ULIP - Unit Linked Insurance Plan

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.

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.

Flexible investment options

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.

Lock-in-period

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.

Premium payment options

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.

Liquidity

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.

 

1. Flexibility

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.

Flexibility in ULIPs

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

a. Fund Switching Option

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.

b. Redirection of Premium

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.

c. Partial Withdrawal Facility

This option gives you chance to withdraw part of your funds if you want.

d. Top-up Facility

Through this feature, you can add additional funds to your existing investment without changing the policy.

2. Transparency

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.

3. Tax benefits

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.

4. Ideal for long term investment goals

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.

5. Market Linked Returns

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.

6. Death Benefits

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.

7. Maturity Benefits

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.

8. Withdrawal Benefits

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 –

Premium allocation charges

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.

Policy administration charges

Insurance companies impose policy administration charges that are deducted on a monthly basis. Such charges are imposed for managing the administration of your policy.

Fund management charges

As the name suggests, fund management charges are imposed for managing your funds so that you earn potentially higher returns.

Partial withdrawal charges

ULIPs provide partial withdrawal of funds that allows investors to withdraw money partially. Although, such withdrawals attract penalty charges.

Mortality 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.

Switching charges

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.

Rider charges

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.

Surrender 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 -

1. To avail tax benefits:

 If you are looking for an investment instrument that helps you save on taxes, then ULIP is the best bet for you. You can enjoy tax benefits on the premiums that you pay towards the policy as per Section 80C of the Income Tax Act. Also, death benefits paid under the plan are exempt from tax as per Section 10D of the Income Tax Act.

2. To enjoy dual benefits packed in a single plan:

 It offers a dual benefit of insurance and investment in a single policy. A ULIP plan not only offers life cover that protects your family against financial difficulties but also provides numerous investment instruments that helps you maximize your returns.

3. Higher returns:

 ULIP offers higher returns offering a range of investment options to choose from. This includes debt funds, equity funds, etc. You can choose any of these based on their performance and your risk appetite. You are also allowed to switch between funds based on the market outlook.

4. Long-term wealth creation:

 If you want to meet your long-term financial goals, then switch to ULIP. ULIPs come with a lock-in period of 5 years that keeps you invested for a longer tenure. This accumulated money helps you meet your long-term financial goals such as buying a house or car, children’s education, marriage or other major financial objectives.

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 –

1. Balance between equity-debt portfolio

ULIP as an investment plan allows you to switch between assets. Each asset has different characteristics like equity funds are ideal for investors who like taking risks. It happens to be riskier than other funds but offers higher returns. On the other hand, debt funds offer least risk but also low returns. It is perfect for those investors who are risk averse. Thus, you need to balance the investment portfolios.

2. Stay updated with the market 

It is advisable to keep yourself updated with the market trends and economic scenarios as this will help you take a better decision. For example, if you have invested in equity funds, but due to the change in market trends, equity market looks overvalued and costly, you can switch out of equity funds and switch back when the market is normal.

3. Understand life stage needs 

Choosing between equity and debts funds mainly depends on your life stage needs. Thus, policyholder needs to understand which life stage they are on as they get more risk averse with time. Therefore, you should try to switch from equity funds to less-riskier debt funds as you get older.

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.

a. Choose the fund option that aligns with your goal

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.

b. Choose a suitable life insurance cover amount

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.

c. Stay for as long as you can under your ULIP

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.

d. Maximum tax saving benefits of ULIPs

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.

Risk appetite

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.

Charges in your ULIP

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 

Mortality/Morbidity Charge

Policy Administration charge

Fund Management charge

Premium Allocation charge

 

Flexibility

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.

Premium Payment Option

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.

Myth 1 -ULIPs are costly

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.

Myth 2 – ULIP is a risky investment option

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.

Myth 3 – Lock-in-period of 3 years

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.

Myth 4 – ULIPs does not offer flexibility

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.

Myth 5 – Not a good option

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.

Myth 6 – ULIPs provide low returns

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.

Myth 7 - ULIPs allow continuation

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.

Myth 8 - Health and accidents cover is not provided in ULIPs

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.

Smart Future Plan (Long Term Investment Plan)
 

• Policy Term
• You can select any of the policy term - 10/15/20/25 years

Premium Amount Details

Minimum
 

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.

Maximum : No Limit

Premium Payment Term | You can select any premium paying term from 10 to 20 years

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Smart Goals Plan (Savings cum protection plan)
 

• Policy Term
• Option A - 10 years (fixed)
• Option B - 15/20/25 years

Option A

Premium Payment Details
 

Premium Payment Term | 5 Years fixed

Premium Payment Mode	Minimum	Maximum
Annual	Rs 50,000/-p.a.	No Limit
Monthly	Rs 5,000/-p.m.

Option B

Premium Payment Details

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

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Smart Life Long Plan (Whole Life Plan)
 

• Policy Term
• Up till 99 years of age

Premium 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.

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Secure Bhavishya Plan (Unit Linked Pension Plan)
 

• Policy Term
• Minimum policy term is 10 years
• For Regular/ Limited Pay-Maximum policy term is limited to 35 years.

Premium Payment Term

	Minimum	Maximum
Single Pay	One time premium only
Limited Pay	5 years	34 years
Regular Pay	10 years	Equal to the Policy Term

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Insure Smart Plan (Wealth Creation Plan)
 

• Policy Term
• 10 years (Fixed)

Premium Payment Details
 

Payment Mode	Minimum	Maximum
Annual	Rs 50,000	No Limit

Premium Payment Term | 5 Years(Fixed)

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