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How flexible are Unit Linked Insurance Plans or ULIP Plans

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How flexible are ULIPS?
December 12, 2022

In this policy, the investment risk in the investment portfolio is borne by the policyholder. 

Making timely and good Investments are the backbone to attaining financial independence and building wealth for any person. Investing is done by directing your savings into securities which build in value in helping your money earn. There are however investments that are flexible and those that are inflexible.  Investing in flexible instruments allows you greater control and autonomy over your invested funds. A ULIP Plan offers tremendous Flexibility when it comes to investments.

But first, let us understand - Flexibility in Investments:

Flexibility in instruments means that they allow you to make the decisions vs. have you adhere to their stringent set of rules. Flexibility in investment instruments can be described as:

1. Having the freedom to Switch Between Assets and Asset Classes: Investing in different Assets & Asset classes allows you to choose between the inherent benefits & riskiness of each investment such as equity, debt, real estate, bonds etc. and ideally also allows switching between these asset classes.

2. Having the freedom to Invest any time: your payment for the investment can be monthly, quarterly, bi-annually, annually or lump sum depending on your availability of funds. Salaried people may prefer monthly payments, whereas an investor who has experienced a one-time bounty may want to invest his gains into an asset at one time.

3. Being able to Withdraw Money when Needed: the ability to access part of the entirety of your funds at the times you may require to do so, even if it’s before the maturity period of the instrument.

4. Choosing your preferred Term of Investment: Depending upon your investment goals, your preferred term of investment could be 5 years or 30 years. Whatever your targeted term of investment a flexible instrument allows you to choose your term of the investment.

Keeping in mind all the above factors about flexible investments ULIP Plans make excellent investment vehicles. ULIP Plans or Unit Linked Insurance Plans provide a two-pronged benefit of being an investment that allows building investment while creating an insurance plan. In addition to that, they also allow great flexibility to investors with their investment plans.

What is the Investment Flexibility in Unit Linked Insurance Plans or ULIP Plans?

ULIP Plans are plans that link insurance and investments and allow you to buy units of the funds that have a lot of flexibility in their investment options. The kinds of flexibility offered by ULIP Plans are:

1. Flexibility In Terms of Choosing the Funds: ULIP Plans offer a wide variety of plans from Equity to Debt, from Balanced Funds to Liquid funds and many others. They offer you the facility of choosing between these funds as per your preference, goals and risk appetite.

2. Flexibility of Fund Allocation: When you invest in ULIP Plans you are not required to pace all your funds in the same asset or fund category. You can choose to allocate your funds between different asset categories. Such as 40% in equity, the remaining in debt funds or any other proportion that works for your goals.

3. Flexibility In Terms of Choosing the Premium Payment Term: Premium payment is something that is directly linked to the way the investor earns. Someone who has consistent earnings may prefer to invest Regularly – these may be monthly or quarterly payments. There may be others who have lucrative seasons that prefer to invest once a year or even do one-time payments for windfall gains. ULIP Plans allow you great flexibility in payments.

4. Flexibility of Benefits to be Received: Benefits to be received in ULIP Plans are classified as Maturity benefits and Death benefits. In similar plans, these benefits are given as pure lump sum. In ULIP Plans, however, these benefits may also be taken in some installments.

5. Flexibility and Systematic Withdrawal: ULIP Plans do allow for systematic withdrawal from the policy. This is subject to a few regulations for the safety of the investor. For example, an investor can withdraw only after they turn 18 or after the minimum lock-in period has been completed.

The key factor of the flexibility offered by ULIP Plans is that they allow switching between the plans by the investor. This means that between the duration of the plan the investor may choose to switch between equity or debt plans. This can be done by the investor by going through the insurance companies or using the ULIP Plan online service or by using the services of a fund manager. Switching between plans may be done by the investor in periods of market flux or distress or even if they wish to switch from riskier equity portfolios to safer debt portfolios. The reasons are the investors' own – the ULIP Plans simply provide the flexibility to switch as per your own wishes.

ULIP Plans are quite user-friendly as they provide a wide variety of investment options under one umbrella. Their flexibility makes them quite a preferred option for investors. Despite the flexibility, all investments are subject to market forces and all investors should read the offer documents carefully before investing. 

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ARN:  ED/09/22/29579

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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Disclaimer

The Unit Linked Insurance products do not offer any liquidity during the first five years of the contract. The policyholders will not be able to surrender or withdraw the monies invested in Unit Linked Insurance Products completely or partially till the end of fifth year.

Unit Linked Insurance products are different from the traditional insurance products and are subject to the risk factors. The premium paid in Unit Linked Life Insurance policies are subject to investment risks associated with capital markets and the NAVs of the units may go up or down based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions. HDFC Life Insurance Company Limited is only the name of the Insurance Company, HDFC Life is only the name of the brand. The name of the company, name of the brand and name of the contract does not in any way indicate the quality of the contract, its future prospects or returns. Please know the associated risks and the applicable charges, from your insurance agent or the intermediary or policy document of the insurer. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns.

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