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The new endowment plus plan is the new insurance-based product which suits the preference of people who are seeking insurance based investment plan. Thus in this plan, a part of the premiums paid by the policyholder is utilized for cover provision, and the other part is utilized to invest in financial instruments.
The new endowment plus plan is a unit linked plan, which means the investment part of the policy holder’s premium is used for buying market linked products which are offered as units. It is necessary to purchase or sell in whole units, the minimum being a single unit. The total invested money in a particular market instrument is the product of the value of one unit multiplied by the number of units purchased.
Investments can be increased or decreased in a particular market instrument by buying more units or selling the units of that market instrument. When the unit values show, an upward trend investors or fund administrators seek to buy more of that instrument, whereas when the unit values show a downward trend investors or fund administrators seek to liquidate their units by selling them.
A trend is identified over a certain overall period of time, thus in a downward trend there may be several points of rise and in an upward trend, there may be several points of fall.
Like for all other markets in the money and financial instruments markets also buyers can find sellers and sellers can find buyers due to differences in value and time perception, preferences, profit objectives, short term and long term perception, portfolio objectives and several other considerations. To say it simply what can be a loss to one can be a gain to another and this holds true for market instruments also. A rise and fall in the value of a particular market instrument depends at what point in time it has been bought or sold instead of a whole time range. Instead of thinking in terms of buying or selling, market investors perceive these acts as investing or liquidating.
Fund administrators make a different type of fund portfolios. Each fund portfolio comprises of a mix of different market instruments. Fund administrators may increase or decrease quantities of market instruments in their portfolios by taking up more units of that market instrument or liquidating units of the same, so as to enhance or maintain the attractiveness and purpose of their different portfolios.
To suit the preferences of different type of investors, the company is offering four types of investment funds in the new endowment plus plan, salient features of which are as mentioned below:
|Risk Preference||Fund Purpose||Fund Option||Investments Instruments|
|Government / Government Guaranteed Securities / Corporate Debt||Short-term investments such as money market instruments||Listed Equity Shares|
|Low||Safety/minimum risk||Bond Fund||Not less than 60%||Not more than 40%||N.A|
|Low to Medium||Income steadiness||Secured Fund||Not less than 45%||Not more than 40%||Not less than 15% and not more than 55%|
|Medium||A balanced blend of income and growth||Balanced Fun||Not less than 30%||Not more than 40%||Not less than 30% and not more than 70%|
|High||Long term capital growth||Growth Fund||Not less than 20%||Not more than 40%||Not less than 40% and not more than 80%|
The units allocated to the policyholder in the new endowment plus plan are not the units of any particular market instrument, but the units of the entire fund opted by the policyholder. Likewise, the value of units of a particular type of fund is the net asset value of the entire fund and not any particular market instrument.
The value of fund units is their net asset value (NAV) which keeps fluctuating with fluctuations in the value of the instruments that comprise them. The net asset value is determined on a daily basis, and the policyholder can check NAV of the units he/she has been allotted daily to know how much has been gained or lost.
The NAV of a unit of a particular fund is worked out on a daily basis, and the value is displayed on the website, the NAV is based on the performance of the market instruments in the particular fund portfolio and fund management charges.
For calculating NAV of a fund the fund’s market value (aggregate of individual market instruments comprising the fund) is added with current assets value and then from this sum, current liabilities and provisions value is subtracted.
Since a portion of policy holder’s premium is invested in market instruments, that portion is not free from risk and all associated risks for this market invested portion has to be borne by the policyholder. The portion of premiums which is utilized for provision of the cover is risk-free.
Policyholders of the new endowment plus plan are covered against:
Death: this is basic cover and implies that if the policyholder dies during the tenure of the policy then sum assured on death shall be paid to his/her beneficiaries
Death due to accident (as rider option): this is a rider option and implies that should the death of policy holder occur due to an accident then beneficiaries will be paid sum assured.
The salient features of the new endowment plus policy in a nutshell are:
Income tax benefit under section 80 C
Fund switching option
Partial withdrawal option
Policy acquires paid up and surrender value
Loans cannot be raised against the policy
Opportunity to invest in market instruments
Fund of Policyholder is skillfully managed
Differentiated fund options for different risk preferences
|When can you enter the policy?||If your age is within 90 days to 50 years|
|Till what age is the policy valid?||60 years of age|
|What is policy term?||10 or 20 years|
|When can premiums be paid?||Yearly, semi-annually, quarterly and monthly.|