Even if you are uninitiated, you must have heard the term ULIP. A ULIP or Unit-Linked Insurance Plan is a mixture of insurance and investment. A small amount of the premium is attributed to secure life insurance and rest is invested just like a mutual fund. You invest through the term of the policy which could be 5, 10 or 15 years, accumulating the units. ULIPs offer options that invest in equity which is apt for an aggressive investor as well as debt suitable for a conservative one, or even a balanced strategy if you want it.
Due to their balanced risk scope, flexibility, multiple tax benefits, and insurance bonus, ULIPs are a very popular investment option. They can easily replace other investments and life insurance policies in your plan if you don’t want to deal with multiple instruments. You can also enhance your ULIP with a top-up.
A top-up premium is a sum that a policyholder can invest into their ULIP, adding to the existing premium payment. One can increase the investment component of a well performing ULIP by paying an extra premium.
A top-up can be done at any point in the policy term till the total number of top-up premiums doesn’t go beyond a specific percentage of your total premium. All companies define the minimum amount for top-ups in their policy documents. The option of top-ups is exclusively available for customers who make timely premium payments. Premium allocation charges can range from 1% to 3%, depending on the policy and insurer. According to norms, every single top-up premium is a single premium contract. It means that the extra amount added to your ULIP should also buy you insurance cover.
Generally, they aren’t. Traditional life insurance plans have minimum guaranteed returns, which makes them opaque, whereas ULIPs have costs that are unbundled, plus market-linked returns. Hence, top-ups are generally a feature of ULIPs.
If you are 35 while buying your Unit-Linked Insurance Plan, and choose to buy a top-up at the age of 40 years, the mortality charges will be those applicable for 40 years of age and not for 30 years. The minimum amount of sum assured is also determined by the age attained at that time.
If you have a Unit-Linked Insurance Plan already and are satisfied with the performance and returns, you can very well consider a top-up. It will only boost your investment and potentially give your better returns. If you haven’t invested in a ULIP yet, it’s never too late. Take your pick from the numerous ULIP available in the market and reap the benefits of this unique financial instrument.
One of the most promising ULIP that you will come across is the Canara HSBC Oriental Bank of Commerce Life Insurance Invest 4G Plan. It is a protection and savings-oriented Unit-Linked Insurance Plan that will give you a wide range of options including 7 different fund options, 4 different portfolio strategies, and 2 different death benefit options. Bonus benefits are Loyalty Additions and Wealth Boosters. All of this and more is just a few clicks away!