Unit Linked Insurance Plans (ULIPs) have enjoyed an increasing popularity over the years due to their hybrid nature which provides you the assurance of a life cover while also giving you market-linked benefits like mutual funds. In the case of ULIPs, a part of the premium you pay is invested in a variety of financial instruments that you get to choose based on your risk appetite. Briefly, in a ULIP plan, the investors purchase units at their NAV ( Net Asset Value) from a fund, but with the added benefit of having an insurance cover. Now to understand what ULIP NAV is and how it is calculated, let us first understand how a ULIP functions.

The premium collected from a number of investors is pooled together to create one large corpus of investment sum which is then invested in various market instruments. In order to divide the returns among all the investors, the company divides the corpus into small units with a particular face value. Basically, ULIP NAV is the price at which the units are bought or sold, meaning that it is the market value of the fund after deducting all of its liabilities.

## How is ULIP NAV calculated?

The value of all units is calculated on a daily basis, from which all the expenses are then subtracted. The result is then divided by the total number of units. What you get out of this is your ULIP NAV. NAV indicates the market value of the units in a fund. So, it helps an investor to keep track of the performance of the fund. An investor can calculate the actual increase in the value of their investment by determining the percentage increase in the ULIP NAV. NAV, therefore, gives accurate information about the performance of your ULIP.

The formula used to calculate the NAV is as follows:

NAV = (Value of Current Assets + Market Value of Investments Held) - (Value of Current Liabilities & Provisions) / Total number of outstanding units on date.

Let’s try to understand this formula better with the help of an example.

Say a company provides ULIPs to two of its customers, Aditya and Astha. Now, while Aditya invested Rs 50,000, Astha could only pay Rs 40,000 for her ULIP. From these two amounts submitted by the two customers, the company deducts associated charges and the resultant investment amount comes out to be Rs 49,500, and Rs 39,600 respectively.

Now, the total amount available with the company to invest in various market funds is Rs 89,100. Suppose the fund manager has created units with a face value of Rs 10 per unit. Based on this, Aditya will hold 4,950 units, while Astha will have 3,960 units. The total number of units within the fund will be 8,910.

On the first day, the NAV of the funds will be Rs 89,100 (total amount), divided by the total number of units that’s 8,910 in this case. The remainder we get is 10.

After the investment, let's assume there is a profit, which increases the fund's net value to Rs 100,000. Now, there will be a ULIP NAV. The new NAV can be calculated by dividing Rs 100,000 by 8,910 (as the number of units in the fund remains unchanged). This means the new value of each unit in the fund is now Rs 11.22, and both Aditya and Astha will make a profit of Rs 1.22 per unit.

It is important to note here that the policyholder can use ULIP NAV to calculate only the simple returns on his/her initial investment. Since investments are built on the compounding of the returns on the investments, this method might not give a true picture of actual returns on investment when you are invested for a long term.

So, if you are now confident you know what ULIP NAV is and want to reap its benefits, there are a range of options available in the market today to choose from. For instance, Future Generali Big Dreams Plan offers six ULIP options to suit your risk appetite. Moreover, ULIP calculators are also provided to help you calculate the cover amount and corpus you may need.