Life Goals Loading…

10 Blue cross

Notifications10

  • Fulfill your Life Goals with Bajaj Allianz Life Goal Assure

    KNOW MORE
  • Here's a Comprehensive Tool To Plan Your Child's Future

    START NOW
  • There is lot to remember in Life, Set renewal premium payments to Auto Pay

    WATCH VIDEO
  • Get Life Cover worth Rs.1 Crore at Rs.21 per day2 – Bajaj Allianz Life Smart Protect Goal

    CALCULATE NOW
  • Life Insurance Term Plan with Return Of Premium

    WATCH NOW
  • Get your Life Goals Done with Bajaj Allianz Life Smart Assist – BINA MILEY MIL-KAR

    KNOW MORE
  • Paying your Renewal Premium is Quick and Easy!

    PAY NOW
  • Know the right amount of Insurance you need in just a few steps!

    START NOW
  • Avail Term Insurance Tax Benefits under Section 80D

    READ MORE
  • Know how to invest money during the covid-19 pandemic!

    READ MORE

Thanks for sharing your details, A Sales representative from
Bajaj Allianz Life will contact you shortly.

Dear Customer, we request you to connect with us in our next business working hours, (Monday to Saturday 24*6) Thank you, Have a great day ahead

Have Us Call You
X

Terms & Conditions

I hereby authorize Bajaj Allianz Life Insurance Co. Ltd. to call me on the contact number made available by me on the website with a specific request to call back. I further declare that, irrespective of my contact number being registered on National Customer Preference Register (NCPR) or on National Do Not Call Registry (NDNC), any call made, SMS or WhatsApp sent in response to my request shall not be construed as an Unsolicited Commercial Communication even though the content of the call may be for the purposes of explaining various insurance products and services or solicitation and procurement of insurance business

 

Please refer to BALIC Privacy Policy

Staggered ULIP Payouts - Know All About It

Staggered ULIP payouts

Staggered ULIP Payouts - Know All About It


calender-blue

August 20, 2020

By : Bajaj Allianz Life

A unit linked insurance plan (ULIP) is a life insurance product that allows the insured to generate market-linked returns by taking advantage of different types of funds. With ULIP investment, you get life insurance protection, wealth creation opportunity and tax savings rolled into a single instrument.

Flexibility is the best part of ULIP benefits for an investor, as not only fund allocation but also how you wish to receive the payout can also be customised in accordance with your needs. Considering the market volatility caused due to COVID-19 pandemic, Insurance Regulatory and Development Authority of India (IRDAI), in the interest of policyholders, allowed staggered settlement of maturity payout across all ULIP investment plans maturing up to May 31, 2020, irrespective of whether such option is part of the terms of the policy. The rationale behind this step was to protect the corpus of policyholders from the huge market correction that has occurred due to the COVID-19 crisis.[1]

The concept of staggered payouts of ULIP returns after maturity offers a protective shield for investors when markets are under turmoil and deep market correction occurs. In this article, we will understand the options available for policyholders to receive their ULIP maturity amount, and how staggered payouts work, its benefits, and why you should take advantage of this option.

Types of ULIP payouts on maturity

Generally, ULIP policyholders can generally receive the maturity amount in the following two ways:

1. If you survive the policy term, you receive your fund value, which is the total number of units under your policy multiplied by the current net asset value (NAV) of the fund.

2. The policyholder (in case of policy maturity) or nominee (in case of the policyholder’s death) can opt to receive the maturity amount in instalments rather than as a lump sum.

What is a staggered ULIP payout?

When you opt for a staggered payout in a ULIP policy, you can withdraw the ULIP maturity money in instalments. IRDAI mandates that the total payout should be completed within a maximum term of 5 years. Going for staggered payouts or settlement options can be especially beneficial when the stock market is performing badly.

How it works?

Let us understand how staggered payouts work with a simple example - Imagine that you have a ULIP Policy that is maturing on a certain date; let us say July 21, 2020. You possess 1-lakh units of the fund in your portfolio and on the date of maturity (July 21, 2020) the NAV of the fund is Rs. 15. Therefore, the fund value, which is also the maturity value of your ULIP policy, is Rs. 15 lakh.

Under such circumstances, if you opt for staggered payouts, also called settlement option, you will receive the maturity amount (fund value) in five instalments. However, it is important to understand that you will not receive 15 lakhs in five annual instalments. The payout will vary according to the outstanding fund value and the number of instalments. The payout in each instalment is outstanding fund value divided by the number of outstanding instalments. The first instalment will be equal to Rs 15 lakh divided by 5, which will be equal to Rs 3 lakh. The next instalment will be equal to the fund value divided by 4 and the payout will continue accordingly.

 

Benefits of staggered payouts

 

For ULIP policyholders, opting for staggered payouts can be especially beneficial for the following reasons:

• It helps you to avoid low fund valuation of your ULIP NAV during market corrections like the one we are undergoing now.

• Staggered payouts can also be opted for receiving death benefits. Rather than receiving the amount in lump sum, family members can receive monthly payments.

• Staggered payouts can be received in monthly, quarterly, half-yearly or annual instalments.

• You may mismanage a large sum of money if received as a lump sum. However, you may be more careful about spending it if received in instalments.

 

Staggered payouts in times of market corrections

 

As we all know, the world is going through a deep economic crisis due to the COVID-19 pandemic. Stock markets have been badly hit and valuation has plummeted. As a result, ULIP returns have also been negatively affected as we can see from declining NAVs. Investors waiting to receive their maturity amount will have to settle with low fund value, which may not be enough to meet their life goals.

With the objective to assist policyholders, the IRDAI has allowed staggered payouts for ULIP policyholders as low ULIP returns are expected due to prevailing market conditions. However, you can now switch funds or make partial withdrawals from your ULIP investment during the settlement period. In case the policyholder dies during the staggered payout period, the nominee will receive higher of 105% of total premiums paid or outstanding fund value according to the prevailing NAV rate.

Market history has proven repeatedly that after the stock market witnesses a fluctuation, it eventually starts to appreciate. In the current scenario, as the impact of COVID-19 subsides and life gradually returns to normal, there is a high probability that the market will rebound with a vengeance. In that case, ULIP fund NAVs would rise and those who have opted for staggered payout will stand to benefit in the upcoming years.

Source

[1] https://www.moneycontrol.com/news/business/personal-finance/ulip-proceeds-battered-by-falling-markets-take-staggered-payouts-to-recoup-5142331.html

Bajaj Allianz Life Videos

Video Icon

Dancing Uncle Is Back | Special Bonus | Bajaj Allianz Life

Contact Us

Bajaj Allianz Life Insurance Company Ltd.

Bajaj Allianz House, Airport Road, Yerawada, Pune - 411 006, Maharashtra

Tel No: 020-66026773

Fax No: 020-66026789

Branch Visit Timings:

Monday to Friday - 9:00 AM to 3:30 PM

Saturday - 9:00 AM to 1:00 PM

Customer Care Helpline:

1800-209-7272

Monday to Sunday: 9:00 AM to 7:00 PM (IST)

NRI Services Helpline

24/7 (All week days)

Sales Enquiry Helpline:

1800-209-4040

Monday to Saturday: 9:00 AM to 7:00 PM (IST)

For NRI: +91 20 67688888 (Call charges apply)

Monday to Saturday: 9:00 AM to 7:00 PM (IST)

Find Us Online

~Tax benefits as per prevailing Income tax laws shall apply. Please check with your tax consultant for eligibility.

The above information is for general understanding and is meant to educate the general public at large. The reader will have to verify the facts, law and content with the prevailing tax statutes and seek appropriate professional advice before acting on the basis of the above information.