ULIPs combine life insurance and market-linked investment, offering the best of both worlds in one product.
Misconceptions about cost, tenure, and lock-in period often lead to unfair criticism of ULIPs.
ULIPs offer flexible investment choices, fund switches, and tailored coverage based on financial goals.
Charges on ULIPs are now regulated by IRDAI, making them more cost-effective than perceived.
With options like ROMC and portfolio customisation, ULIPs are versatile tools for both protection and wealth creation.
Perceptions play a critical role in human decision making. People make important decisions based solely on perception, but the reality is often very different. In the world of financial products, perceptions can have a significant impact on the acceptability of a product. Due to a lack of financial awareness in India, most financial products suffer due to misplaced perceptions.
Even though ULIPs are one of the best investment options, they are considered to be a tricky investment and that too without any factual reasons. Various factors are responsible for the negative perception, but let us try to clear the misconceptions.
If anyone wants to secure their family's financial future, they will most probably opt for a term insurance plan as they provide substantial cover at affordable rates. In a different scenario, if anyone wishes for capital appreciation, they will invest in an equity mutual fund. Mutual funds are known to provide decent returns in the long run. But what if you get both the features in a single product?
Most people get confused due to a lack of knowledge or comparison based on only one parameter. ULIPs are a combination of insurance and investment and provide the best of both products. You can secure the financial future of your family with life cover and get the benefits of capital appreciation with ULIPs.
The best ULIPs provide adequate flexibility and allow fund investment in both categories as per one's financial goals and risk appetite. If capital appreciation is your primary target, choose a ULIP with small life cover and opt for an equity fund. Further, if your aim is life cover, accordingly, focus on selecting the appropriate cover option that meets your needs. ULIPs also offer Return of Mortality Charges (ROMC). Many more flexible options with ULIPs allow you to customise your plan as per your financial needs and goals.
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There may be a lot of misgivings regarding the tenure of a ULIP. ULIPs use a part of the premium to provide life cover, while the balance is used for investment. People opting for a term plan take the policy for 20-25 years depending on the time left for retirement. Term plans are long-term investments, but as the premiums are affordable, they do not require substantial resource allocation. The tenure varies significantly for people investing in equity products.
Depending on the financial goal, people invest in equity products for 3 to 10 years or even more. Since ULIPs are a combination of insurance and investment, the optimum tenure varies. You can't expect an ultra-short tenure like ELSS or some equity funds boast of, nor do you have to compulsorily commit for 20-25 years. Even though it is better to remain invested for the long term, if the financial goal demands, you can opt for a 15-year tenure. Other flexible options are also available to choose from with these plans. Many people invest in ULIPs with the target of getting returns similar to short-term equity products, and get disappointed.
This aspect is similar to other insurance policies and ELSS in the category of mutual funds. However, the period isn’t long. The lock-in period for mutual funds is five years, aimed at enhancing the value of investment. This is accompanied by partial withdrawal, thus offering liquidity in the invested funds. Hence, ULIPs allow funds to remain safe and working for you while being simultaneously accessible.
There are various costs associated with ULIPs, like fund allocation charges, premium management charges, mortality charges, etc. Multiple charges have led to a perception that ULIPs are costly products. People also find it hard to comprehend the impact of the various charges.
However, the reality is starkly different. Even though there are a host of charges, the maximum fees have been capped by the Insurance Regulatory and Development Authority of India.
ULIP maturity benefits are taxed at 10% as LTCG if the annual premium is above ₹2.5 lakh, but death proceeds remain tax-free.
Source: India Today
The best ULIPs offer individuals the option to choose from a variety of investment funds and several portfolio management strategies. If the financial aim is clear, opting for the right combination of funds and strategies would not be difficult. Unit Linked Insurance Plans from Canara HSBC Life Insurance provides flexibility to the investor along with simplicity. Explore the options and choose now!
Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.
Canara HSBC Life Insurance offers online ULIP plans that blend life insurance protection with investment growth, helping you build wealth while securing your family's future.
