When NAVs plummet

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: indicator of how your fund is performing, the true indication of the overall performance of your investment is the IRR (internal rate of return).”

The falling markets could worry two types of investors. First are the ones who bought a unit-linked policy with the intention of enjoying the holiday premium after payment of three premiums. And the second are the ones who invested in such polices through the single-premium mode.

Most insurance companies allow premium holiday for a set period of time, usually more than two years, or till the fund value reaches a set limit. During the bull run, investors enjoyed the entire premium holiday period without worrying much about fund size. However, falling markets will definitely not give them such luxury now. “Investors who have opted for this route might have to top up their investments to ensure that they enjoy the premium holiday period,” says Jaideep Lunial, a Chandigarh-based financial planner.
Trouble might also crop up for single-premium investors. “If the fund value falls below a set limit, insurance companies have the right to cancel the policy,” says R. Krishnamurthy, managing director, Watson Wyatt.
Investors who have chosen any of these two plans can top up their investments to avoid such a scenario. “In fact this is a good time to top up your investments, if your company allows,” says Lunial.

Points to remember
Express Money has always advocated that insurance should never be mixed with investment. But still, if what you get at maturity of the policy is more important to you, here are a few things you should take note of.
“One should not totally bank on Ulips for life insurance cover. One should opt for a combination of traditional plans and Ulips. A traditional plan will act as a cushion and give a certain sum assured irrespective of how equities perform,” says Anuj Agarwal, chief financial officer, SBI Life.