What is Fund Value in ULIP?

Unit Linked Insurance Plans (ULIPs) are popular because they offer the dual benefit of life insurance protection and investment growth. One key concept every ULIP investor should understand is fund value.

Your ULIP’s fund value shows how much your investments are currently worth and helps you track your financial progress. Understanding fund value helps you make better decisions about fund switches, premium payments, or withdrawals.

In this blog, we’ll explain what fund value is, how it is calculated, what influences it, and how you can track and manage it effectively.

What is Fund Value in ULIP?

Fund value is the current market value of your investments in a ULIP.

When you pay premiums into your ULIP, the insurer allocates a portion of them (after charges) to buy units in your chosen investment funds (such as equity, debt, or balanced funds). The fund value represents the total worth of all these units at any given time.

In simple terms:

Fund Value = Total number of units held × Current Net Asset Value (NAV) of each unit

Your fund value plays a key role in determining:

• The returns on your investment
• The maturity amount you will receive
• The death benefit payable to your nominee

By tracking fund value, you can monitor your investment performance and make informed choices about fund switches, premium top-ups, or partial withdrawals.

How is Fund Value Calculated in ULIP?

The formula to calculate fund value is:

Fund Value = Number of Units × NAV (Net Asset Value)

• Number of Units: Units you hold in the fund are purchased when you pay premiums. The number of units depends on the NAV at the time of purchase.
• NAV (Net Asset Value): The NAV represents the per-unit market value of the fund, based on the value of the underlying assets (stocks, bonds, etc.). NAV changes daily, depending on market movements.

Other factors that affect fund value calculation:

• Premium Payments: Regular and top-up premiums add more units to your fund.
• Fund Switches: Moving between different funds (equity, debt, balanced) can affect the NAV and unit allocation.
• Partial Withdrawals: When you withdraw money, units are deducted, reducing the fund value.

Understanding this simple formula helps you see how your fund value grows or changes over time.

If you're looking to understand how different charges affect this calculation, you can read more in our detailed guide on Understanding ULIP Charges and Fund Value.

Factors That Affect Fund Value in ULIP

• Market Performance: Since ULIPs invest in market-linked funds, the value of the underlying assets (stocks, bonds, etc.) impacts NAV and thus fund value. If markets perform well, your fund value generally increases.
• Premium Payments: Your regular premiums and any top-up premiums add more units to your fund, helping grow your fund value over time.
• Fund Switches: Switching between different funds (equity, debt, or balanced) impacts how your investments perform and can influence fund value positively or negatively.
• Partial Withdrawals: When you make partial withdrawals, units are deducted from your fund, which reduces the overall fund value.
• Charges: Certain charges (such as policy administration charges, fund management charges, and premium allocation charges) are deducted from the fund, reducing fund value.
• Insurance Costs: Mortality charges (cost of life insurance cover) are regularly deducted from your fund, slightly lowering your fund value.

How Fund Value Affects Your Returns and Insurance Coverage

• Returns: Your returns from a ULIP depend on how your fund value grows over time. A higher fund value at maturity means better returns. Fund value growth depends on market performance, fund choices, and how long you stay invested.
• Insurance Coverage: In many ULIPs, the death benefit is either the higher of:
  • Sum assured (the guaranteed life insurance amount), or
  • Fund value at the time of claim

Hence, your fund value can directly influence what your nominee receives.

Tax Benefits

The premiums you pay qualify for tax deductions under Section 80C. The maturity proceeds (which include your fund value) are tax-free under Section 10(10D), provided the policy meets required conditions.

How to Track and Manage Your Fund Value

• Tracking and managing your ULIP’s fund value regularly: Most insurers provide secure online platforms where you can log in and check your fund value anytime. Your insurer will also send periodic fund value statements to your registered email or address.
• Review Fund Performance Regularly: It’s important to review your ULIP fund performance every few months or at least once a year. Look at NAV trends and returns compared to benchmarks. This helps you decide whether to continue with your current fund or consider switching.
• Consider Fund Switches: ULIPs give you the option to switch between funds (for example, moving from equity to debt or balanced funds). You can switch based on:
  • Your risk appetite
  • Market outlook
  • Changes in your financial goals (like moving to safer options closer to maturity)

Conclusion

Fund value is one of the most important aspects of your ULIP investment. It reflects your current investment worth and plays a big role in determining both the returns and the insurance benefits your plan provides.

By tracking your fund value regularly and managing it actively through smart fund switches and disciplined premium payments, you can maximise your returns and achieve your financial goals.

To explore ULIP options that help you grow your fund value and protect your family, visit Bandhan Life ULIP offerings or consult your financial advisor for personalised advice.

Frequently Asked Questions

What factors affect the fund value in a ULIP?

Fund value is affected by market performance, premium payments, fund switches, partial withdrawals, policy charges, and mortality charges.

Does the fund value affect my life insurance coverage in ULIP?

Yes. In many ULIPs, the death benefit is the higher of the sum assured or fund value. Hence, a higher fund value can increase the insurance payout.

How often does the fund value change in a ULIP?

Fund value can change daily, as it depends on the NAV, which fluctuates based on market conditions.

How does a partial withdrawal affect my fund value?

When you make a partial withdrawal, units are redeemed from your fund, reducing the total number of units held and lowering your fund value.