ULIP - Edelweiss Tokio Wealth Plus. Rising star

Unit Linked Investment Plans (ULIPs) are also an option if you want to secure the future of your daughter against exigencies and save some money for her future. Our pick in this category is ‘Edelweiss Tokio Wealth Plus.’ The plan offers policy holders a life cover and a return on investment through equity and fixed income instruments.

The plan provides an additional feature called “Rising Star Benefit” to secure the future financial needs of the child. You need to choose this option at the time of policy inception itself.

When you choose the ‘Rising Star Benefit’, you (the parent) become the policyholder and the child the ‘life insured’ under the policy. The policy provides life cover for both parent and child. In the unfortunate event of the parent’s death, a lump-sum will be paid to the child immediately. This is a multiple of the premium. Depending on the age of the policyholder at the time of the inception of the policy, the lumpsum is 10/9/5/4 times the premium (for age 18-40, 41 to 44, 45 to 50, 51 to 55 respectively).

The highlight is that after the death of the parent, the policy will continue to be in force (though no future premium will be required to be paid) and an amount equal to the sum of all the future premiums will be credited to the fund value. This helps the fund value grow faster due to the power of compounding. Normally, in child ULIPs, the insurers invest the premiums in the fund only when they fall due. However, relevant charges such as fund management charges and mortality charges for the child will continue to be levied as and when due by cancellation of units.

On maturity, the fund value will be paid to the child. In the event of the death of the child preceding the parent before maturity, the insurer will pay the sum assured or the fund value, whichever is higher at that point to the parent or nominee.

Fund options

The plan offers two investment strategies; 1) Life stage and duration-based strategy and 2) Self-managed strategy.

The life stage and duration-based strategy is a pre-defined formula-driven investment solution suitable for novice investors investing in equity large-cap and bond fund.

Under the ‘self-managed strategy’, the policy holder is allowed to invest in any of the five funds –equity large-cap, equity top 250, equity mid-cap, bond and managed fund. The plan allows unlimited switches among funds free of cost.

Additional allocation

An attractive feature of the plan is that it provides additional allocation every year starting from the first policy year till the end of the premium paying term.

Though it is similar to loyalty additions of other insurers, the quantum of allocation in this plan is higher; one per cent of the annualised premium every year for the first five years. From the sixth policy year, the additions are called ‘premium booster’ complementing three, five and seven per cent in the corresponding 6-10, 11-15 and 16-20 policy years respectively. Hence, the additional allocations to the policy with 20-year tenure is equivalent to 80 per cent of the one-year premium.

Lower charges

Edelweiss Tokio Life Wealth Plus is cheaper than standard ULIPs. The premium allocation charges, policy administration charges, switching charges, premium redirection charges and partial withdrawal charges are nil. The fund management charge of 1.35 per cent for equity funds is lower than the average expense ratio of the direct equity diversified mutual funds, which was 1.45 per cent (as on January 2017).

Investors with a high risk appetite with long-term financial goal for children can consider this plan and choose the equity funds. You can check if the insurance cover under the plan is adequate or else, take a separate term insurance policy.

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