Self assessment questionnaire for ULIP buyers

ULIP or Unit Linked Insurance Plan is a product designed to offer insurance and investments opportunities for long term ULIP buyer. Ideally a 10 years or more focus required by a ULIP buyer to get profit or good returns from his investments. Short term focus to ULIP is not recommended because of the charges tailed with ULIP products are comparatively higher from a mutual fund or any other investment instruments.

In general, know that two types of ULIP’s, Type I and II. A Type I ULIP pays the higher of sum assured or fund value as death benefit, while TYPE II pays the sum assured as well as the fund value

In this article, I am presenting a bunch of questions that and investor should ask to himself for an assessment before planning to buy any ULIP products.

Investment objective

1. Identify what is your investment objective with ULIP?

2. Is the ULIP product designed to meet these objectives?

3. What is your investment horizon? “Short” or “Long”? If “short”, don’t buy a ULIP product. It is designed in a way to get profit from long term investment. In an other word, it is a product intended to long term investor only.

Premium term and options

4. What is the minimum and maximum premium for the ULIP?

5. What are the premium payment options? Yearly, half yearly, quarterly or monthly?

6. Does the ULIP allow you to pay premium as per your option?

7. Years to pay premium without failures (most of the time this will be three years. But, some cases, it can extend up to 5 years.)

8. What are the methods available to pay premiums?

Insurance protection and its charge

9. What is the policy type? (Identify Type 1 or 2)

10. What is the level of insurance protection available with the product? (it can vary from 5 to 10 times of an annual premium)

11. What is the option to select your own insurance requirement with the ULIP?

12. What is the death benefit?

13. What are the critical illness covering in this insurance?

14. What are the accidental benefit in this insurance?

15. What are the exclusions in case of critical illness?

16. What are the medical checkup requirements for insurance?

17. What are the procedures and requirements to claim the insurance?

18. What are the Mortality charges for this given insurance? (It can vary year to year from 1.31% per $1000 to 5% or more. Depends on company and how the ULIP policy designed. Ask them and clear the point.

19. Will the mortality charge increase year to year? If increase, what is the maximum percentage it will increase?

Fund options and performance

20. How many funds are available with this product where your money is going to invest. (In most case, this can be from Equity fund, balanced funds, capital protection funds etc. etc. and a number of funds with the ULIP will be informed by the consultant or the advisor)

21. What is the benchmark for this fund?

22. What are the fund performance at least for last 5 years against its bench mark.

23. Find out the fund performance for at least last 5 consecutive years and what is the benchmark performance in these years (Compare both, ULIP fund and Benchmark, to find out whether the fund beating or outperforming its benchmark continuously or constantly. If it is not performing well with its benchmark, don’t go for that policy)

24. How many free fund switching options available with the product in an year?

25. What is the cost for an additional switch if required?

26. How frequently you will receive the fund performance report and policy statements?

Surrender options and charges

27. What are the surrender options of this policy? (If you surrender the policy within the compulsory premium paying years, your entire money will be lost)

28. What are the procedures and requirements to surrender the policy?

29. What is the surrender charges for the years after compulsory premium paying years? This can be vary year to year after the compulsory premium paying years and entirely depends on the insurance company. Identify and confirm. Refer Question# 7 for details)

Premium Allocation Charges

30. What are the premium allocation charge for first year?

31. What is the charge for 2nd, 3rd, 4th, 5th particularly?

32. Is the PAC continuing after 5th years, what are those percentage?

Policy Administration Charge

Commonly, policy administration charge is reducing by selling our fund unit monthly. Most of the case, this is not calculating in the percentage of yearly premium but a fixed amount of each month.

33. Identify what is the Policy Administration charge per month

34. Ask if there is any increase in the future?

Fund Management Charges

35. What are the monthly Fund Management Charges?

36. Do this charges vary to funds to fund?

37. What is the Fund Management Charge for various funds (this is helpful while switching the fund)

38. Will the FMC change? If change, what will be the maximum percentage in an year?

Top-up premium options

39. Find out the options to pay top-up premium in addition to the regular premium.

40. What is the allocation charges for top-up premium

41. What is the minimum and maximum top-up premium allowable

Miscellaneous charges

42. What are the miscellaneous charges other than mentioned above.

43. What is the policy redirection charges (This mean, you can pay your future premiums into a different selection of funds, as per your needs.

44. What are the partial withdrawal charges for year to year after completion of your compulsory premium paid years.

45. What are the revival charges in case you are not paying premium after compulsory premium paying years and want to pay later.

46. What are the miscellaneous charges applicable to policy by levying for any alternations to the policy.

47. What are the possibility of free servicing requests and what are the charge for an additional servicing request per year.

48. If charges applies to any of the above mentioned services, ask what is the charges? Specially, charges for premium revival, premium redirection, partial withdrawal, revival of policy and additional service requests.

49. If there is any other hidden cost other than all the above mentioned charges, ask to get clarification.

Loyalty units/bonus

50. Find out if the ULIP is providing any Loyalty Units/Bonus to you

51. If yes, what is the percentage?

52. What year your ULIP start getting loyalty units/bonus


53. What are the tax benefits while taking the ULIP if available?

54. Ask for any free-look period available

55. What are the procedure to surrender and receive the benefits once completing the term successfully.

56. Ask for the term and policies specially applicable to the ULIP

Proper knowledge through research is must prior selecting an investment instrument like costly ULIP. I have provided the self assessment questionnaire which enable you to collect 99.999% must have information before signing your first premium check to the ULIP company. I promise, this self assessment will give you maximum success to select a good ULIP. Remember, proper contact to the proper place and personal required to receive correct information to assess as per the questionnaire.

As a thumb rule, find out the charges of Premium Allocation Charge, Policy Administration Charge, Fund Management Cost of a ULIP for first 10 years and compare the total amount with one year premium amount you are paying. If the 10 year cost is more than 85% of 1 year premium amount, the ULIP is considered as costly.

If you found this questionnaire help you to identify and apply for a ULIP by tracking all about the policy, help me by posting “Comments” to show your gratitude to the time and research I have made for you.