Why you should get a ULIP that returns mortality charges on survival

The latest reductions in charges have gained a Unit Linked Insurance Plan (ULIP) increasing popularity. The reduction in these ULIP charges has not only acquired the attention of many investors but also helped them to boost their ULIP performance. Charges levied by a ULIP Policy are premium allocation charge, policy administration charge, mortality charges, and fund management charges, respectively.

While premium allocation charges are directly deducted from the premium, other charges like policy administration, fund management, and mortality charge are deducted from the corpus. In order to make investments more lucrative, ULIPs have launched a feature called ‘Return on Mortality Charge (ROMC)’ So if you’re wondering about ROMCs and why invest in those ULIPs that offer you with ROMC, then keep reading to find out why:

What are Returns on Mortality Charge (ROMC)?

A few of the insurance companies offer these benefits in two forms: Return on Mortality Charge (ROMC) and the Return Enhancer. ROMCs promises the policyholder with not only the cost of a life cover but also enhancement of the value of the corpus. Since ROMCs are investor-friendly, it increases the returns on the date of maturity.

On the other hand, the return enhancer may offer the investor with an additional option of 0.5% on each due installment. This additional option is provided only if the investor opts for installments for a period of 5 years in a maturity benefit. Over the due course, the investor’s participation in funds of his choice is permitted by ULIPs.

Reasons why you should opt for ULIP with the ROMC benefit:

  1. ChargesUnder a ULIP Policy, there are certain charges incurred on the premium allocation, policy administration as well as fund management. In the initial stages of investment, you may have to pay Rs.400 which is further increased up to 5% every year. The charges of fund management are 1.35% for equity funds and for debts funds, the charges are 0.95%.
  2. Returns
    Returns on Mortality Cost (ROMC) make the investment in this policy less expensive. The mortality charges usually are based on the age, sum assured, and so forth of the policyholder. As the fund value of the policy nears the mark of sum assured, then the mortality charges may keep reducing.
  3. Premiums
    Under section 80C of the Income Tax Act, 1961, the premium paid towards the ULIPs are eligible for deductions on tax. These premiums can either be paid in a lump-sum amount or in installments based on monthly, yearly or quarterly basis. At times, certain insurance companies provide the policyholder with an option of choosing the year for the payment of premium. However, this depends totally on your insurance company.
  4. Life covers
    Being a dual product, ULIPs offer the benefits of investment and insurance, at the same time. Therefore, as an investor, you have the perfect opportunity of gaining higher returns while securing your family needs. When you invest in ULIPs, it encourages your saving and investment habits. This, in turn, will help you in creating wealth to fulfill your long term goals.
  5. Death Benefit
    Under a ULIP Policy, the nominees of the policyholder are offered with a death benefit. They are offered with a sum assured or fund value, whichever is higher. This ensures the safety and security of the financial goals of the families of the policyholder at the time of his death.

Now that you know why you should get a ULIP that returns mortality charges on survival, when do you plan on investing in ULIPs? Return on mortality is one of the key features that you should look for while investing in ULIPs. However, when you’re doing so, be aware of the lock-in period of the ULIPs as they are not a portable option.

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