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Have you heard about the term ULIP before? ULIP is Unit Linked Insurance Plan, it is the full form. And it is a multi-faceted life insurance product. A ULIP plan is a mixture of life insurance and investment. ULIPs need you (as a policyholder) to produce regular premium payments, part of which is utilized to provide life insurance coverage. The remaining is pooled with the assets acquired from other policyholders and then invested in financial instruments (i.e. equity and debt), equivalent to mutual funds. Investment in ULIP indicates you can stay financially secure against emergencies and increase your money as well.
How do ULIPs Work?
Just like every other life insurance product, you are needed to pay a small amount, known as premiums to keep your policy running. In ULIPs such as Canara HSBC Oriental Bank of Commerce Life Insurance Invest 4G, up to 100 percent of your premium is allocated towards your investment.
The premium you pay is assigned to various funds according to the ratio selected by you.
After your premium is assigned to your selected funds, units are allocated as per your contribution. Units are estimated based on NAV (Net Asset Value).
After units are allocated, the insurance provider deducts some charges from your fund. The different types of charges are:
- a) Mortality charges
- b) Policy administration charges
- c) Fund management charges
- d) Fund switch charges
Some expenses are deducted monthly while some charges are deducted quarterly. After these expenses, the next thing that can come into your mind is how your fund is organized.
In ULIPs your fund is operated by highly qualified and abled fund managers. Invest 4G presents you with 4 active fund management strategies.
These strategies have a pre-determined way of performing so that you do not have to get much concerned.
- a) Systematic Transfer Option
- b) Return Protector Option (RPO)
- c) Auto Funds Rebalancing (AFR)
- d) Safety Switch Option (SSO)
The safety switch choice facility can opt only in the last 4 years of the policy. While the other 3 strategies can be operated anytime.
In ULIPs there is a lock-in period of five years and after five years you can begin to withdraw from your policy.
Benefits of Investing in ULIPs
The best ULIP offers several benefits to the average investor. With young investors developing increasingly aware of these benefits, ULIP is quickly becoming one of the most preferred options of investment. Here’s why more people are selecting to buy the best ULIP offered by financial institutions.
Dual Advantage of Investment and Insurance
ULIPs are the only investment opportunities that propose you the advantages of investment and insurance combined. The insurance part of the plan presents you with a protective life cover. If you outlive the term of the plan, you receive maturity benefits also. On the other hand, if you do not persist in the plan, your beneficiaries acquire death benefits that can help them cope with any financial crises following your demise. In addition to this, the best ULIP also permits your investment to grow over the years, resulting in a sizeable corpus that you can fall back on later in life.
Flexibility of Investment
Another cause people select to invest in the best ULIP is the flexibility they offer. In most other investment opportunities, the money you park is invested in the same vehicle throughout the assignment of investment. In ULIP, however, you have the opportunity to switch between debt, equity, or balanced funds, relying on your risk appetite. You can select the kind of units you want to purchase right at the beginning of the investment tenure. Thereafter, depending on shifts in the market and variations in your risk disclosure, you can move your money to other low-risk or high-risk funds as required.
The best ULIP also presents tax advantages to investors. Since ULIPs are essentially investment yields, the premium you pay to invest in these plans is deductible as per section 80C of the Income Tax Act. You can deduct the premium paid during each financial year from your entire income for that year, thereby lowering your tax liability. In addition to this, the maturity or death advantages obtained from the ULIP scheme are also tax-free as per section 10 (10D) of the Income Tax Act. With so many tax advantages to its credit, it’s no wonder that the ULIP is being increasingly chosen by savvy investors.
Choose Investment Option
ULIPs are very flexible and thus deliver you with full freedom to select between the various options to invest your money.
You can invest either in equity funds, debt funds, or even in a mix of both according to your choice and risk-taking abilities. The fund switching option in ULIPs also permits you to move your money between two funds during the policy.
Achieve Life Goals
You work hard in your life to reach your and your family’s dreams. To accomplish a life goal, a reasonable investment must be done.
ULIPs present you with the chance to invest in the market. This offers you a possibility to make large wealth which can be used for your child’s higher education, marriage, or even your retirement. It also protects your life so that your family can still reach their goals even if you are not present.
In most of the investment options, you are provided very little liquidity as the funds are available only at maturity.
But ULIPs on the other hand have a partial withdrawal structure. After the lock-in period of 5 years, you can begin to withdraw from your retirement corpus. This becomes very useful when you require quick cash.
How to Select the Best ULIP Plan?
Once you understand what is ULIP plan, the next step is to select the best-suited policy for you since there is a variety of choices available. So, before you invest in a ULIP plan, you must consider comparing and evaluating to select the best ULIP plan available in India. Following are some of the key points to keep in mind while selecting the best ULIP plan:
- Evaluate Your Goals
- Choose the Right Life Insurance Cover Amount
- Stay Invested for an Extended Investment Tenure
- Avail Maximum Tax Benefits u/s 80C & 10 (10D)
Fund Option Under ULIPs
Some of the most typical investment opportunities available under ULIP plans are –
In an equity fund of ULIP plans, the given investment amount is used to purchase stocks, which have a Net Asset Value (or NAV) associated with them. NAV is the price per share (or ‘unit’) in a Fund. As the ULIP full form suggests, the ULIP plan is a market-linked tool, so the equity investments carry high innate risk because of market fluctuations. Regardless, equity investments can also be the most rewarding.
The premium given towards debt funds is used to invest in agencies such as Government Bonds, and debentures, which offer a lower risk than equity investments. Corresponded to equity investments in ULIP plans, yet, debt funds may offer a lower return on investment.
Hybrid or Balanced Funds
Under ULIP plans, Hybrid or Balanced Funds are developed to deliver capital growth (from the equity component) while providing lower risk (due to the debt component.) In case of market changes, thus, any loss that you incur from the equity share is balanced out by the lower risk yet constant returns from the fund’s debt portion.
ULIP also enables you to save for the long term in a disciplined manner. You can select Invest 4G, Titanium Plus Plan, Smart Future Plan, and Smart Goals Plan to meet your financial goals.
Invest 4G from Canara HSBC Oriental Bank of Commerce Life Insurance is an extremely excellent investment option for investors. With this plan, you can select from 8 different funds and 4 portfolio strategies. You also get to appreciate additional advantages such as wealth boosters and loyalty additions. Also, Invest 4G also permits you to switch between funds, so you can take advantage of changes in the financial markets.