Bajaj Allianz ULIP plans offer the flexibility of market linked returns on your investments and life insurance cover for you and your family. https://www.bajajallianzlife.com/ulip/ulip.jsp

1. HIGHEST-NAV ULIPS ARE PURE MARKETING
Recently, there have been several advertisements of products which guarantee
investors the highest net asset value (NAV) of the scheme.
Such declarations do not come as a relief to the layman, who understands the
intricacies of the stock market nor has the time to buy low and sell high. However,
the devil lies in the detail. Let us see how most of these plans work:
Timing the returns
Although the stock markets in India have been delivering superb returns since
2004, the massive crash of -52.45% in 2008 did cause panic amongst the market
players and left investors with colossal losses. No wonder retail investors have
become wary of the stock market volatility and are increasingly looking at capital
protection products.
That explains the launch of the highest NAV guarantee unit-linked insurance plans
(Ulips).
A highest NAV guarantee plan is based on the constant proportion portfolio
insurance (CPPI) model. According to this model, the fund would invest in fixed-
income type of securities in order to maintain a certain minimum unit value.
When the fund value exceeds this floor value, the surplus is placed into stocks.
With constant rebalancing of the portfolio, the aim of the fund manager is to not
let the unit value fall below a certain base value.
Similarly, the proceeds in highest NAV guarantee plans would be invested in
equity, fixed income and money markets instruments. However, in such plans,
there is no specific asset allocation that the fund manager has to adhere to, unlike
a mutual fund or Ulip. Since such plans are a new product, there is no historical
data to evaluate the performance of the said funds.
As the policy guarantees you the highest NAV, a fund manager

2. May follow a conservative approach and allocate your money into money market
and fixed income instruments and ensure that you get the highest NAV without
much trouble. At the beginning, the NAV is Rs 10 and let’s say the fund has
invested into equity. Suppose the stock market rises and NAV goes up to Rs 12. As
the fund has already made a gain of 20%, the fund manager has to maintain this
NAV at least for next 6-8 years.
Consequently, the fund would be rebalanced into fixed income securities to
ensure that the fund maintains the NAV of 12. Thus, even though the fund
manager may fluctuate from equity to fixed income or money market, the returns
may not be comparable to equity-diversified mutual funds.
No easy exit
The insurance component in highest NAV guarantee works merely as a
supplementary portion to the entire plan as these plans provide limited cover.
Also most of them offer guarantee at maturity after a period of 7-10 years.
Secondly, the highest NAV guarantee terminates past the grace period when you
stop paying your premiums. The exit from the plan or partial withdrawals is
possible only after 3-5 years. Also, for partial withdrawals or surrenders which
attract an exit charge of 0-20%, this guarantee is not applicable. Thus, these plans
do not offer immediate liquidity.
No free lunch
Now, consider the actual investible part. These plans have five types of charges as
shown in the chart. The charges lie in the given range for products of different
companies.
The units are calculated after deduction of premium allocation charge. So the
balance from premium received goes as an investment into the fund. Apart from
initial charges, the mortality, policy administration charges and fund management
charges are deducted every year from your fund. There is a fund management fee
plus a charge for highest ULIP NAV guarantee to assure that you get highest NAV
which would be deducted from your fund units. In totality, besides the premium
allocation charge, you would end up paying from your fund approximately 2.50%

3. per annum. In the later years, the premium allocation charges may come down
but other charges would remain.
Source: https://www.bajajallianzlife.com/ulip/ulip.jsp