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ULIPs Are a Little Tricky But Easy to Make Good Money
Different from a regular insurance policy, a Unit Linked Insurance Plan (ULIPS) gives investors the benefit of both investment and insurance. A part of your investment will go towards ensuring your life and the rest will be invested on your behalf in different plans which you choose. Your life cover will depend on the premium which you pay. The primary benefit which it offers is that there is no need to execute the two transactions separately.
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ULIP Plans
- Plan starting from ₹1,000/month
- Save upto ₹46,800 in Tax under section 80C^
- Zero LTCG Tax¶
- In built life cover
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- ULIPs Are a Little Tricky But Easy to Make Good Money
Top ULIP Funds†
Fund Name
AUM
NAV
Returns (in %)
3 Year
5 Year
10 Year
High Growth Fund
Max Life
AUM:8,482 Cr
8,482 Cr
NAV
119.99
1.59%
Returns
23.95%
Whole Life Mid Cap Equity Fund
Tata AIA
AUM:13,435 Cr
13,435 Cr
NAV
158.69
2.49%
Returns
21.08%
Virtue II
PNB Metlife
AUM:3,532 Cr
3,532 Cr
NAV
77.53
1.12%
Returns
17.59%
Accelerator Mid-Cap Fund II
Bajaj Allianz
AUM:6,452 Cr
6,452 Cr
NAV
86.49
1.27%
Returns
17.79%
Opportunities Fund
HDFC Standard
AUM:40,966 Cr
40,966 Cr
NAV
78.44
1.16%
Returns
15.75%
Fund Name
AUM
NAV
Returns (in %)
3 Year
5 Year
10 Year
Whole Life Aggressive Growth Fund
Canara HSBC Oriental Bank
AUM:869 Cr
869 Cr
NAV
93.59
0.82%
Returns
16.11%
Whole Life Stable Growth Fund
Canara HSBC Oriental Bank
AUM:266 Cr
266 Cr
NAV
61.92
0.32%
Returns
12.53%
Balanced Fund
Canara HSBC Oriental Bank
AUM:380 Cr
380 Cr
NAV
48.06
0.34%
Returns
11.49%
Asset Allocation Fund II
Canara HSBC Oriental Bank
AUM:341 Cr
341 Cr
NAV
31.32
0.18%
Returns
9.45%
Save N Grow Money Fund
Canara HSBC Oriental Bank
AUM:68 Cr
68 Cr
NAV
58.7
0.37%
Returns
8.69%
Fund Name
AUM
NAV
Returns (in %)
3 Year
5 Year
10 Year
Builder
Canara HSBC Oriental Bank
AUM:243 Cr
243 Cr
NAV
89.55
0.06%
Returns
6.87%
Whole Life Income Fund
Canara HSBC Oriental Bank
AUM:802 Cr
802 Cr
NAV
38.31
0.03%
Returns
6.22%
Debt Fund
Canara HSBC Oriental Bank
AUM:482 Cr
482 Cr
NAV
36.29
0.04%
Returns
5.92%
Conservative Fund
Canara HSBC Oriental Bank
AUM:233 Cr
233 Cr
NAV
55.4
0.09%
Returns
7.01%
Protector
Canara HSBC Oriental Bank
AUM:307 Cr
307 Cr
NAV
64.22
0.06%
Returns
6.07%
Disclaimer :
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
ULIPS are Flexible and Dynamic in Nature
In the case of ULIPs, you can choose the sum assured at the time of policy inception. Additionally, some ULIPs will allow you to increase the sum assured over the term of the plan. It is important that you choose the appropriate ULIP which is in accordance with your financial capabilities.
Choosing the Right Plan
Make sure that you evaluate your risk appetite and find out what the ULIP offers before you narrow down on a plan. As the investment risk will be borne completely by the policyholder you need to monitor the policy closely and actively. Before you choose an appropriate plan, ascertain your financial commitments, funding needs, and risk appetite. The choice of the plan should largely depend on your risk appetite.
Why ULIPs are a Little Tricky?
Additionally, it is important to understand the charges which are associated with a ULIP. In the first year, you may have to pay an overhead charge of 25% to 30% of the premium. The entry load for the fund is around 5% while the policy administration charges are around 1.5%. In case of an eventuality, your family will get the insurance amount. As long as there are funds in your account to pay the premium, your life is covered. But when the unit value falls to an extent that it does not cover the insurance, you may be asked to pay the premium failing which the policy will lapse. Further, the portfolio disclosures are not made regularly and openly as in the case of a mutual fund which reduces the transparency quotient of a ULIP.
Deciding on the Financial Goals
If you are looking to invest in a ULIP you should ensure that the goal for which it is used is approximately 10 years away. The charges such as the mortality charges, administration charges, and fund management charges are amortized in the initial few years. Thus, an early exit will not favor the investor. As the impact of cost is less in the long term, less charge will eat into your return.
How ULIPs are Beneficial?
Although a little tricky, a good ULIP plan will yield high returns. An effective plan is one that costs less to give good returns. It should provide adequate life cover and must have proper disclosure with respect to returns and costs in addition to good servicing. Unlike mutual funds, ULIPs have a simpler cost structure. ULIPs offer policyholders the flexibility to choose fund options. They come with an in-built range of funds which can range from aggressive to conservative. You can decide which to choose depending on your investment preferences. ULIPs also offer the choice of switching between different fund options so that you can reap the maximum benefits.
Range of Funding Options
The fund options cater to the varying levels of risk appetites. On the aggressive side, the funds are invested mostly in equities which improves returns but increases volatility as well. This requires you to be more careful after the inception of the plan. On the conservative side, the funds are mostly invested in debts and money markets which ensure stable returns and low risk. Depending on your financial capabilities, you can choose to opt for a hybrid plan as well where a portion will be invested in equities and the balance in debts and money market securities.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
*All savings are provided by the insurer as per the IRDAI approved insurance
plan.
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
+Returns Since Inception of LIC Growth Fund
¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.
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