NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Life Insurance Products
Mr. Iyer, 40, buys a regular-premium unit-linked plan. Which statement about the investment risk in a ULIP is correct?
In a ULIP the policyholder bears the investment risk, because the fund value depends on the NAV of the funds chosen. The insurer does not guarantee fund value, and there is no government guarantee of the NAV.
- AThe insurer bears the investment risk and guarantees the fund value
- BThe policyholder bears the investment risk, as the fund value depends on NAV of the chosen fundCorrect
- CThe government guarantees the minimum NAV
- DInvestment risk is shared equally between insurer and policyholder
Explanation
In a ULIP the premium net of charges is invested in funds chosen by the policyholder, and the fund value moves with the NAV. The investment risk therefore lies with the policyholder, apart from any specifically stated guarantee in guaranteed variants.
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