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ULIP Insurance
Is ULIP A Good Investment For Short Term Gains
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ULIP - known as Unit Linked Insurance Plan offers dual benefits of investment and life insurance.
Investing in the best ULIPs can help you fulfil the goal of long-term wealth creation and life coverage. ULIP is the best investment option to meet your financial goals. Buy ULIP from Canara HSBC Life Insurance to get life cover, multiple portfolio management options, flexible premium paying options, tax benefits along with a wide array of other benefits.
Get A Call BackThe full form of ULIP is Unit Linked Insurance Plan. A ULIP is an insurance product that provides you the double benefit of investment to achieve long-term wealth creation goal, and a life cover to secure your family’s future if there is an unfortunate event. The premium paid for ULIP is divided in two parts. One part of premium is used for your life cover and the remaining sum is invested in the fund of your choice. In ULIP plans, you can invest your money in equity, debt or a combination of both funds depending on your risk appetite. The returns on the investment depend upon the performance of the funds.
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A ULIP plays as both an insurance policy and an investment avenue. A ULIP has a pre-decided death benefit, which is paid to the nominee in case the unfortunate happens. In addition, if the policy holder survives the term of the ULIP, they receive the maturity value of the ULIP, which is the amount generated by the ULIP investments in equity and debt funds.
While the maturity benefit is subject to market linked risks, the insurance cover under a ULIP remains fixed. Like any other insurance, you need to pay a premium for unit linked insurance plan. In ULIPs, the insurance company deducts an amount of your premium towards life cover and the rest is invested in a number of qualified funds. Afterwards, you get returns based on the performance of funds you opted for. There are several investment options such as debt, equities, hybrid funds, etc., for you to choose from.
The total investment made is then divided into the 'units' with a unique face value, and every investor is allocated 'Units' based on their invested amount.
| Investor Type | Types of ULIPs Suited |
|---|---|
| Risk-Taking Investor | If you have a high-risk appetite, then invest in equity instruments. They offer great returns, but also have high risk. |
| Risk-Averse Investor | If you have low-risk appetite, then invest in debt funds such If you have low-risk appetite, then invest in debt funds such as fixed income bonds, corporate bonds, etc. They offer less returns and risks associated to them are also low. |
| Moderate Risk Investor | If you are ready to take risk but not too much, then invest in balanced funds. Thus, lowering the risk factor. |
With ULIPs, you have the flexibility to select your fund as per your risk appetite. ULIPs come with a variety of funds to choose from. Investors with a low risk appetite can invest in debt funds while those with a high risk appetite can invest in equity funds.
ULIPs come with a lock-in-period of 5 years and offer good returns on investment over a long period of time.
So, it can be said that the longer you stay invested with a ULIP, the better it may become for your investments.
There are three ways of making payments - single, limited, and regular payment options. Single payment option is a one-time investment where you are required to pay the premium amount as lump sum at the inception of the policy.
ULIPs also allow you to do partial withdrawals when you need it after completion of lock-in period.
Simply put, ULIPs provide liquidity only after the lock-in period is over.
ULIP gives you the flexibility to switch to a different investment option. This can be useful if you do not have fixed financial goals and you want to shift from one fund to another.
ULIP policy provides you with high flexibility as it allow you to control where and in what proportion your money will be invested. This is done by the following features provided by ULIPs
Through the use of this feature, you can move your money between funds as you like. For example, you have invested a major part of the money in equity funds and now you want to transfer the some to safer debt funds. Fund switch allows you to do that.
ULIP provides you with a host of funds to invest your money. If you have invested in one fund earlier and now you no longer find it suitable. You can still choose another fund and the next premium will be redirected to that fund.
This option gives you chance to withdraw part of your funds if you want. This is free of cost if done after the lock-in period.
Through this feature, you can add additional funds to your existing investment without changing the policy.
It offers transparency. With ULIPs, you don't have to worry about the hidden changes or fees. All charges such as management of funds, policy administration, etc are disclosed upfront before you to buy the product.
ULIPs are efficient tax saving instruments. The premium that you pay towards the policy is exempt to deduction under section 80C of the Income Tax Act.
It is perfect for long term investment objectives. Before investing in ULIP plan, it is advisable to make a list of your long term financial goals that you want to fulfill through investment. Goals such as funding for your kid's higher education, purchasing a house, children marriage, etc.
Returns that you can earn through a ULIP policy are market-linked. Returns vary according to the performance of the chosen asset in the market. The Premium you pay is invested in funds. These funds invest in different market securities according to your choice. You can either invest in debt, equity, or even a mix of both. Keep a close check on the NAV of securities to watch the returns.
Since Unit Linked Insurance Plans offer you insurance, they provide death benefits as well. This refers to the amount your family will receive in case you die during the policy. The death benefit is not the same and varies according to the cause of death. It is usually higher of the sum assured and the fund value at the time of the death.
Apart from the death benefits, ULIPs give you maturity benefits as well. If you manage to survive through the term of the policy, you are entitled to receive the maturity benefits. This is the value your fund has attained throughout the policy term. The more your fund grows, the higher the benefits you get.
This benefit allows you to partially withdraw from your unit linked investment plan. This comes in handy during situations when you require money. You can withdraw from your investment at no additional charge after the lock-in period is completed. These withdrawals are tax-free.
Unit Linked Insurance Plan or ULIP is an insurance-cum-investment plan that not only offers life cover but also allows you to invest in several asset classes. Although, before investing in a Unit linked Insurance Plan, you need to know about the charges that you have to pay for the entire policy term. The structure/applicability of charge may differ from one insurer to other but here’re some of the most common ULIP charges and fees –
This is a fixed percentage that is reduced from the premium at a higher rate in the starting years of a policy. This fee is charged by the insurance company before allocating the policy. This includes charges such as initial and renewal expenses, medical expenses, etc.
Insurance companies impose policy administration charges that are deducted on a monthly basis. Such charges are imposed for managing the administration of your policy.
As the name suggests, fund management charges are imposed for managing your funds so that you earn potentially higher returns.
ULIPs provide partial withdrawal of funds that allows investors to withdraw money partially. Although, such withdrawals attract penalty charges.
These charges depend upon a number of factors such as age, amount of sum assured, etc. For instance, if you are buying a policy at the age of 25, then your mortality charge will be lower because life expectancy of a 25-year-old is higher as compared to that of a 50-year old individual. This charge will be deducted on a monthly basis.
Moving your investments from one fund to another is called switching in ULIPs. It allows investors to switch between funds every year on the basis of their performance and risk appetite. But, each switching would attract some charges depending on the insurance company’s charge structure.
These type of charges are levied on additional riders. For example, if you want to opt for a critical illness rider, you will have to pay extra charges.
These are the charges which will be imposed in case you decide to discontinue your ULIP policy. You will have to pay surrender charges only if you want to discontinue within the lock-in period. No charges apply after the lock-in period has been completed. Surrender charges are levied on the total value of the fund.
Unit Linked Insurance Plan or ULIP is a one-stop option for those looking for a long-term investment instrument that offers both transparency and flexibility. Also, it’s a perfect choice for those looking for a cost-effective way to enter the investment market. ULIPs come with a range of fund options that help in meeting the investment needs of the policyholder. Besides, here’re few more reasons that show the need to buy a ULIP -
Unit Linked Insurance Plan or ULIP is a long-term investment instrument that helps you achieve your dreams in a robust and effective manner. Although, to make the most out of your Unit Linked Insurance Plan, you need to learn how to manage them wisely. You need to ensure that your returns are balanced out so that any loss caused by one asset class is covered by the other. Therefore, it minimizes the overall risk of your investments. Here are some tips that will help you manage ULIPs effectively –
Overall, ULIP is a market linked insurance plan. Keeping the market fluctuations in mind, you need to manage them properly in order to reduce risks and gain higher returns.
ULIP policies provide you with the flexibility in choosing the funds you want. It will be better if you choose the fund options that can help you reach your goal effectively. Investing in equity can grow your funds higher in the long term but also has a high risk involved. Whereas debt funds are safer and less reactive to market changes, but returns are safer, lesser. So, it is necessary to identify the goal first and then choose the fund accordingly.
Other than providing the opportunity of investment, ULIPs provide you with life coverage as well. This helps in securing your family in case something happens to you. So, in this regard, you must choose a life cover that will be sufficient for your family to achieve their goals. You must also make sure that the cover chosen doesn’t result in high premiums.
ULIPs are a long-term investment plan. So, it can give you the best results when you stay invested longer. This is why ULIPs have a lock-in period of 5 years. The longer you stay in the policy, the more time you are giving your investments to grow. This will allow you to create huge wealth due to compounded returns.
ULIP plans provide you with tax benefits. There are deductions as per the Income Tax Act 1961 available under various sections if you have invested in ULIP. These involve
Deduction up to 1.5 Lakh is available on the premium that is paid towards the policy under section 80C.
Also, the maturity, as well as the death benefits received, are tax-free under section 10(10)D.
You must know your risk appetite before investing in ULIP. This plan comes with wide range of funds to select from basis your needs and risk appetite. Those who are reluctant to take risks can invest most of their investment in debt funds while those who like to take risks can go for equities.
This investment cum insurance plan comes with a set of charges. Thus, before purchasing the policy, it is important for you to understand the following charges -
ULIPs offer you the flexibility to switch between the funds. While buying a ULIP investment, you must consider the cost of switch, ease of switch, and complimentary switches during the policy period.
ULIPs basically offer three types of payment options - single, limited, and regular. Therefore, compare and choose plan that you are comfortable with.
| Factors To Decide | Example |
|---|---|
| Current Income | At current income level of 5 Lakh per annum, opt for a life cover that provides coverage of Rs. 1 Crore. |
| Age | If your age is b/w 20-30 years, buy a life insurance cover of 15 times your annual income while if you are b/w 45-55 years, buy life insurance 10 times your annual income. |
| Financial Liability | Ensure your life coverage is enough to cover your financial liabilities like outstanding debts, mortgages, education loans, etc. |
| Inflation Rate | In 15 years, at 7% inflation rate, the value of Rs. 1 crore would whittle down to an equivalent of Rs. 33 lakh in present terms |
| Life Goals | Know your financial goals such as your child’s education, marriage, sustaining lifestyle, etc., while deciding on your life insurance coverage. |
ULIPs had a heavy charge structure way back in 2008. However, IRDAI intervened and the cost of ULIPs have reduced significantly over the years. If you are refraining yourself from investing in ULIP due to high cost, you don’t have to worry now.
Under ULIPs, investors are allowed to choose funds based on their risk appetite. ULIPs come with several fund options such as debt and liquid funds for low-risk investors while equity funds for high and moderate risk investors.
Earlier, the lock-in-period was 3 years. But, post 2010, IRDA revised the guidelines and extended the lock-in-period from 3 years to 5 years. Now, ULIPs have a lock-in-period of 5 years.
ULIPs offer complete flexibility to the investors. It provides the flexibility to switch between funds based on your risk appetite. It also gives you the flexibility to partially withdraw money from your accumulated Fund Value before the policy matures.
ULIP is an ideal option for both your insurance and investment needs. It not just offers life cover but also provides investment options as well.
ULIPs offer maximum returns as compared to other investment options, if you choose wisely. It is one of the best investment options if you want to gain higher returns to fulfil your long-term goals.
This is not true. There are no restrictions to exit in the ULIP plan. You can discontinue from a ULIP anytime you want. If you decide to exit from the ULIP after the lock-in period, you can do so without paying any charges. However, surrender charges apply if you decide to exit before the lock-in period is over, you will be required to pay surrender charges.
This statement is also misleading. Apart from providing you with the dual benefit of both investment and insurance in a single plan, ULIPs offer riders as well. You can receive additional protections such as Accidental death benefit, waiver of premium, etc. in the form of riders. ULIPs also provide a partial withdrawal facility that can help you in times of emergency.
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Premium Amount Details
| Premium Payment Mode | Minimum | Maximum |
|---|---|---|
| Annual | Rs.1,25,000/- p.a. | No Limit |
| Monthly | Rs.16,667/- p.m. | |
| Single | Rs.1,25,000/- p.a. |
Premium Payment Term|Pay: Single Premium|Limited Pay: 5/7/10/15 Years|Regular Pay: Equal to Policy Term
Know MorePremium Amount Details
| Policy term | Payment Mode | |
|---|---|---|
| Annual. | Monthly | |
| 10 years | Rs 50,000 p.a. | Rs 5,000 p.m. |
| 15/20/25 years | Rs 25,000 p.a. | Rs 3,000 p.m. |
Premium Payment Term|You can select any premium paying term from 10 to 20 years
Know MoreOption A
| Premium Payment Mode | Minimum | Maximum |
|---|---|---|
| Annual | Rs 50,000/-p.a. | No Limit |
| Monthly | Rs 5,000/-p.m. |
Premium Payment Term|5 Years fixed
Option B
| Premium Payment Mode | Minimum | Maximum |
|---|---|---|
| Annual | Rs 25,000/-p.a. | No Limit |
| Monthly | Rs 3,000/-p.m. |
Premium Payment Term|10 years to 25 years
Know MorePremium Payment Details
| Premium Payment Mode | Minimum | Maximum |
|---|---|---|
| Annual | Rs 25,000/-p.a. | No Limit |
| Monthly | Rs 3,000/-p.m. |
Premium Payment Term|Minimum 10 years and maximum 99-Age at Entry years.
Know MorePremium Payment Term
| Minimum | Maximum | |
|---|---|---|
| Single Pay | One time premium only | No Limit |
| Limited Pay | 5 years | 34 years |
| Regular Pay | 10 years | Equal to the Policy Term |
Premium Payment Details
| Payment Mode | Minimum | Maximum |
|---|---|---|
| Annual | Rs 50,000 | No Limit |
Premium Payment Term|5 Years(Fixed)
Know MorePremium Amount Details
| Policy term | Payment Mode | |
|---|---|---|
| Annual. | ||
| 10 years | Rs 50,000 p.a. | |
| 15/20/25 years | Rs 25,000 p.a. | |
Premium Payment Term|You can select any premium paying term from 10 to 25 years
Know MorePremium Payment Details
| Payment Mode | Minimum | Maximum |
|---|---|---|
| Annual Premium | Rs 25,000 | No Limit |
Minimum 10 years|Maximum 99 less age at entry years
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Read ArticleIn 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 -
The main difference between SIP - a systematic investment plan and ULIP is that ULIP offers you insurance as well. In SIP, you are required to invest a certain sum of money at an interval chosen by you. This reduces the market risks and helps you grow your wealth over some time.
ULIP, on the other hand, provides you with an option to invest your funds systematically and earn a return and gives your life coverage as well. ULIP gives you chance to invest in your own chosen fund. So, you not only get market-linked returns but also insurance cover.
| Basis | ULIP | Traditional Plans |
|---|---|---|
| Meaning | Financial product that gives you the benefits of both investment and insurance in a single plan | Type of plans which is characterized by guaranteed returns and low risk. |
| Funds | You can choose to invest in both equity and debt. | The funds involved are mostly debt. |
| Charges | Contains multiple charges such as fund allocation, surrender charges | Few minimal charges involved |
| Transparency | Full transparency. All charges are known. The investor also has the option to track his funds. | Low transparency no tracking allowed. |
| Lock-in period | 5 years | No lock-in period |
| Withdrawal | Can withdraw after lock-in period is over | Once invested, you cannot withdraw before maturity |
| Switching | Allows you to switch between funds | Not allowed. |
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.
If you want to enjoy the triple benefits of life cover, good returns, and tax savings, then you must invest in ULIP. It's a great investment plan as compared to other investment options. In ULIP, the premium paid towards the policy is divided in two sections-Insurance and investment. Therefore, an individual investing in such plan will not just fetch good returns but will get life protection cover as well.
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.
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 they 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.
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.
The best time to invest was yesterday, the next best time is today. This statement fits aptly in the case of ULIPs as well. The earlier you can invest in ULIPs the more time you will give your investment to grow. This will help you achieve your goals.
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).
Well, discontinuing your premium payment will disrupt your savings as well as financial goals. In such a case, you can approach your life insurance company and ask for the revival of discontinued policy within the stipulated timelines. Also, you will have to pay all the unpaid premiums to revive the ULIP policy.
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.
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.
Yes, ULIPs do offer tax benefits. In fact, it is one of the best tax saving instruments. As per Income Tax Act, 1961, you can save tax on your hard earned money by investing in unit linked insurance plan. The premium paid towards ULIP is allowed a tax deduction of up to 1.5 lacs under section 80C of the Income Tax Act.
You can withdraw free of any charge after the initial lock-in period. This lock-in period is generally 5 years. Some plans have a fixed number of withdrawals after that you are charged. While some plans give you unlimited free withdrawals as well.
If you want to withdraw before the lock-in period, you will have to incur the policy changes.
Yes, you can cancel/surrender your ULIP plan. This cancellation will incur expenses in the form of discontinuance charges if done before the lock-in period is over. Also, this ceases your life cover benefit as well. This is why discontinuing your policy is not advisable.
Knowing the multiple benefits ULIP offers, it is recommended to choose the best plan depending your age and objectives. Canara HSBC offers different ULIPs that are just perfect for you and will help you meet your financial goals.
We offer a range of ULIP plans for you to enjoy the benefits of investment and life insurance protection at the same time.
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