenly. Mutual fund managers cannot take a similar long-term

view because they have bulk investors who can move money in and out of

schemes at short notice. Unit Linked Insurance Plan, popularly called ULIP, it is

to be borne in mind that ULIPs being a market linked instrument will fetch good

returns on a long term basis. The basic advantage of a ULIP over other

investment instruments is that it offers the twin benefits of life insurance as well


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as an investment. Apart from that, there are a number of ways in which ULIP’s

can prove to be advantageous over Mutual Funds, Regular Insurance Policies

and Fixed Deposits. Let’s analyze:

4.8 ULIP VS MUTUAL FUND

1. Flexibility on Mode of Investment/investment amounts

ULIP provide the flexibility to alter the premium amounts during the

policy’s tenure. Surplus funds can be used to enhance the contribution thereby

ensuring that the funds are gainfully invested. Alternatively, lower payments can

be made when faced with a liquidity crunch (the difference being adjusted in the

accumulated value of the ULIP). This option of modifying premium payments at

one’s convenience clearly gives ULIP an edge over Mutual Funds.

2. The cost factor for altering Asset Allocation

In Mutual Funds, shifting the corpus into a debt from the same fund

house will involve an exit load and/or entry load. On the other hand, in a ULIP,

the option to invest across asset classes as per your convenience is very cost-

effective Most insurance companies allow shifting the investments across

various plans/asset classes either at a nominal or no cost. This can prove to be

very useful. For example, in a bull market when the ULIP investor’s equity

component has appreciated, he can book profits by simply transferring the

requisite amount to a debt oriented plan.

3. Tax Benefits

ULIP’s qualify for tax benefits under Section 80C of the Income Tax Act.

This holds good for any kind of plan chosen by the investor. In Mutual Funds,


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only investments in tax-saving funds (also referred to as equity-linked savings

schemes) are eligible for Section 80C benefit.

4.9 ULIP VS REGULAR INSURANCE POLICY

ULIP’s and Traditional policies both work alike. A part of the premium is

set aside for life cover and the rest are invested in a fund after deducting

charges. The main advantage of a ULIP is that the investor knows exactly about

the break-up of his Premium into life cover, the fees being paid and the amount

being invested in a fund. The performance of the funds can also be tracked as

the returns are linked to the market performance. On the other hand, in

traditional policies, no information about the break-up of a charge is shared with

the investor. He also does not know whether the bonuses paid to him every year

is all that his fund has made or whether the company is giving him only a share

of the profits. Policies encourage savings whereas ULIPs take the investment

path and hence have higher growth options.

4.10 ULIP VS FIXED DEPOSIT

There is always a degree of risk, however small, involved in a ULIP.

Traditionally, investors preferred investing in safer instruments like Fixed

Deposits, despite the lower returns. But Fixed Deposits are able to only beat the

inflation. On the other hand a ULIP is a market linked plan with an equity

exposure. A plan with an equity exposure for a long term usually consistently

gives better returns than any other asset like Fixed Deposit or Bonds.

4.11 ULIPS- SYSTEMATIC INSURANCE CUM INVESTMENT PLAN

Any individual who has purchased a life insurance policy in the last year or so

surely would have a Unit Linked Insurance Plan (ULIP). ULIPs have been


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selling like Wonder Products in the recent past and they are likely to continue to

outsell their plain vanilla counterparts going Ahead. A ULIP is a market-linked

insurance plan. The difference between a ULIP and other insurance plans are the

way in which the premium money is invested. Premium from, say, an

Endowment plan, is invested primarily in risk-free instruments like government

securities (gsecs) and AAA rated corporate paper, while ULIP premiums can be

invested in stock markets in addition to corporate bonds and gsecs. So what else

apart from this reason makes ULIPs so attractive to the individual? Here, we

have explored some reasons, which have made ULIPs so irresistible.

Transparency

However, ULIPs offer a transparent option for customers to plan their

various life stage needs through market-led investments as compared to

traditional investment plans.

Insurance cover plus savings

ULIPs serve the purpose of providing life insurance combined with

savings at market-linked returns. To that extent, ULIPs can be termed as a two-

in-one plan in terms of giving an individual the twin benefits of life insurance

plus savings. This is unlike comparable instruments like a mutual fund for

instance, which does not offer a life cover.

Multiple investment options

ULIPs offer variety than traditional life insurance plans. So there are

multiple options at the individual's disposal. ULIPs generally come in

three broad variants

Aggressive ULIPs (which invest 80%-100% in equities, balance in debt)


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Balanced ULIPs (invest around 40%-60% in equities)

Conservative ULIPs (invest upto 20% in equities),

Although this is how the ULIP options are generally designed, the exact

debt/equity allocations may vary across insurance companies. A ULIP

policyholder has the option to invest in a variety of funds, depending on his risk

profile. If one does not have the appetite to invest in equity, they can choose a

debt or balanced fund.

Flexibility

Individuals can switch between the ULIP variants outlined above to capitalize

on investment opportunities across the equity and debt markets. Some insurance

companies allow a certain number of free' switches. For instance, when stock

markets were on the brink of 7,000 points (Sensex), the informed investor could

have shifted his assets from an Aggressive ULIP to a low-risk Conservative

ULIP.They can shift from an Aggressive to a Balanced or a Conservative ULIP

as they approach retirement.

4.12 POINTS OF PARITY

FUNDS AVAILABLE WITH ULIP PLANS


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Generally all life insurance companies have three types of fund which are Equity

fund, Debt fund and Balance fund. These funds have different risk profile.

Equity fund has high risk but it gives high return, Debt fund has low risk so it

gives low return and balanced fund is combination of both Equity and Debt fund

so risk is medium and return is also low.

4.13 TABLES, GRAPHS AND ANALYSIS:


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TABLE: 1

SHOWING AGE GROUP OF SURVEYED RESPONDENTS:

AGE GROUP NO OF RESPONDENTS PERCENTAGE

18-25 Years 26 52%

26-35 Years 10 20%

36-49 Years 10 20%

Above 50 years 4 8%

Total 50 100%

GRAPH: 1


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SHOWING AGE GROUP OF SURVEYED RESPONDENTS:

INTERPRETATION:

From the chart above we find that 26 of the respondents fall in the age group of

18 – 25 years, 10 fall in the age group of 26 – 35 years, 10 fall in the age group

of 36 – 49 years and 4 fall in age group of above 50 years.

Therefore most of the respondents are relatively young (below 30 years of age).

These individuals could be induced to purchase insurance plans on the basis of

its tax saving nature and as an investment opportunity with high returns.

TABLE: 2


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SHOWING PROFILE OF RESPONDENT:

PROFILE NO OF RESPONDENTS

STUDENT 10

HOUSE WIFE 8

WORKING PROFESSIONAL 14

BUSS/SELF-EMPLOYED 8

GOVT.EMPLOYEE 10

GRAPH: 2


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SHOWING PROFILE OF RESPONDENT:

INTERPRETATION:

Above chart shows that the 28% respondents are working professional can put their money as investment and tax savings, 16% are house wife will invest

their money for the family responsibility, 20% students work as financial

consultants and invest their funds for building there career, 20% are government

employees who plan their investments as pension schemes and finally 16% are

business and self employed who are in least who ultimately look for high

returns.

TABEL: 3


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SHOWING AWARENESS ABOUT ULIPS IN THE MARKET:

AWARENESS ABOUT ULIPS IN THE MARKET

YES 40

NO 10

GRAPH: 3

SHOWING AWARENESS ABOUT ULIPS IN THE MARKET:


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INTERPRETATION:

This graph shows that out of total 50 respondents only 40 or 80% respondents

Know ULIPS. Rest all don’t know about ULIPS so there is a very big scope for

life insurance companies to cover these people. So the business of life insurance

will grow further in the future.

TABEL: 4

SHOWING ANNUAL PREMIUM PAID BY INDIVIDUALS FOR LIFE

INSURANCE:


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PREMIUM PAID (RS) NO OF RESPONDENTS

Rs. 5000-Rs.15000 24

Rs.15001-Rs.50000 12

Rs.50001-Rs.80000 4

Rs.80001-Rs.100000 6

More than 100000 4

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GRAPH: 4

SHOWING ANNUAL PREMIUM PAID BY INDIVIDUALS FOR LIFE

INSURANCE:

INTERPRETATION:

From the chart above we find that, 48% of the respondents surveyed pay

an Annual premium less than Rs. 15000 towards life insurance 24% of them pay

an annual premium less than Rs. 50000 and 8% pay less than Rs. 80000. Hence

we can safely say that HDFC SLIC would be able to capture the market better if


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it introduced products/plans where the minimum premium starts at Rs. 5000 per

annum. Only 8% of the respondents pay more than Rs. 100000 as premium and

most products sold by HDFC SLIC have Rs.12000 as the minimum annual

premium amount. They should introduce more products like Easy Life Plus and

Safe Guard where the minimum premium is Rs.6000 p.a. and Rs. 12000 p.a.

respectively. This would definitely increase their market share as more

Individuals would be able to afford the policies/plans offered.

TABEL: 5

SHOWING POPULAR LIFE INSURANCE PLANS:


TYPE OF PLAN NO OF RESPONDENTS

Life insurance 10

Life insurance & investment plan 24

Pension plans & child plans 6

Tax savings plans 10

Total 50

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GRAPH: 5

SHOWING POPULAR LIFE INSURANCE PLANS:

INTERPRETATION:


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From the chart given above we can clearly see that 10 or 20 % of the

respondents hold life insurance plans and 24 or 48% of the respondents hold life

insurance cum investments plans. If the policy holder dies during the policy

term the nominee gets the death benefit that is, sum assured and accumulated

bonus. On survival the policy holder receives the survival benefit with a bonus,

6 or 12% hold pensions plans so that they can led the life after retirement and

finally 10 or 20% of respondents hold tax savings plans so that the ensure safety

for their money.

TABEL: 6

SHOWING CONSUMER WILLINGNESS TO SPEND ON LIFE

INSURANCE PREMIUM:


WILLINGNESS TO SPEND ON

PREMIUM NO OF RESPONDENTS

< Rs.6000 8

Rs.6001-Rs.10000 14

Rs.10001-Rs.25000 14

Rs.25001-Rs.50000 8

Rs.50000-Rs.100000 6

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GRAPH: 6

SHOWING CONSUMER WILLINGNESS TO SPEND ON LIFE

INSURANCE PREMIUM:

INTERPRETATION:

From the graph above, we can clearly see that 16% of the respondents would

Be willing to spend < Rs. 6001 for life insurance. 28 % would be willing to

spend between Rs. 6001 – Rs. 10000 per annum. Only 28% would be willing to


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spend Rs.10001- Rs. 25000 p.a premium. We could say that the maximum

premium payable by most consumers is less than Rs. 25000 p.a. HDFC SLIC is

facing with a large amount of competition. There are 18 insurance companies in

India inclusive of LIC. Hence to capture a larger part of the market the company

could introduce more reasonable plans with lesser premium payable per annum.

TABEL: 7

SHOWING CHART SHOWING IDEAL POLICY TERM:


IDEAL POLICY TERM NO OF RESPONDENTS

3-5 YEARS 22

10-15 YEARS 10

16-20 YEARS 4

21-30 YEARS 8

WHOLE LIFE POLICY 6

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GRAPH: 7

SHOWING CHART SHOWING IDEAL POLICY TERM:

INTERPRETATION:

From the chart given above it can be seen that 22 or 44% of the respondents

prefer a policy term of 3– 5 years, 10 or 20% prefer a term of 10 – 15 years and

4 or 8% prefer a term of 16 – 20 years. This means that HDFC SLIC could

introduce more plans where in the premium paying term is less than 15 years.

The outlook of insurance as a product should be changed from something which

you pay for your whole life (whole life policy) and do not receive any benefit


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(the nominee only receives the benefit in case of your death) to an extremely

useful investment opportunity with the prospects of good returns on savings, tax

saving opportunities as well as providing for every milestone in your life like

marriage, education, children and retirement.

TABEL: 8

SHOWING FACTORS THAT MOTIVATE RESPONDENTS TO

PURCHASE INSURANCE:


PARAMETER NO OF RESPONDENTS

ADVERTISEMENTS 8

HIGH RETURN 28

ADVICE FROM FRIENDS 8

FAMILY RESPONSIBILITY 6

TOTAL 50

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GRAPH: 8

SHOWING FACTORS THAT MOTIVATE RESPONDENTS TO

PURCHASE INSURANCE:

INTERPRETATION:

From the chart above it can be seen that 12% of the respondents purchase life

insurance to secure their families, 56% take life insurance to get high returns,

16% purchase insurance on the advice of their friends and 16% purchase

insurance because of the influence of advertisements. The main purpose of

insurance is to cover the financial or economic loss. But now a day this trend is


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changing. Along with protection (life cover), a savings with the introduction of

the new unit linked plans in the market is playing major role.

TABEL: 9

SHOWING PREFERRED COMPANY TO PURCHASE

INSURANCE:


TYPE OF COMPANY NO OF RESPONDENTS

GOVT.OWNED 16

PUBLIC LTD CO 10

PRIVATE CO 16

FOREIGN CO 8

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GRAPH: 9

SHOWING PREFERRED COMPANY TO PURCHASE

INSURANCE:

INTERPRETATION:

From the graph above we find that 32% of the respondents preferred to purchase

insurance from a government owned company and private company, 20% of the

respondents preferred to purchase insurance from a public limited company, and


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only 16% of the respondents preferred a foreign based company. Heavy

advertising through television, newspapers, magazines and radio is required.

TABEL: 10

SHOWING MINIMUM EXPECTED RETURN ON

INVESTMENT:


EXPECTED RETURN NO OF RESPONDENTS

LESS THAN 5% 4

10%-20% 24

21%-30% 12

31%-40% 6

MORE THAN 50% 4

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GRAPH: 10

SHOWING MINIMUM EXPECTED RETURN ON INVESTMENT:

INTERPRETATION:

From the chart above it can clearly been seen that 8% of the respondents would

like < 5% returns, 48% would like returns between 10 – 20% and 24% would

like returns of 21 – 30% on their investments. Therefore the average return on

investment should be at least 10 – 30 %.Most consumers are willing to adapt to

some amount of risk but still want some guaranteed returns. Therefore the bulk

of investment should be made in the balanced fund with 50% debt and 50%equity. The returns on the Secure Fund are guaranteed as these involve

investment in government securities and the debt Market. But the returns on

these instruments are low (8 – 10%).If the company invests in shares, returns are


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higher (39%) but correspondingly risk Borne by the policy holder is also higher.

Therefore a good combination of the two instruments is often a wise choice.


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