K Srinivas Bhat
What is ULIP policy in LIC?
At present 3 ULIP Plans are sold by LIC. 1) New Endowment Plus 2) Nivesh Plus 3) SIIP.
Please update the same.
23 Nov 2020
Namaste, and welcome to Coverfox’s dedicated page on ULIP. Coverfox helps you compare and buy ULIP plans in India. We have all the information you need to make your decision easier. Have a doubt? Let our advisors solve all your problems.
What is a ULIP Plan, you ask? Read on below!
ULIPs don't just provide investment opportunities. They can become a second source of income and help your family. Coverfox helps you compare and buy ULIP plans in India. Have a doubt?
Customize your ULIPs according to personal preferences. Want to read more about ULIP products? Scroll down below to get all the necessary information you need to fulfill your investment potential.
Unit Linked Insurance Plan or ULIP gives an individual the freedom to explore the capital market for investments while at the same time bestowing the all-too-important risk coverage. ULIP can be classified as a two-in-one plan which aims at offering investment and protection to investors, which are customised according to individual requirements. As a comprehensive plan, the investment and protection part can be managed according to specific buyer choices and needs.
At a time when the share market and mutual funds were dominating individual's investment portfolios, ULIPs were launched by insurance companies to lure customers with the promise of high investment returns. Today, ULIPs have become popular among many investors as these plans provide the dual benefit of insurance cover and wealth maximization. So, let us understand the concept of ULIPs in details.
Before you start investing it is important to have a basic understanding of ULIP plans let’s take you through its working.
When you pay the premium for a plan, a part of it is used for providing life cover and remaining is invested. The premium amount gets invested into the fund of your choice. The insurer (insurance company) has various investment funds with varying risk levels in which you can select - equity, debt, or balanced funds or hybrid funds.
The insurer allocates 'Units' to each investor in proportion to the invested money. This amount is the 'NAV' or Net Asset Value. But who looks after the entire fund? Well, fund managers keep track of the invested funds. Based on market performance, the units NAV increase or decrease.
“On the maturity of the ULIP, the insurer pays you the fund value depending on the market value.” Confused? Don’t be. It simply means you will get the NAV of the units assigned to you on maturity.
If an unforeseen situation - like death, the insurer pays your nominee the higher of the sum assured or the fund value.
While there are several ULIPs Plans available in the market, certain plans stand out because of the benefits they provide for insurance and investment purposes. A few of them are
| ULIP Plans | Entry Age | Min. Premium | Premium Allocation Charge | Policy Admin charge | Free switches (annual) |
|---|---|---|---|---|---|
| Bajaj Allianz Future Gain | 1 to 60 years | ₹25,000 | 0% to 1.5% | ₹33.33 p.m. | Unlimited |
| PNB Metlife Smart Platinum | 7 to 70 years | ₹30,000 | Policy 1 to 5 Year (5, 7 & whole life pay) : – 6% for Annualised Premium < 50,000 5.50 % for Annualised Premium >= 50,000 Policy 6 to 10 Year for 7 & whole life pay: - 2.50% Policy 6 to 10 Year for & year 11 onwards: - NIL |
Rs. 35 (Annual) Rs. 40 (All other modes) |
4 |
| MAX Life Fast Track Growth Fund | Three months – 60 years | Rs. 25, 000 – Rs. 1 lakh | Policy Year 1: - Single Pay – 4%, 5 & Regular pay – 4% Policy Year 2-5: - 5 Pay & Regular pay – 3% Policy Year 6 - 20: - Single Pay & 5 Pay – NA Policy Year 6 – 10 Year: - Regular Pay – 3% Policy Year 11 - 20 Year: - Regular Pay – 0% |
0.05% p.m. of Single Premium & 3% p.a. from 2nd year. 5 Pay and Regular Pay - Annual mode: - 0.33% p.m. compounding at 4% p.a. from 2nd year onwards up to a maximum of 500/month 5 Pay and Regular pay- Non-Annual modes: - 0.24% p.m. compounding at 4% p.a. from 2nd year onwards up to a maximum of 500/month |
12 |
| SBI Life Wealth Assure | 8 – 60 years | ₹50,000 | 3% of Single Premium | Rs 45p.m. for the first 5 years | 2 |
| HDFC Life Pro Growth Plus | 14 to 65 years | Rs 24,000 – 1,00,000 | Premium due in Year – 1 – 2.5% 2 – 2% 3 and subsequent years – 0% |
Policy Year 1- 5: - 0.42% Policy Year 6 – 10: - 0.83% Policy Year 11 – 15: - NIL Policy 16 and subsequent years: - 0.83% (For the policy mentioned above, administration fees will be charged monthly and will be subject to a maximum charge of `500 per month.) |
NA |
| ICICI Pru Wealth Builder II | 0 to 69 years | One Pay: Rs. 48,000 Limited Pay and Regular Pay: Rs. 24,000 p.a. | One Pay: 3% A discount of 0.5% in the premium allocation charge to customers who buy directly from the Company’s website. Limited Pay and Regular Pay: Annual: - Policy 1 year – 6% Policy 2 year – 5% Policy 3-5 year – 4% Policy 6 years onwards – 2% Half-yearly/Monthly Policy 1- 2 year – 4% Plan 3 year – 3.5% Plan 4-5 year – 3% Policy 6 years onwards – 2% |
One Pay: Rs. 60 p.m. (Rs. 720 p.a.) for the first five policy years Limited Pay and Regular Pay: Year 1 to PPT - 0.21% p.m. (2.52% p.a.) Thereafter - 0.10% (1.20% p.a.) |
NA |
| SUD Life Dhan Suraksha Plus | 8 – 50 years | ₹24,000 | Policy 1 year – 6% Policy 2 year – 5% Policy 3-10 year – 4% Policy 11 & above – 3.50% |
Policy 1 to 10 year - 2.50% p.a. Policy 11 and above year - 2.25% p.a. |
1 |
| Tata AIG Life Invest Assure II - Balanced Fund | NA | NA | - | Rs. 38 p.m. The Charge could be up to a maximum of five (5) percent per annum. |
4 |
Disclaimer: The above information has been sourced from the Insurance Company's Website.
ULIP Calculator is an online tool (available on the website of insurance companies) that allows users to find out the returns they stand to receive at the end of the policy period. It essentially calculates the future value of an investment. The information that one would need to input in the calculator include - investment amount, frequency of premium payment, tenure of policy, fund selection, etc. Based on the information entered, the individual will be able to get an estimate of the returns on a particular investment, and accordingly he or she will be able to decide which would be the best-suited ULIP.
You want to invest in a ULIP plan, but you’re afraid to follow through because you’ve heard numerous rumors about its risk? Or is it because you don’t know enough about the investment vehicle?
Let’s save you the trouble. Coverfox solves the myths that may have stopped you from investing so far!
Myth: ULIP is not a good option for investment.
FACT: They are in fact an excellent option for investment. ULIP offers insurance protection for you, thereby in your absence, the family can live a comfortable life and increases your wealth via high returns.
Myth: ULIPs have a high cost.
FACT: Not true. New generation ULIPs are relatively cheaper than those of previous generations. The cost is distributed evenly over the entire lock-in period. You also have the flexibility to choose premium payment terms and modes.
Myth: ULIPs are risky instruments due to market-linked returns.
FACT: Any market-linked instrument always carries some risk. However, you can minimize volatility in ULIPs by choosing low-risk investment funds in your portfolio like Money Market Funds, Debt Funds, or Balanced Funds.
Myth: ULIP is not a liquid instrument in case of an emergency.
FACT: Untrue! ULIP Plans offer complete liquidity post the 5-year mandatory lock-in period. You can surrender the entire policy and receive the invested amount or make partial withdrawals as and when required.
Myth: ULIPs do not provide good returns.
FACT: If this were true, nobody would ever invest in ULIP Policies. They provide healthy returns - some plans have provided higher returns than mutual funds! The returns in a ULIP depend on market conditions and investment fund chosen as per your risk profile i.e. Equity Fund, Debt Fund, Balanced Fund or Hybrid Fund.
Myth: ULIPs do not allow for the investment of surplus funds.
FACT: That’s not true either. All their plans come with Top-up facility or ‘booster additions’. They allow you to invest funds over the investment tenure.
Myth: ULIPs do not allow discontinuation.
FACT: That’s untrue as well. A ULIP can be discontinued anytime you want, however, the payment will only be given post completion of the five-year lock-in period. Thankfully, you can also revive discontinued policies - just in case you didn’t realize how awesome these policies were!
Myth: ULIP cover decreases with market volatility.
FACT: The life cover under a ULIP plan varies from policy to policy and the insurance service provider. It has got nothing to do with market volatility as the sum assured is guaranteed.
Now that we’ve made you seriously consider buying ULIP policies, our job is only half-done. If you want to get the best plan for yourself, you need to understand the types of plans available first. Let Coverfox help you there.
Classification by Purpose
Classification by Death Benefit
Funds that ULIP Plan offers to Invest in
Now that you’re aware of the ULIP plans’ investment potential, there should be no doubt about their ability to generate wealth for you.
However, as Mutual Funds are a very popular option, you may still want to do a ULIP, Mutual Fund and traditional insurance plan comparison.
| Criteria | ULIPs | Mutual Funds | Traditional Plans |
|---|---|---|---|
| Type | Investment cum Insurance Plan | Pure Investment Plan | Pure Insurance Plan |
| Investment | The money is invested in equity, debt or hybrid funds as per the investors selection | The money is invested in equity, debt and money market instruments as per investors decision | The money is invested in equity and debt instruments as per insurer’s decision |
| Liquidity | Post the mandatory lock-in period of 5 years | No such lock-in period | Investment is locked till maturity |
| Loyalty | They are given in the form of booster additions over the investment tenure | No such loyalty additions | Only participating plans offer loyalty additions provided you stay invested for a loner term |
| Risk | Moderate Risk | High Risk | Low Risk |
If you’re about to invest in ULIP plans, you should know that the insurer will charge you for maintaining your fund until it matures, and making investments for the policy period. Let’s take a closer look at those charges, all of which have been listed below.
Documents Required to Buy ULIP
It’s critical that you carry the most important documents, both for verification and investment purposes while buying a ULIP. Some of the most important documents required are -
Ever go into a grocery store for a month’s shopping without your shopping list? No, right? Well, we’re here to remind you that you need the perfect check-list before buying a ULIP. Take care of your investment by following these tips - Know how a ULIP functions. The more you know, the better it is.
Also remember, compare, and buy ULIP plans on Coverfox!
If you’re reading this, then it’s worth noting that you could be someone perfect to invest in these plans. But, people from all over the country invest in ULIPs for different reasons and purposes.
They are best suited for individuals with long-term financial goals and are willing to remain invested for a minimum time horizon of 5 years. It is also an excellent option for those investors aiming for wealth creation and retirement funds.
Those investors seeking tax benefits can also consider this investment route as premiums paid toward ULIP qualify for tax deduction under Section 80C of the Income Tax Act, 1961. The maximum possible deduction claimed under the section is Rs. 1,50,000. Proceeds from the policy are completely tax-free in the hands of the receiver under Section 10(10D) of the Income Tax Act.
What is the meaning of ULIP?
ULIP is Unit Linked Insurance Plan, a market linked product that provides the benefit of insurance and investment under one comprehensive plan. A plan linked to the capital market, ULIP offers flexibility to invest in debt or equity based in the risk appetite of the investor.
What tax benefit is offered under a ULIP?
ULIPs offer tax benefits at the time of investment and on maturity of the policy. Money invested in ULIP can be claimed as a deduction under section 80C (life insurance) or 80CCC (pension). A maximum of Rs. 1,50,000 is allowed under section 80C/ 80CCC. You can obviously invest a higher amount, but the deduction will be limited to Rs. 1,50,000.
What is the meaning of sum assured in ULIP?
Sum assured in ULIP is the minimum amount under death benefit which a nominee receives in case of death of the assured within the term of the policy.
How can I track my Fund Value?
To keep a track of your total Fund Value you need to know the Net Asset value of your funds. This NAV is determined everyday based on the market changes. Insurance companies publish an update for these values regularly.
If I am not happy with the returns, can I surrender my ULIP?
Yes, it is possible to surrender the policy by paying Surrender Charges after 5 years of lock-in period. But it is advisable to continue with the policy as in the initial years the policy may not yield higher returns due to Allocation Charges.
Can I borrow a loan against my ULIP?
Earlier it was possible to borrow loans against a Unit Linked Insurance Plan but according to new IRDA rule this is not an option anymore. Since ULIPs have an option of Partial Withdrawals, policyholders can withdraw some amount from their ULIP without asking for a loan.
How is the Death Benefit in ULIP calculated?
Based on the highest amount of Fund Value, Sum Assured or a Percentage of the paid premiums, the beneficiaries will be paid with the Death Benefit at the time of the policyholder's death.
What is the difference between death benefit and maturity benefit?
Unit linked insurance plans generally provide two kinds of benefits – maturity and death benefits. Maturity benefits are paid out by the insurance company when the policy has completed its full tenure and the policyholder survives the term. However, to receive this benefit, the insured individual must ensure that all premiums are paid on time. Once the policy has reached its maturity, the individual will receive the value of the fund, along with the loyalty benefits, if any.
Death benefits are paid out to the nominee(s) in the event the life assured passes away during the term of the policy. The nominee(s) stands to receive any one of these in the form of death benefits: i) sum assured or ii) sum assured or fund value, whichever is higher or iii) sum assured and the value of the fund, depending on the terms associated with the policy. The proceeds received in case of maturity of the policy or on the death of the life assured are tax-free under Section 10(10D) of the Income Tax Act, 1961.
What are the various riders? (Premium waiver, Income benefit, Critical Illness)
Riders are the additional benefits that can be included to ULIPs. It is an efficient way of customizing the ULIP to match the present and future needs of the policyholder.
Here is a list of riders that can be added to ULIPs:
Premium waiver rider – This rider waives off all the future premiums payable under the policy in case the proposer is unable to pay the premiums due to the occurrence of any unexpected events like death, accidental permanent total disability or diagnosis of critical illness.
Income benefit rider - In case of the demise of the policyholder, a monthly death benefit amount, which usually equals to 1% of the rider sum assured, would be paid for a specified period, as mentioned in the policy documents.
Critical illness rider - On first diagnosis of any one of the specified critical illnesses, a lump sum benefit will be paid out to the life assured. The number and type of ailments covered will vary from policy to policy.
Accidental death benefit rider - In the event of death due to an accident, the rider sum assured will be paid. This is over and above the standard benefit payable from ULIP. The death of the individual should be a direct result of the accident and within a certain timeframe of the date of the accident.
What do we mean by lock in period?
A lock-in period is a period of time wherein the policyholder of a ULIP cannot liquidate nor make any withdrawals from his or her policy. If one wishes to discontinue the policy during the lock-in period, the insurance company will move the fund value to discontinued fund, after applying a surrender charge. The funds will only be paid back once the lock-in period is complete. The Insurance Regulatory and Development Authority of India has raised the lock-in period for ULIPs to 5 years on September 2010 from the earlier lock-in period of 3 years to promote long-term saving habits among investors and weed out mis-selling.
What are the various charges in a ULIP Plan? Do all plans have the same charges?
ULIP offered by different insurance companies have varying charges. While the structure of charges differs across insurance companies they have a maximum cap on it as per the guidelines issued by IRDAI applicable to all insurers, but broadly here are the different kinds of fees levied on ULIPs:
Premium Allocation Charge - Premium allocation charge is deducted upfront from the premium. This is levied as a fixed percentage of the premium, prior to allocating the units under the policy.
Fund Management Charge – Insurance companies levy fund management charges for managing various funds in a ULIP. It is deducted before arriving at the net asset value.
Mortality Charges - Mortality expenses are charged on the insurance component. When a policy is issued, the insurance company assumes that the life assured will at least live to a specific age. The mortality charge compensates the provider, in case the individual does not live to the assumed age.
Policy Administration Charge - As the name suggests, policy administration charges are levied for the administration of the policy. It is charged on a monthly basis.
Partial Withdrawal Charge - After the policy has completed its lock-in period, policyholder can avail the partial withdrawal facility. Such withdrawals may be free up to a certain limit and then the insurance company may levy a fee per withdrawal.
Fund Switching Charge - A policyholder is allowed a limited number of free switches between different fund options. With subsequent switches, charges may be imposed according to the insurance company's charge structure.
Discontinuance charge - If the policyholder stops premium payments before the lock-in period is complete, his or her money will be transferred to a Discontinuance Policy Fund, after discontinuance charge is deducted in the policy.
Premium Redirection Charge - Premium redirection refers to redirecting future premiums payments into another fund option. After a policyholder has exhausted the limit on the number of times he or she can redirect premium payments for free, charges will be levied.
What is fund switching in ULIP?
To safeguard the policyholder's returns from market volatility, ULIPs offer a variety of options – fund switching facility being one of them. Policyholders can move their investments between different asset classes like equity, debt and balanced, as per their risk appetite and financial goals of the policyholder.
Units can be transferred partially or completely into different fund options. Some insurance companies allow unlimited switch options, while others have a limit of 5 to 10 switches in a policy year. To generate good returns on investments from the switch, the policyholder needs to constantly review and monitor his or her plan’s NAV, given that the market conditions change frequently.
Which is a low-cost ULIP that can only be bought online?
ULIPs are insurance cum investment plans that provide risk cover for the policyholder, along with investment options to park funds in stocks, bonds or mutual funds. Online investment plans like HDFC Life Click2Invest, SBI Life - eWealth Insurance and Max Life Online Savings Plan are some great options that individuals looking for ULIP schemes can consider. The charges associated with these investment plans are easy on the pocket and can be availed anytime over the web. Investors are advised to consider some of the recently launched ULIP as they fare better than the older ULIPs on account of the lower charges.
How to revive lapsed ULIP?
A policy is regarded as lapsed when an individual fails to make premium payments, not just by the due date, but even during the grace period. A unit-linked insurance plan (ULIP plan) lapses when one skips paying the premium in the first 5 years, or during the lock-in period. The money is then moved to the discontinuance fund and a discontinuance charge is levied. To revive a lapsed ULIP plan, insurance companies generally give a window of at least 2 years. If an individual chooses to revive a lapsed ULIP plan during this period, then discontinuance charges levied upon revival will be reversed.
Why should I start planning my savings now?
The earlier you start, the money gets a longer time period for growing. A longer time period of investment beats market volatility and yields good returns.
Can US NRI invest in ULIP?
Yes, NRIs can invest in ULIP schemes
Does ULIP come under LTCG?
No, it does not come under LTCG
Is HDFC click to invest a good plan?
Yes, it is one of the best selling plans
How to find the right time to invest in ULIP?
One must start investing at the earliest possible to get the best returns from ULIPs.
Is surrender value of ULIP taxable?
No, the surrender value of ULIP is not taxable.
What is absolute return ULIP?
Absolute return is the return that a ULIP achieves over a period of time.
What is the difference between SIP and ULIP?
A Systematic Investment Plan is a mode of investment in mutual funds while a ULIP is an independent investment plan.
What is fund value in ULIP?
The total fund value in a ULIP is the prevailing price of the ULIP plan i.e. NAV multiplied by the total no. of units available in the policyholders account.
What is premium allocation charge in a ULIP?
These charges are levied before the premium is paid by the investor. They are the initial charges imposed by the company.
What is ULIP policy in LIC?
ULIP plans offered by LIC are similar to the ones currently available in the market. At the time being no ULIP Plans are available for purchase from LIC.
When was ULIP introduced in India?
The first ULIP was launched in India during 1971 by Unit Trust of India.
What is maturity benefit of a ULIP?
This is the fund value payable to the policyholder when the policy reaches the date of maturity.
What is a ULIP Fund and what type of funds do ULIP Plans offer?
United Linked Insurance plans or ULIP is a combination of investment and insurance. In this plan, the policyholder has the option to pay premium on monthly, quarterly, half-yearly or annually or even as a lumpsum. While a certain amount of the premium goes to provide life cover, the rest of the amount is invested, similar to a mutual fund. The different types of funds ULIPs offer are-
1) Cash/debt Funds (Low risk) – Often known as Money Market Funds, these funds invest in cash, bank deposits and money market instruments 2) Income, Fixed Interest and Bond Funds (Medium risk) – These funds have medium risk and invest in corporate bonds, government securities and other fixed income instruments 3) Equity Funds (Medium to High risk) – These primarily invest in company stocks with the primitive aim of capital appreciation 4) Balanced Funds (Medium risk) – These funds are a combination of investment in equity and fixed interest instruments
What is Ulip NAV?
In Unit Linked Insurance plans, a number of investors pool money together to make one large investment sum. This amount is then invested in numerous capital market instruments. In order to enable the company to divide the returns amongst the investors in a proper manner, the fund manager divides the total investment corpus into smaller units which have a particular face value. The formula used to calculate the NAV is as follows:
NAV = (Value of Current Assets + Market Value of Investments Held) - (Value of Current Liabilities & Provisions) / Total number of outstanding units on date
Why is ULIP a good investment product?
ULIP is considered a good investment product as the premium can be either be paid monthly, quarterly, half-yearly or annually or even as a lump sum. Also, ULIPs have the potential to fetch better returns as compared to any other insurance product because they have an equity advantage over others traditional investment options. Moreover, ULIPs invest the premium paid by the investor in numerous asset classes through various funds.
What is ULIP Charges & Lock-in Period?
ULIPs have a mandatory lock-in period of 5 years. You can only withdraw from a ULIP post the 5 year time period. The various charges levied as a fee under a ULIP scheme are:
What are the Benefits of ULIP?
Flexibility
ULIPs offer flexibility in the following ways
Market Linked Returns
ULIPs offer more than 6-7 types of investment funds to select from. Some of these funds are equity based which offer good market linked returns and increase the overall returns derived from a ULIP.
Investment with Life Protection
A ULIP offers the dual advantage of life cover and investment. Not only are you secured, but you also have the option to gain higher returns and build wealth.
Funds for Crucial Milestones in Life
Being an investment cum insurance plan with a long term investment horizon, a ULIP can be bought for meeting the expenses arising out of important milestones in life such as marriage, college education, etc. So, if you have a long term goal for yourself or your family, a ULIP is a good investment plan.
Protecting your Child’s Future
In case of an unforeseen event which leads to your demise, the ULIP will provide guaranteed death benefit to your wife and child. Thus, your child’s future will not get affected in your absence.
Financial Security Post Retirement
Retirement is an essential stage of every individual’s life. Over the period of investment, a ULIP scheme will gather enough corpus which can be utilised to live a stress-free life post retirement
Transparent Structure
ULIPs allow you to keep track of your investment portfolio. They also intimate you of the percentage of premium that is invested along with the charges levied regularly. As an investor, you are also kept informed about the value and number of fund units that you hold.
Choose your Investment Mix
When choosing a Unit Linked Insurance Plan, one can decide the various fund options, based on the risk taking appetite. In case you wish to gain higher returns and have the capacity to take higher risks for the same, you can choose to invest in an equity fund. Hence, if you win, you earn big. However, if you wish to take lesser risk and are satisfied with medium to low returns, you can choose to invest in a debt fund. ULIPs also provide hybrid funds which suit an individual investor's needs.
Rider Options for Additional Coverage
Along with investment benefits, ULIPs also provide rider options for additional coverage to take care of your loved ones. With rider options such as accidental death rider, critical illness rider and term rider, you can rest assured that ULIPs not only take care of your insurance needs but are also beneficial for your family.
Tax Benefit/Deductions
As ULIPs are life insurance products, they offer tax benefit in the form of deductions of premium amount up to Rs. 1.5 Lakh from ones taxable income and tax-free maturity or death benefit paid.
What are ULIPs for Different Class of Investors?
Investors across Different Life Stages
ULIPs are suitable for all stages of life irrelevant of young or old age or married or married with children and so on. Each and every individual can invest through ULIPs
People at varying risk types Your capacity for risk can determine the type of fund options under a ULIP scheme. If you have a high appetite for risk, you can switch to equity based investment fund which offer higher returns. For low risk appetite, you can invest in bond based funds. If you are looking at moderate risk, you can invest in hybrid funds.
Hands on Investors It is not necessary for a person to be a hands-on investor for making an investment through ULIP. If you do not know much about ULIPs, the professional investment strategy provided by the insurer can take care of your investment needs.
People with Medium to Long Term Investment Horizon LIP is the best option for everyone looking for options which have an investment horizon of medium to long term investment horizon. When equity investments are given the required time frame, they can provide the best returns among the various investment plans available.
Last Updated On 16th February 2021
