Imagine you have a box of gold coins. Every year on your birthday, you gift yourself one gold coin that you keep adding to this box. At any given point, the total value of this box will vary depending upon the market value of gold at that time.
The Fund Value of your ULIP plan () works in a similar way. In exchange for the premium that you pay for your policy every year, your money is invested in a combination of funds or a single fund of your choice (as per the product features).
Thus, the market value of these funds at a given time is called the Fund Value. It depends on performance and conditions of its individual components, like equity, debt, a combination of both or others, etc. You receive the maturity amount based on the fund value of your funds on the date of maturity or selected frequency in case of the settlement option.
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It refers to the total present value of your investments in a ULIP. It represents the market value of the units you hold in the chosen funds at any given time.
Not necessarily. The fund value is your fund’s market value the date you check it on. The maturity amount is the fund value on the final day of the policy.
In a ULIP, the surrender value you receive if you exit early is the fund value minus any applicable surrender charges. For instance, if you have a car and sell it after a few years from purchase at the current market price, the money you receive can be considered the car’s surrender value.
The surrender value in an insurance policy is often lower than the full fund value, especially in the initial years.
In insurance, the meaning of fund value is limited to ULIPs. The value keeps changing according to market conditions. Cash value is a term often used for traditional life insurance policies with a savings component (such as an endowment plan). The cash value grows at a pre-defined (usually guaranteed) rate.
You can track your fund performance through your online insurance account. The insurer provides regular statements showing your fund value, the number of units you hold, and the NAV (Net Asset Value) of the funds.
The best value funds depend entirely on your personal risk appetite and financial goals. ULIPs offer a range of funds, from equity-oriented (higher risk) to debt-oriented (lower risk). It is best to consult with a financial advisor and choose the funds suited to your objectives.
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