What is ULIP Net Asset Value and how to calculate?

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A Unit Linked Insurance Plan (ULIP) can be a new-age financial product, which has undergone many changes by the Insurance Regulatory and Development Authority (IRDA). Although its key advantage of investment and insurance remains the same, there can be an introduction of new concepts, such as Net Asset Value (NAV), that you might be unaware of. Since NAV is complex, you might be unable to understand the meaning of ULIP NAV. Therefore, let’s decode the ULIP meaning of NAV in detail for better clarity and information at the time of purchase:

A guide on ULIP Plan or Term Insurance- Aegon Life

What is Net Asset Value (NAV) under a ULIP policy?

ULIP NAV can be the total value of the holdings of each unit minus the value of the liabilities. After the deduction of liabilities, such as management fees, marketing fees, operating fees, and so on, you can calculate the ULIP NAV. Let’s understand in detail about how you can easily calculate the NAV under a ULIP policy with the help of an illustration:

Let’s assume that XYZ is your selected ULIP policy. As a policyholder, your holdings can be of Rs. 11 Lakhs. After all the deductions, the management fees, operations expenses, and so on can be worth Rs. 1 Lakh. The ULIP NAV can be Rs. 10 Lakh.

Now that you have understood how to calculate ULIP NAV let’s proceed further to understand how to arrive at NAV if you look at the ULIP surrenders, maturity claim, and switches.

If you are looking at ULIP surrender, maturity claim, and switching, you should be deducting the liabilities and expenses on the day of the surrender, maturity claim, or switch. After the deduction of liabilities, the remaining can be termed as ULIP NAV.

Typically, NAV can be affected by one primary factor, such as the date of application. If your insurer receives valid applications for surrender, maturity claim, or switch on a particular day before 1,500 hours, the closing NAV can be applicable on the same day. On the other hand, the closing NAV of the next business day can be applicable after the completion of 1,500 hours.

Since NAV is a new concept, there can be various misconceptions associated with it. Before you invest in a ULIP policy, it can be crucial to bust myths about NAVs to reap the maximum benefit of the ULIP policy. Therefore, let’s understand what these misconceptions are and what the real truth behind ULIP NAVs is:

  • High NAV can be expensive

A high NAV might neither necessarily be expensive nor, can it be misrepresented. Since it is the face value, the final NAV can be obtained after the deduction of expenses. Moreover, it can display the fair price of the assets, if on a given day, the ULIP fund of your choice liquidates all the investments. Whether the prices are high or low, NAV might not indicate the quality of the ULIP fund.

  • Calculation of NAV for surrender, maturity claim, or switches can be different

NAV for any type of application, whether it surrender, maturity claim, or switch, can be calculated in the same way after the relevant deductions.

To conclude, understanding the NAV calculations can be complex. Therefore, you should clarify the meaning of the ULIP NAV with the help of a financial expert at the time of purchase. Understanding the NAV concept can allow you to make better decisions in the future as well as let you know the working of a ULIP policy in detail.