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Why a unit-linked plan is a must for stable fund generation

Why a unit-linked plan is a must for stable fund generation

Whether you are a first-time investor or a veteran, striking a balance between stability and higher returns is always an exercise. While debating this, you are sure to come across the term ULIP multiple times. Here's why ULIPs are always been considered one of the best-balanced investment options.

What is a ULIP?

A Unit Linked Insurance Plan (ULIP) is a unique insurance-cum-investment tool. A part of your premium payment is utilised for a life cover. The other part is invested in equity, debt, or balanced funds as per your choice and risk appetite. ULIPs are known to be one of the ideal investment tools because they eliminate the need for a separate insurance policy, amongst scores of other ULIP advantages.

Why ULIPs?

Financial discipline

One of the major benefits of ULIP is that it comes with a 5-year lock-in period. Generally, even if you choose to surrender your policy within this period, you will receive your surrender value only after the lock-in period is over. Knowing this is bound to make you extra careful about your premiums, inculcate a strong sense of financial discipline and streamline your savings in order to reap ULIP advantages in the long run. This also makes them excellent funds for medium to long-term financial goals.

Flexibility to switch funds

Another important part of ULIP advantages is the freedom to make switches in your ULIP's investment component. Depending on how your fund is performing, you can choose to switch it as you please, whenever you please. Usually, there are no switching charges for a certain number of switches; beyond which a nominal fee is charged.

Flexibility in premium payments

ULIPs are known as highly flexible investments not just because of the flexibility to switch funds, but also because of the flexibility they offer in premium payments. If you choose to invest in the Canara HSBC Oriental Bank of Commerce Life Invest 4G, you can opt for a single, lump sum premium, or regular yearly premium, or even half yearly, monthly or quarterly payment modes. This makes it a lot easier to maintain financial discipline without compromising on financial needs and expenses.

Balanced investment

Another one of the key benefits of ULIP is that it offers you a range of funds across equity and debt. You can choose to take risks with an equity-heavy portfolio, or stay safe with a debt-oriented one. You can even balance the two to take calculated chances. This assists you in securing the highest possible returns on your investments.

Easy to track

Generally, when you opt for a ULIP, your insurance provider will supply you with a fund manager, so that you don't have to take on the entire burden of managing your funds. You can always turn to your manager for switching funds or any other needs. However, you can also do your own homework. The fund is divided into units called NAVs. You can keep track of your fund value through NAVs. If you feel that your fund is not doing too well, switching or redirecting your investment is a breeze. This way, you ensure that the payout you receive upon maturity is substantial.

Minimal charges

Previously, there were heaps of charges associated with ULIPs - administration charges, mortality charges, switching charges are more. However, one of the benefits of ULIP, in recent times, has been the discount on charges offered by multiple insurers. Due to rising demand for ULIPs and increasing competition, providers have started offering investors substantial discounts on such charges, in order to help maximize their returns. The most notable development has been the introduction of the return of mortality charge. The amount of mortality charges deducted in the policy term is added to the fund value upon maturity.

A great online deal- the Invest 4G plan

Take, for example, the Canara HSBC Oriental Bank of Commerce Life Invest 4G plan. The Invest 4G plan is a protection and savings oriented tool that not only covers your family against eventualities but also helps you gather wealth for your life goals. You can choose from 7 different funds, as per your risk appetite and investment horizon. It comes with a minimum amount of charges, and even offers the option of return of mortality charges upon maturity. On top of this, it also offers Loyalty Benefits and Wealth Boosters to maximize your earnings. Unplanned contingencies? No stress! It also offers you the benefit of liquidity through partial withdrawals.

Gift your family an Invest 4G plan that protects them, fulfills their dreams and assures them of safety and stability, all at once!

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Annual Income (In Lacs)


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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