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How To Get Better Returns With ULIP?

dateKnowledge Centre Team dateSeptember 03, 2021 views314 Views
Returns from ULIPs | Buy the Best ULIP Plan | Invest 4G

Wondering which is the best savings plan for you? We can answer this for you. ULIP, abbreviated as Unit Linked Insurance Plan, is a combination of investment and insurance that provides you with dual benefits - both savings and protection. In this plan, one part of the premium goes to the savings, while the other goes to the investment scheme.

Five Ways to Optimize your Returns In ULIPs

By investing in the right plan, you can get the best returns in ULIPs. This is because while standard insurance policies promise you returns of 4% and 5%, ULIPs can give you returns of double-digit values if you know how to do them right.



1. Switching between equity and debt

One important feature of ULIP is that it enables its investors to switch between equity and debt. ULIPs offer a great feature in which you can switch your investment between equity and debt. To gain the most ULIP return out of these plans, utilize the switching option well.

When the markets are stooping low, you can switch your funds to equities, and when they are soaring high, transfer them to debt. In your total investment period, let us say 20 years, you can implement this method 2-3 times.

2. Stay in for the long haul

The standard lock-in period for a ULIP is five years. Although this may seem like a long enough period, you are advised to invest for longer periods. The longer you stay in a ULIP, the better the powers of compounding will work.

FUNDS AVERAGE RETURNS (%) MAXIMUM RETURNS (%)
Large Cap Equity 9.57 15.18
Mid and Small-cap Equity Funds 16.81 24.43
Conservative Funds 7.37 9.21
Short Term Bonds 6.6 7.87
Long term Bonds 6.59 7.89

The above table was the result of the research conducted by Morningstar India. This data shows the returns provided by the different ULIPs in the past year.

3. Equity funds and tax benefits

By investing in equity funds, you can obtain the EEE tax benefits. What does this mean? This implies that one can avail income tax exemption of the capital, interest, and maturity by investing in ULIPs.

4. Consider your life stage needs

The risks you take should depend on the age at which you are investing. You should keep in mind that equity funds are riskier than debt funds, so as your financial responsibilities grow, you should consider switching to the latter.

5. Slow and steady

If you are investing in any long-term plan, you should have a disciplined approach to it. As ULIPs have a minimum lock-in period of five years, it is advised that you commit to it only if you are ready for long-term investments. But consider this too - the longer you invest in a ULIP, the better will be your ULIP return.

By investing in the best ULIP return plan with high benefits and following these pointers, you can be assured of a great investment ahead of you.

Four Benefits of Investing In a ULIP

When you invest in the best ULIP return plan, you get the following benefits:

1. Protection, Investment, and Savings

As explained earlier, ULIP provides you with double benefits - by investing in ULIP, you can both save and invest simultaneously. Both of these elements assist you immensely in building your wealth in the long term. You need not panic about investing in an independent firm because ULIP provides you an insurance cover.

2. Returns based on the market

As we know that a part of your premium in ULIPs goes for investment in the market, its fluctuation will affect your returns. By buying the best ULIP return plan from Canara HSBC Oriental Bank of Commerce Life Insurance, one can optimize their returns from the changes occurring in the market.

3. Long-term gains

One notable benefit of ULIP is the benefits you acquire when you invest in long-term plans. These plans are recommended to those who wish to make the maximum out of an investment in the long run.

Learn how to plan your long-term financial goals with ULIP investment plan.

4. Insurance

By investing in a ULIP, you not only make the maximum returns, but you also get insurance cover. The investor can choose the insurance plan at their convenience. This benefit of ULIP is remarkable because it provides the investor's family with security in case there is some emergency.

Why should you Invest in the Invest 4G Plan?

Invest 4G by Canara HSBC Oriental Bank of Commerce Life Insurance is a ULIP that allows its investors to customize the plan as per their needs and goals. Providing you with high flexibility and a wide variety of Portfolio Management Options, Invest 4G also offers you an Insurance Cover for the family in case of the policyholder's untimely demise.

With its assured loyalty additions and limited premium payment, you can invest in this long-term plan and reap excellent rewards. Some of its benefits are:

1. Three different cover options to choose from as per your life stage

2. A range of 8 funds from which you can opt for the one you want

3. Flexibility in paying for the entire policy term or limited years or as only once

4. Systematic Withdrawal and Milestone Withdrawal for different situations

While utilized rightly, ULIPs tend to provide the best return rates. ULIPs are the best type of investment for people with long-term goals as they give you both security and growth. Canara HSBC Oriental Bank of Commerce Life Insurance offers you the best ULIP plan with high returns. By investing in it, you can reap numerous benefits, be it short-term or long-term.

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FAQs

In order to understand ULIP NAV, you first need to understand how ULIPs work. In ULIPs, a portion of premium from different investors is accumulated to create one investment corpus. This money is invested in several different market instruments. So to divide the returns properly among all the investors, the fund manager divides the net asset value in to small units with a specific face value. NAV is the per market share value of a fund. To better understand the definition of NAV, take a look at the formula below -

Net Asset Value = [Assets-(Liabilities + Expenses)] / Outstanding Units

It's not risky to invest in ULIP if you chose a safer path. Risk factor in ULIPs depends on the investment option you choose. If you are not okay with sharp movements, then choosing a low risk investment is a better idea. For people with high risk appetite, it's good to choose equity funds while risk-averse investors can go for debt funds.

You can opt for settlement option if you want to take your fund value in periodic installments. With the settlement option, you can get your maturity amount in installment as per the frequency chosen by you over a maximum period of 5 years. You can choose complete withdrawal of fund value at any point of time. Although, you will not get any life cover during this period.

ULIPs are life insurance products that provide paths to invest. And just like other investment option, there's no guaranteed investment return in a ULIP. Although, if you like taking risks and want to earn more returns on your investment, then opt for equity funds.

At the time of maturity of ULIP policy, you will get the fund value on your prevailing NAV. Fund value is the number of units of policy multiplied by NAV (net asset value).

Value of the fund = Total units of policy x NAV (Net Asset Value)

Well, discontinuing your premium payment will disrupt your savings as well as financial goals. In such case, you can approach your insurance company and ask for the revival of discontinued policy within the stipulated timelines. Also, you will have to pay all the unpaid premiums.

ULIP plan is a combination of investment and insurance. Thus, one must hold this plan for a duration of at least 10 years so as to get investment benefits out of it. As an early exit will have its own consequences. ULIPs have a lock-in-period of 5 years. Thus, you may surrender your policy before the completion of 5 years, but you will be paid only after the end of 5 years.

Generally, minimum lock-in period for ULIP is 5 consecutive policy years. During this time period, if the policyholder discontinues or surrenders the policy, then he/she will not able to receive any payouts. Withdrawals are only allowed at the end of the lock-in period. In addition to this, if you surrender your policy before the lock-in period ends, then you will have to pay surrender charges as well. Also, it is advisable not to exit your plan after the completion of 5 years of lock-in period, because if you stay invested for a longer duration it will help you reap better benefits.

The amount that you pay towards the Unit Linked Insurance Policy is eligible for tax deduction as per Section 80C of the Income Tax Act, 1961. This means that the premium amount paid will be deducted under section 80C from your taxable income up to a maximum limit, which is currently ₹1.5 Lakhs. However, the aggregate amount of deductions under section 80C, section 80CCC and 80CCD (1) shall not, in any case, exceed ₹1.5 Lakhs. Also, upon the maturity of the policy, the payout amount you receive will be exempt from income tax, subject to the applicable provisions of Section 10(10D) of the Income Tax Act, 1961.

Here’re the following major benefits of buying ULIP

1. Tax Benefits – It helps you to reduce tax liabilities. This means you are liable to enjoy tax benefits on the premiums paid towards the policy as per Section 80C of the Income Tax Act.

2. Long-term growth– One of the major benefits of buying a ULIP plan is that it offers long-term benefits. ULIPs come with a lock-in period of 5 years which will keep you invested for a longer period.

3. Dual benefits – ULIPs not only offer life coverage but also come with a wide range of investment funds that will help you earn great returns. This includes balanced funds, debt funds or equity funds. You can invest in any of them depending on your need and risk appetite.

4. Flexibility – It gives you the flexibility to switch between funds basis your risk appetite. You could select multiple funds and different investment strategies.

5. Partial withdrawal option – It allows you to make partial withdrawal in case of any uncalled medical emergency or contingency after completion of lock-in period.

ULIP is a perfect investment option if you are looking for long term wealth creation. It could be buying your own house, a new car, going on a long vacation, or your child’s higher education or marriage, ULIP helps you to meet all your long-term financial goals. Moreover, it comes with a lock-in period of 5 years which keep you invested for a longer period and helps you earn better returns. The lock-in period is calculated from the date when the policy is issued.

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