NAV in ULIPs

What is NAV in a ULIP?

NAV, or net asset value, is the price of one unit in a ULIP fund. When a customer pays a premium, the amount left after allocation charges buys units at that day's NAV. When money comes out, through a switch, partial withdrawal, surrender, maturity or death claim, units are cancelled at the NAV that applies on that day. The value of a policy's fund at any time is the number of units it holds in each fund multiplied by that fund's NAV.

The IRDAI (Insurance Products) Regulations, 2024 define NAV as the price per unit of a segregated fund. Each fund in a ULIP, such as an equity, debt or balanced fund, is a separate segregated fund with its own NAV.

How ULIP NAV is calculated

The 2024 Regulations and the Master Circular on Actuarial, Finance and Investment Functions of Insurers (May 2024) set one formula for all insurers:

NAV = (market value of investments held by the fund + value of current assets, minus current liabilities and provisions) ÷ number of units existing on the valuation date, before creating or redeeming units for that day

• Current assets include accrued interest, dividends receivable, bank balance and amounts receivable from sale of investments.
• Current liabilities are mainly amounts payable for investments bought.
• Provisions include brokerage and transaction costs, provisions for bad assets and the fund management charge (FMC).

Because the FMC is taken through the NAV every day, the published NAV is already net of that charge. Charges deducted by cancelling units, such as mortality and policy administration charges, reduce the number of units instead of the NAV. See ULIP charges.

Rules on publishing and applying NAV

• Daily NAV. NAV must be computed every day for every segregated fund. Each fund has a single NAV, identified by its segregated fund identification number (SFIN).
• Public disclosure. Insurers must publish NAV on their own website and on the Life Insurance Council website, and keep the fund-wise NAV history from the fund's launch.
• Audit. A concurrent auditor checks the NAV calculation for each fund every day.
• Errors. If an error makes the NAV of a plan differ by more than 1%, investors who were disadvantaged must be compensated, and where the error favoured investors, the insurer makes good the fund from shareholders' money.
• Allotment date. For a new policy, units are allotted only on the day the proposal is accepted. A renewal premium paid early is applied on its due date.
• Cut-off time. Each insurer sets a daily cut-off time in its policy terms. Requests and funds received before the cut-off get that day's NAV; later ones get the next day's. ICICI Prudential Life, for example, states a 3 pm cut-off for its ULIP funds.
• No "highest NAV" promises. The Master Circular on Life Insurance Products (June 2024) does not allow products that guarantee the highest NAV reached during the term.

Index linked insurance products follow the same structure, but their NAV is linked to a publicly available index.

NAV in ULIPs vs mutual funds

The calculation looks like a mutual fund NAV, but a ULIP NAV is not directly comparable. ULIP charges are split between the NAV (FMC) and unit cancellation (mortality, administration), while mutual fund expense ratios sit wholly inside the NAV. A ULIP NAV that has risen 10% does not mean the policy's fund value rose 10%, because units may have been cancelled for charges in the same period.

What NAV means for distribution

• Fund value is the number that matters. Customers often track NAV and forget unit deductions. Advisers should use the policy's unit statement, which shows units held and fund value, when reviewing performance.
• Compare funds, not NAV levels. A fund with a NAV of ₹80 is not cheaper than one at ₹20. What matters is the growth rate over time and the fund's asset mix. Fund factsheets and the SFIN help compare like with like.
• Cut-off times affect switches. A switch request submitted after the cut-off is processed at the next day's NAV. In volatile markets, customers should know this before they act.
• Disclose risk plainly. NAV can fall. The June 2024 master circular requires every ULIP document, including the proposal form, to state at the top that the investment risk is borne by the policyholder, and the sales conversation should match that.
• Discontinuance changes the fund. A ULIP discontinued during the five-year lock-in moves to the discontinued policy fund, which has its own NAV and a minimum guaranteed return of 4% a year. Customers who are told only "your NAV has changed" will be confused.