India is a country with a vast population where people think of saving more than spending it. It is a common belief that, if one can afford it, then they should put 30% of their income in investment tools. There are many instruments where you can put your money as an investment but not all give you returns on it. Can you think of any product that can give you a life cover as well as higher returns on investment? If not, then this is the right time you explore ULIPs.
The Indian market has the best ULIP plans available for you to pick from. ULIP is a financial instrument providing life protection cover and compounded returns on the investment made. But before that, let us explore Unit Linked Insurance Plans in detail and find out what the insurance plan is all about.
Why are ULIPs a safe option to invest in 2021?
Life after the crisis is witnessed by not one but many across the globe. People had seen the biggest financial as well as emotional downturn when they lost their loved ones unexpectedly. This has been the struggle for more than 3 crore covid patients and their families.
In common, individuals do not have a safety perspective associated with buying a life cover and investing money. For a large part of the population, life insurance and products like ULIP are for saving income tax.
But with the changing scenario, more and more people are buying life insurance policies through products like ULIPs. It is considered one of the safest investment options to put money in 2021 as:
→ ULIP provides the income tax deduction benefit to individuals. The amount admissible for deductions is Rs.1,50,000/- under sections 80C and 80 CCC.
→ ULIP provides a life insurance cover to the buyers. The minimum amount of coverage that any individual will get is 10 times the annual sum insured paid.
→ If the yearly premium remains below Rs 2.5 lakhs for this product type, you will get a tax-free return under section 10(10D).
→ It is a market-linked product that provides life cover to individuals. After deducting different charges, the portion of the policy premium is invested in various funds that include equity, debt, and balanced funds. The product offers transparency to you, allowing you to know what returns you will earn after investing. In addition, as the owner of the units with different Net Asset Value, you can monitor the returns you make on the money invested.
There is no other product that provides dual benefits other than ULIP. This is why ULIPs are very popular and the safe option to buy in 2021.
Still not clear what ULIP is? Let us see down here.
What is ULIP?
A Unit Linked Insurance Plan (ULIP) is a dual benefit financial instrument that provides an option of long term financial wealth creation. Let us understand this with an example. Think that when you grow older, you may need a considerable volume of money for different stages of life. These events may be unexpected or planned ones. In either case, you require money from your savings and investments, and this is where a ULIP works.
ULIP is a market-linked investment product that indicates the growth/ fall and the exact value of the fund you own. It is because the product is completely transparent with the policyholders. ULIP is an investment product that works wonders if you are looking for higher returns over a long period. The massive bulk of funds is collected when you pay the premium under ULIP for a more extended period. But if you choose the product from the life insurance point of view, you may not get coverage with a higher sum insured.
Types of ULIP.
These are the types of ULIPs you can invest your money in:
- Equity Funds:
- Under the equity funds, investors can put their money in buying shares and stocks of the companies.
- These are further divided into two categories which are active and passive. In the active funds, the fund manager evaluates the market and performance of the funds before investing in the stocks of the companies.
- On the other hand, the manager would build a portfolio in the passive funds to divide the investment into different funds depending on the index, Sensex and Nifty.
- Investing in equities are riskier as they are linked to fluctuations in financial markets. But the expected growth is more in comparison to other instruments.
- Debt Funds:
- Debt funds attract investment in debt instruments like debentures, government bonds and securities, corporate bonds, fixed income bonds.
- Debt funds entail medium to low risk.
- Returns with the debt fund are comparatively less risky, and they are moderate.
- Balanced Funds:
- When the investment is made in the mix of both the instruments, it is called balanced funds.
- The investors can put one part of their investment into equity funds and the other into debt funds, then it is called creating a balance.
- This way, the risk is spread evenly between high risk and low-risk investment options.
- Cash Funds:
- Some Unit Linked Insurance Plans direct their funds to low-risk cash fund instruments. These include cash deposits, term deposits, and market funds.
- The percentage of return that these ULIPs offer is the lowest compared with equity, debt, or balanced funds.
- The risk factor with the ULIP that invests in cash funds is lower.
- Guaranteed/Non-guaranteed ULIPs:
- The guaranteed ULIPs talk about capital preservation, and non-guaranteed ULIPs focus on maximizing wealth creation.
- Under this ULIP plan, a small amount of premium money is invested in equity which controls the exposure to market risk. On the contrary, for non-guaranteed ULIP, you can put a large part of the premium in equity markets.
- Guaranteed ULIPs are an excellent investment choice for those who expect stable income returns over a long period. But if you are looking for higher returns, then non-guaranteed ULIPs are better but more volatile.
- Life-Staged ULIPs:
- Life staged ULIPs suit the requirement of those investors whose risk-taking ability goes down as they grow old.
- These ULIPs push the investors to put a part of the premium in equity instruments and the remaining in debt funds.
- The higher premium is invested in equity rather than debt in the initial years, as the former pays you higher returns. But later, gradually and slowly, more investment is made towards debt instruments.
The information about the type of ULIPs assists you in decision making for which kind of product you must purchase. It also clarifies different product categories that you can align with life goals and savings plans.
You can now further read about the different types of ULIP plans you can buy in 2021. After which, you can study the factors to consider before buying a ULIP, how you can calculate the premium, different charges under ULIP, etc.
Top ULIP plans to buy in 2021
Here are the top ULIP plans you can consider to buy in 2021:
ABSLI (Aditya Birla Sun Life Insurance) Wealth Assure Plus Plan:
- ABSLI Wealth Assure Plus Plan helps you in wealth creation goals against death, disability, and diseases.
- The investment in the portfolio is borne by the policyholder.
- The plan allows you to make a choice of investment between 5 investment strategies and 16 funds.
- You get the systematic withdrawal facility to enable regular withdrawals.
- The plan allows you to choose from 2 types of plan options one is Classic and the other one is Assured. Under the Classic Option you get sum assured plus the policy fund value as the benefits. Contrarily, Assured Option provides you sum assured plus fund value in addition to the occurrence of any Critical Illness or permanent disability. The policy will continue till maturity and ABSLI pays all the future premium installments.
- The plan comes with a survival benefit in which at the end of the Term Plan, the policyholder will get lump sum payment. The only condition is that all the premiums must be paid.
- Flexibility to choose between the 4 investment options.
- The policyholder can avail tax under Section 80 C and 10 (10D).
- Premiums under these two plans can be paid annually, semi-annually, quarterly, and monthly.
- Quick Glance at the plans:
| Particulars | Classic Option | Assured Option |
| Entry Age | 30 days to 65 years | 18 to 50 years. |
| Maturity Age | 18 to 75 years | 33 to 65 years |
| Basic Premium (Min.) | Rs.24,000 | Rs.24,000 |
| Basic Sum Assured(Min.) | Rs.2,40,000 | Rs.2,40,000 |
| Top-Up Premium (Min.) | Rs.5,000 | Rs.5,000 |
Bajaj Allianz Life Smart Wealth Goal:
- Bajaj Allianz Life Smart Wealth Goal is a ULIP plan that allows you to choose from the three variants like Wealth, Child Wealth, and Joint Life Wealth.
- The plan comes with the return of premium allocation benefit but charges you for that.
- The plan comes with features like return of mortality charges, return of allocation charges, and fund booster.
- Life Smart Wealth Goal gives you an option to increase the premium paying term after 5 years of lock-in period but before the end of 5th year. The only condition is that the policyholder will have to give a 30-day advance notice.
- The policyholder can get systematic but partial withdrawals. You can also accelerate your journey by returning the life cover charges provided all the premiums were paid by you.
- The plan comes with multiple investment strategies that includes Investor Selectable Portfolio, Wheel of Life Portfolio, Trigger Based Portfolio, and others.
- The owner of the ULIP plan can choose to reduce the premium or increase the premium paying term but only after completion of the 5 years of the policy.
- Quick Glance at the conditions:
| Particulars | Details | ||||||||||
| Minimum Entry Age | 0 year | ||||||||||
| Maximum Entry Age | 60 years | ||||||||||
| Maturity | 18 years to 85 years | ||||||||||
| Policy Term | Min 10 years to Max 30 years | ||||||||||
| Premium paying term | Min 5 years and max equal to policy term. | ||||||||||
| Min Premium |
|
||||||||||
| Minimum top-up Sum Insured | 1.25 times top up premium. | ||||||||||
| Maximum top-up Sum Insured | 10 times top up premium. |
- One of the hottest selling products that you can explore from HDFC is HDFC Life Capital Shield. The plan assures you to reach greater heights.
- HDFC Life Capital Shield comes with the assured maturity benefit and life insurance cover for the entire policy term.
- You get loyalty additions to boost the fund value from the 6th year onwards.
- Option to make partial withdrawals from funds after 5 years of policy term.
- Quick Glance of the product:
| Particulars | Minimum | Maximum | ||||||||
| Premium (Single Pay) | Rs.48,000 | No Limit | ||||||||
| Premium (Limited Pay) |
|
No Limit | ||||||||
| Entry Age | 8 years | 60 years | ||||||||
| Maturity Age | 18 years | 70 years |
- ICICI Pru Signature Life offers a life insurance plan with flexible investment options. It is a savings plan and provides a life shield to the loved ones.
- The premium paid under the policy is allocated in the funds of the policyholder’s choice.
- You get to choose from 4 portfolio strategies and a wide range of funds.
- With ICICI Pru Signature Life you get a whole life cover, unlimited free switches, systematic withdrawals, and tax benefits.
- Quick Product Glance:
| Particulars | Minimum | Maximum |
| Policy Term | 10 years | 30 years |
| Premium in Other than Whole Life Policies | Rs.30,000 p.a | Unlimited |
| Premium for Whole Life Policies | Rs.60,000 p.a | Unlimited |
| Entry Age in Other than Whole Life Insurance Policies | 0 years | 45 years and above. |
| Entry Age in Whole Life Insurance Policies | 0 years | 60 years |
| Maturity Age | 18 years | 75 years |
Max Life Platinum Wealth Plan:
- Max Life Platinum Wealth Plan is an ideal ULIP plan that helps you accumulate money for your long term life goals.
- You are allowed to use additional wealth boosters to increase the collection of amounts.
- The plan helps you to secure your family’s future with maturity and death benefits.
- As a policyholder, you can choose premium paying terms and policy terms as per your convenience.
- Quick Glance at the Product:
| Particulars | Minimum | Maximum |
| Entry Age (Single Pay) | 91 days | 60 years |
| Entry Age (Regular Pay) | 91 days | 55 years |
| Maturity Age (Single Pay) | 70 years | |
| Maturity Age (Regular Pay) | 65 years |
| Policy Term (Single Pay) | 10 years |
| Policy Term (Regular Pay) | 10 to 20 years |
| Annualized Premium | Minimum Rs.2 lacs and Maximum No Limit |
| Sum Assured (Single Pay) | 1.25 times Single Premium |
| Sum Assured (Regular Pay) | Higher of (10 times Annualised Premium or 0.5 x Policy Term x Annualized Premium) |
After reading about these plans, you might not understand which one will suit your requirements. Hence, you should read about the factors to consider before buying a ULIP.
What will you consider before buying a ULIP?
Word of mouth publicity works wonders in everything and affects an investment product or a typical electronic gadget in the same dimension.
Agreed?
But can you increase your savings with it? Everybody needs money in abundance in their life. Well, not everyone, but some are born blessed with money served on their platters. If you are not one of those, you must plan to save money in different ways.
Discussing ULIP here, you must explore the type of products you must invest in. But before buying a ULIP, this is what you should consider:
- Choose the ULIP that aligns with your goals: Check whether the ULIP matches your goals or not. A ULIP gives you an option to invest in different funds and identify which options suit you and your risk absorption capacity.
- What is the maximum tax benefit you look at: A ULIP plan provides you with a top tax benefit of Rs.1.5 lakhs. Consider what the total deduction you are looking at is. You can then invest accordingly in the ULIP.
- Choose the life insurance cover amount: ULIPs satisfy you with the high returns it offers. Apart from this, you also get life insurance cover, of which you can choose the coverage limit. Pick the ULIP that supports your purpose.
- Evaluate the risk profile: Evaluate the risk profile, which implies that you monitor the funds and returns. Compare it with your risk tolerance capacity. If you are an aggressive investor, then go for equity funds. But those who look for stable income in the long run, debt funds will suit them.
- Check the charges levied: When you buy a ULIP, a portion of it is charged for different fees like fund management, allocation charges, surrender charges, and initial charges.
- Monitor the performance of ULIPs: See over a long period how the ULIPs perform against their expectations set as indices on Nifty 50, BSE 100, NSE 500, etc. The companies from which you buy the ULIP plan keeps you informed about the growth. Keep track of it.
Conclusion
Buying a ULIP is about planning for your future goals. These were the top ULIP plans you just read. But before making the purchase, you must compare the products. Always bear in mind the ultimate goal, and if still things are not clear, then speak with a life insurance expert. Buy a policy as soon as you think you can bear the fluctuation in the returns on the premium invested. It happens as ULIP is a market-linked insurance product. These plans help you to collect money for your long term goals.
