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Nath Balakrishnan

WITH the surging popularity of unit-linked insurance plans, it should not come as a surprise that companies are putting out new products in this category. One such recent launch is Freedom, by ING Vysya. This week, we will examine some of the key features of this plan.

Premium payments are parked in what is called Individual Policyholders' Account (IPA). After deducting the charges, the remaining amount is used to purchase units in a fund of the policyholder's choice. Investments can be made across four funds — debt, secure, balanced and growth.

These funds offer avenues for progressively higher returns, with a commensurate increase in the risk profile. Two switches per policy year between funds is offered free; subsequent charges attract a charge.

Policyholders also can choose the extent of life cover they want; while the lower level is Rs 75,000, the upper limit is pegged at one-and-half times the total regular premium to be paid over the duration of the plan.

To illustrate, if a policyholder pays an annual premium of Rs 30,000 over a 15-year term, the life cover can be between Rs 75,000 and Rs 6,75,000 (Rs 30,000 x 15 years x 1.5).

As with most unit-linked plans, this policy also allows top-up, under which, the policyholder can bring in any surplus amount in a year to step up his contribution to the investment corpus.

Survival benefits can be taken at predetermined intervals; 25 per cent of the funds in the IPA can be withdrawn, each at the end of the 10th, 15th, 20th and 25th years. These withdrawals, however, do not affect the sum assured under the plan.

The policy matures when the policyholder attains the age of 70, at which he can withdraw the balance amount available in the IPA.

Should the policyholder die before the policy maturing, the beneficiary would receive the higher of the sum assured or the amount available in the IPA.

The plan also gives policyholders the option of a one-time partial surrender between the sixth and tenth policy year, for an amount up to 25 per cent of the IPA.

In such a case, the sum assured will also stand reduced proportionally. Full surrender is also possible after the first policy year.

As with unit-linked plans, there are charges towards initial policy, allocation, plan administration and fund management charge and switching (if number of switches exceed two in a year).

Getting familiar with the charge structure would be imperative to avoid any negative surprises at a later date.

(Readers are requested to compare products featured under this column with similar ones offered by other players.)

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