Everyone’s financial future is unique, but what is the common factor that can brighten everyone’s financial prospects? Simple—investing their savings.
What’s the best strategy for investing? You need a term plan to protect your life and an investment plan to channel your savings. Kotak offers a Term Insurance plan with ULIP features, known as the ‘Kotak T.U.L.I.P Plan.’
Will it serve as a safeguard for future uncertainties while simultaneously aiding in wealth accumulation? We’ll find out through a comprehensive review, conducting a thorough analysis of the advantages and disadvantages of the Kotak T.U.L.I.P plan.
Let’s begin!
Table of Contents
1.)What is Kotak T.U.L.I.P Plan?
2.)What are the Features of Kotak T.U.L.I.P Plan?
3.)Who is eligible for the Kotak T.U.L.I.P Plan?
4.)Kotak T.U.L.I.P Plan – Review of Benefits in Detail
5.)Investment Strategies and Fund Options in Kotak T.U.L.I.P Plan – Analysis
6.)Review of Charges under Kotak T.U.L.I.P Plan
7.)The Grace period, Discontinued policy, and Revival of Kotak T.U.L.I.P Plan
8.)Free Look Period of Kotak T.U.L.I.P Plan
9.)Surrendering Kotak T.U.L.I.P Plan
10.)What are the Advantages of Kotak T.U.L.I.P Plan?
11.)What are the Disadvantages of Kotak T.U.L.I.P Plan?
12.)Research Methodology of Kotak T.U.L.I.P Plan
- Benefit Illustration – IRR(Internal Rate of Return i.e. Interest Rate) Analysis of Kotak T.U.L.I.P Plan
13.)Kotak T.U.L.I.P Plan Vs Other Investments Options
- Kotak T.U.L.I.P Plan Vs. Pure term + ELSS
- Kotak T.U.L.I.P Plan vs Kotak Assured Savings Plan
- Kotak T.U.L.I.P Plan vs Kotak Guaranteed Fortune Builder
14.)Final Verdict on Kotak T.U.L.I.P Plan – Good or Bad Investment Option?
1.)What is Kotak T.U.L.I.P Plan?
Kotak T.U.L.I.P Plan is a Non-Participating Unit Linked Endowment Plan. It provides higher life insurance coverage (Basic Sum Assured) to cater to your protection needs along with your investment objective. It’s a long-term financial tool designed to grow your wealth while safeguarding your family’s future. On your survival till maturity, this plan pays the available fund value to you.
Read the Kotak T.U.L.I.P Plan policy brochure for more details.
2.)What are the Features of Kotak T.U.L.I.P Plan?
- Flexibility to pay a premium for a limited duration or throughout the policy term.
- Option to choose from multiple investment strategies and fund options
- Enhance your protection through Rider options.
- Loyalty additions as a reward for staying invested to enhance your maturity value on maturity.
- Option to choose a High Sum Assured multiple to offer significant life cover.
- 2X Return of Premium Allocation Charges from the end of the 10th policy year onwards.
- Up to 3X Return of Mortality Charges on Survival starting from the 11th policy year onwards.
3.)Who is eligible for the Kotak T.U.L.I.P Plan?
Minimum | Maximum | |
Entry Age | 18 years | 60 years |
Maturity Age | 48 years | 100 years |
Policy Term | 30 to 40 years | |
Premium Paying Term | Limited Pay: 10/12/15 Years Regular pay: Same as Policy Term |
|
Mode | Yearly, Half-yearly, Quarterly and Monthly | |
Premium Level | 1,00,000 (annual mode) and 1,20,000 (for other modes) | |
Basic Sum Assured | 7 times of Annual Premium | No limit |
4.)Kotak T.U.L.I.P Plan – Review of Benefits in Detail
Death benefit – Review
In the event of death, the nominee would receive Highest of:
- Basic Sum Assured less applicable partial withdrawal amount from Main Account (if any), OR
- Fund Value in the Main Account which will include Loyalty Additions, if any, OR
- 105% of the total Premiums paid up to the date of death less applicable partial withdrawal amount from the Main Account, if any
Maturity Benefit – Review
On survival of Life Insured till the end of the policy term provided all the premiums are paid up to date and the policy is in force, Fund Value (Main Account + Top up Account, if any) inclusive of Loyalty Additions shall be payable.
5.)Investment Strategies and Fund Options in Kotak T.U.L.I.P Plan – Analysis
Kotak T.U.L.I.P Plan offers you the flexibility to choose from 2 Investment Strategies i.e. Self-Managed Strategy and Age-Based Strategy to suit your investment needs.
Self-managed Strategy
This strategy offers you the flexibility to choose from a range of power-packed fund options that enable you to maximize your earnings potential. You can match your desired tenure and risk profile with the available fund selections.
Fund options | Equity | Debt | Money Market | |
Classic Opportunities Fund | 75-100% | 0-25% | 0-25% | Aggressive |
Frontline Equity Fund | 60-100% | 0-40% | 0-40% | Aggressive |
Kotak Midcap Advantage fund | 75-100% | 0-25% | 0-25% | Aggressive |
Balanced Fund | 30-60% | 20-70% | 0-40% | Moderate |
Dynamic Bond Fund | – | 60-100% | 0-40% | Conservative |
Dynamic Floating Rate Fund | – | 60-100% | 0-40% | Conservative |
Dynamic Guilt Fund | – | 80-100% | 0-20% | Conservative |
Money Market Fund | – | – | 100% | Secure |
The risk profile of each fund varies depending on the asset under management. Make sure to choose the fund(s) that match your risk tolerance.
Age-Based Strategy
This investment tactic involves allocating funds according to the investor’s age and risk tolerance. Depending on the customer’s risk appetite, categorized as Aggressive, Moderate, or Conservative, the allocation is distributed between the Classic Opportunities Fund and the Dynamic Bond Fund. To maintain the predetermined proportions of the Fund Value in the specified funds, unit rebalancing occurs monthly as needed. The rebalancing of units is scheduled to take place on the monthly policy anniversary, referred to as the “month-versary.”
Age of life Insured | Aggressive | Moderate | Conservative | |||
Classic Opportunities Fund | Dynamic Bond Fund | Classic Opportunities Fund | Dynamic Bond Fund | Classic Opportunities Fund | Dynamic Bond Fund | |
0-25 | 80% | 20% | 70% | 30% | 60% | 40% |
26-35 | 70% | 30% | 60% | 40% | 50% | 50% |
36-45 | 60% | 40% | 50% | 50% | 40% | 60% |
46-50 | 50% | 50% | 40% | 60% | 30% | 70% |
51 onwards | 40% | 60% | 30% | 70% | 20% | 80% |
6.)Review of Charges under Kotak T.U.L.I.P Plan
Premium Allocation charge
This charge represents a percentage of the premium amount. Subsequently, the net premium is allocated based on the Net Asset Value (NAV) as of the date of premium receipt. These charges remain applicable throughout the premium payment term.
Policy Year | % as of Annual Premium |
Year 1 | 12% |
Year 2 | 6% |
Year 3 | 3% |
Year 4 | 3% |
Year 5 | NIL |
Policy Administration Charge
It will be Nil during the first four years and will be applicable from the 5th Kotak T.U.L.I.P Plan policy year onwards till the end of the policy term. The policy administration charge shall be ₹ 500 per month deducted monthly by cancellation of units from the Fund value.
Fund Management Charge (FMC)
Fund options | Fund management Charges |
Classic Opportunities Fund | 1.35% p.a. |
Frontline Equity Fund | 1.35% p.a. |
Kotak Midcap Advantage fund | 1.35% p.a. |
Balanced Fund | 1.35% p.a. |
Dynamic Bond Fund | 1.20% p.a. |
Dynamic Floating Rate Fund | 1.20% p.a. |
Dynamic Guilt Fund | 1% p.a. |
Money Market Fund | 0.60% p.a. |
Discontinued Policy Fund | 0.50% p.a. |
Switching Charge
The first twelve switches in a policy year are free. For every additional switch thereafter, ₹ 250 will be charged.
Partial withdrawal Charge
The first 12 partial withdrawals in a policy year are free thereafter for each Partial Withdrawal from the Main Account in any policy year ₹ 250 will be charged.
Discontinuance charge
The Discontinuance Charges will be applicable to the Main Account only and not to Top-Up Accounts. The charges will be based on the year of discontinuance and the amount of the premium.
Mortality Charge
Mortality charges are calculated on Sum at Risk and deducted from the Fund Value on a monthly basis by cancellation of units. The charges are determined by multiplying the Sum at Risk by the mortality rate.
Inference from the charges
Though the Plan allows you to invest in markets, the various charges as discussed above will be deducted from the premium amount. Other market-related products, don’t levy these charges. Over a period of time, these charges will pull down your returns.
7.)The Grace period, Discontinued policy, and Revival of Kotak T.U.L.I.P Plan
Grace period
In the Kotak T.U.L.I.P Plan, there is a Grace Period of 30 days for the annual, half-yearly, and quarterly modes and 15 days for the monthly mode from the due date for payment of the premium.
Discontinued policy
In case of discontinuance during the first five Kotak T.U.L.I.P policy years, funds will be transferred to the Kotak T.U.L.I.P Discontinued Policy Fund. The proceeds of the discontinued policy fund shall be paid to the Kotak T.U.L.I.P policyholder at the end of the revival period or lock-in period whichever is later.
In case of discontinuance of Kotak T.U.L.I.P policy after the lock-in period, the Kotak T.U.L.I.P policy shall be converted into a Reduced Paid-Up policy with the Reduced Paid-Up Sum Assured i.e. original Sum Assured multiplied by the total number of premiums paid to the original number of premiums payable as per the terms and conditions of the Kotak T.U.L.I.P policy.
Revival
Kotak T.U.L.I.P Policyholder can revive the policy within a revival period of 3 years.
8.)Free Look Period of Kotak T.U.L.I.P Plan
The Kotak T.U.L.I.P Policyholder is offered 15 days free look period (except electronic policies and policies sold through Distance Marketing mode – which will have 30 days), from the date of receipt of this Kotak T.U.L.I.P policy document. During this period the Kotak T.U.L.I.P Policyholder may choose to reconsider his/her decision to hold this policy or may choose to return the same, within the said 15 days /30 days.
9.)Surrendering Kotak T.U.L.I.P Plan
In case you wish to Surrender within the Lock-in Period: Fund Value (less applicable discontinuance charges) will be moved into the Discontinuance Policy Fund. Proceeds of the discontinued Kotak T.U.L.I.P policy shall be refunded only upon completion of the lock-in period.
In case you wish to Surrender after the Lock-in Period: the Fund Value (Main Account + top-up account, if any), as available on the date of surrender of the Policy will be paid out immediately and the policy will get terminated.
10.)What are the Advantages of Kotak T.U.L.I.P Plan?
- Enhance your protection with critical illness and accidental death cover
- 2X Return of premium allocation charges and up to 3X return of mortality charges.
- Increase your investment contribution with a top-up premium as and when you have surplus money.
- Option to decrease the sum assured without change in premiums
- 12 free switches and 12 partial withdrawals (after 5 years) are allowed.
11.)What are the Disadvantages of Kotak T.U.L.I.P Plan?
- There is no liquidity in the first five policy years.
- Though the plan invests in the market, the returns are not up to the mark.
12.)Research Methodology of Kotak T.U.L.I.P Plan
Kotak T.U.L.I.P Plan offers life cover and at the same time provides the opportunity to invest in the market. The investment part is analysed in the next segment through a benefit illustration. This will give you a broader aspect of how the ULIP plan works. Analysing the plan in terms of returns percentage will assist you in decision-making.
Benefit Illustration – IRR(Internal Rate of Return i.e. Interest Rate) Analysis of Kotak T.U.L.I.P Plan
A 35-year-old male opts for the Kotak T.U.L.I.P Plan for a sum assured of ₹ 1 Crore. The policy term is 20 years and the premium paying term is 10 years. The annualised premium is ₹ 2 Lakhs. He is eligible for the fund value as of the date of maturity.
Male | 35 years |
Sum Assured | ₹ 1 Crore |
Policy Term | 20 years |
Premium paying term | 10 years |
Annualised premium | ₹ 2 Lakhs |
The values are based on an assumed investment rate of return of 4% p.a. and 8% p.a. The values shown are not guaranteed and they are not upper and lower limits of what you might get back as the value of your policy is dependent on a number of factors including future investment performance.
At 4% p.a. | At 8% p.a. | ||||
Age | Year | Annualised premium / Maturity benefit | Death benefit | Annualised premium / Maturity benefit | Death benefit |
35 | 1 | -2,00,000 | 1,00,00,000 | -2,00,000 | 1,00,00,000 |
36 | 2 | -2,00,000 | 1,00,00,000 | -2,00,000 | 1,00,00,000 |
37 | 3 | -2,00,000 | 1,00,00,000 | -2,00,000 | 1,00,00,000 |
38 | 4 | -2,00,000 | 1,00,00,000 | -2,00,000 | 1,00,00,000 |
39 | 5 | -2,00,000 | 1,00,00,000 | -2,00,000 | 1,00,00,000 |
40 | 6 | -2,00,000 | 1,00,00,000 | -2,00,000 | 1,00,00,000 |
41 | 7 | -2,00,000 | 1,00,00,000 | -2,00,000 | 1,00,00,000 |
42 | 8 | -2,00,000 | 1,00,00,000 | -2,00,000 | 1,00,00,000 |
43 | 9 | -2,00,000 | 1,00,00,000 | -2,00,000 | 1,00,00,000 |
44 | 10 | -2,00,000 | 1,00,00,000 | -2,00,000 | 1,00,00,000 |
45 | 11 | 0 | 1,00,00,000 | 0 | 1,00,00,000 |
46 | 12 | 0 | 1,00,00,000 | 0 | 1,00,00,000 |
47 | 13 | 0 | 1,00,00,000 | 0 | 1,00,00,000 |
48 | 14 | 0 | 1,00,00,000 | 0 | 1,00,00,000 |
49 | 15 | 0 | 1,00,00,000 | 0 | 1,00,00,000 |
50 | 16 | 0 | 1,00,00,000 | 0 | 1,00,00,000 |
51 | 17 | 0 | 1,00,00,000 | 0 | 1,00,00,000 |
52 | 18 | 0 | 1,00,00,000 | 0 | 1,00,00,000 |
53 | 19 | 0 | 1,00,00,000 | 0 | 1,00,00,000 |
54 | 20 | 0 | 1,00,00,000 | 0 | 1,00,00,000 |
55 | 22,34,343 | 43,37,182 | |||
IRR | 0.72% | 5.05% |
The fund value at the end of 20 years @ 4% scenario is ₹ 22.34 Lakhs. The IRR calculation for this cash flow results in 0.72%. This rate is not even close to your bank savings account interest rate.
The fund value at the end of 20 years @ 8% scenario is ₹ 43.37 Lakhs. The IRR calculation for this cash flow results in 5.05%. This rate is less than the bank’s fixed deposit interest rate.
Investing Kotak T.U.L.I.P Plan will not aid in wealth accumulation and the plan doesn’t offer liquidity. This is a long-term investment, but the plan fails to beat inflation.
13.)Kotak T.U.L.I.P Plan Vs Other Investment Options
In this segment, we shall compare the returns of Kotak T.U.L.I.P Plan with other market-linked products. This comparison will guide you in your investment decision. Kotak T.U.L.I.P Plan offers life cover protection and an opportunity to invest in the market. Both these action items are to be met in the alternate investment.
Kotak T.U.L.I.P Plan Vs. Pure term + ELSS
Let us assume the same figures as seen in the above illustration. A pure term life insurance policy for a sum assured of ₹ 1 crore would cost ₹ 21,800 p.a. The policy term is 20 years and the premium paying term is 10 years. For the same sum assured, we paid ₹ 2 Lakhs p.a. under the previous scenario. In this alternate investment strategy, you will be left with 1,78,200.
Pure-term Life Insurance Policy | |
Sum Assured | ₹ 1 Crore |
Policy Term | 20 years |
Premium paying term | 10 years |
Annualised premium | 21,800 |
ELSS Investment | 1,78,200 |
For comparison purposes, let us assume the balance amount is invested in another market-related product which is an ELSS fund. At the time of redemption, the fund value is subject to capital gain tax. Tax calculation is given below.
Age | Year | Term insurance + ELSS | |
Term Insurance premium + ELSS | Death benefit | ||
35 | 1 | -2,00,000 | 1,00,00,000 |
36 | 2 | -2,00,000 | 1,00,00,000 |
37 | 3 | -2,00,000 | 1,00,00,000 |
38 | 4 | -2,00,000 | 1,00,00,000 |
39 | 5 | -2,00,000 | 1,00,00,000 |
40 | 6 | -2,00,000 | 1,00,00,000 |
41 | 7 | -2,00,000 | 1,00,00,000 |
42 | 8 | -2,00,000 | 1,00,00,000 |
43 | 9 | -2,00,000 | 1,00,00,000 |
44 | 10 | -2,00,000 | 1,00,00,000 |
45 | 11 | 0 | 1,00,00,000 |
46 | 12 | 0 | 1,00,00,000 |
47 | 13 | 0 | 1,00,00,000 |
48 | 14 | 0 | 1,00,00,000 |
49 | 15 | 0 | 1,00,00,000 |
50 | 16 | 0 | 1,00,00,000 |
51 | 17 | 0 | 1,00,00,000 |
52 | 18 | 0 | 1,00,00,000 |
53 | 19 | 0 | 1,00,00,000 |
54 | 20 | 0 | 1,00,00,000 |
55 | 99,78,461 | ||
IRR | 10.63% |
ELSS Tax Calculation | |
Maturity value after 20 years | 1,08,78,068 |
Purchase price | 17,82,000 |
Long-Term Capital Gains | 90,96,068 |
Exemption limit | 1,00,000 |
Taxable LTCG | 89,96,068 |
Tax paid on LTCG | 8,99,607 |
Maturity value after tax | 99,78,461 |
The pre-tax fund value is ₹ 1.08 Crores. The post-tax fund value is ₹ 99.78 Lakhs which is double the times of fund value at the 8% scenario of Kotak T.U.L.I.P Plan. This fund can be utilized for achieving any of your life goals. The IRR calculation for Pure Term + ELSS results in 10.63%. The returns are much higher than the Kotak T.U.L.I.P Plan.
Kotak T.U.L.I.P Plan vs Kotak Assured Savings Plan
The Kotak Assured Savings Plan is categorized as a Non-Participating, Endowment, or Assurance Plan. It serves the dual purpose of offering cost-effective protection and facilitating the accumulation of wealth to meet future financial objectives through guaranteed benefits. Upon maturity, policyholders are assured of receiving a Guaranteed Maturity Benefit.
Read the complete review of Kotak Assured Savings Plan.
Kotak T.U.L.I.P Plan vs Kotak Guaranteed Fortune Builder
The Kotak Guaranteed Fortune Builder is characterized as a Non-Participating, Non-Linked, Individual, Savings, Life Insurance Plan. This dynamic savings-focused life insurance plan ensures guaranteed benefits tailored to meet various financial needs, including wealth creation, short-term or long-term income goals, and securing your child’s future through guaranteed payouts.
Read the complete review of Kotak Guaranteed Fortune Builder.
14.)Final Verdict on Kotak T.U.L.I.P Plan – Good or Bad Investment Option?
Investing in life goals and protecting your family from uncertainties are the two basic aspects covered under the Kotak T.U.L.I.P Plan. The insurance cover i.e. the sum assured is quite reasonable to protect the family’s future needs. But the premium they charge for this sum assured is enormous compared to a Pure term life insurance policy.
The excess premium is supposed to be invested in the market and the maturity value is paid to the policyholder. The potential return on investment is not convincing for a long-term investment. The reason for these low returns is hefty charges and high agent commissions.
If you are interested in market-linked products, you can do so without clubbing it with insurance. This way you can combat inflation and accumulate wealth for your life goals.
Building a diversified investment portfolio and term insurance to protect your family will keep your financial plan on track. If you would like to create a personalised financial plan, then consult a Certified Financial Planner instead of adhering to unreliable information on social media sites like Quora, Facebook, Twitter, etc.
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