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Investment plus insurance Vs only investment- Which is best for you

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March 16, 2019
Often, when it comes to the choice between an investment mode and a traditional insurance model, there are a lot of options that are involved. This may mean making a choice between a market-linked instrument that also offers a significant cover for the future and a fixed premium, traditional, non-market linked plan. Therefore, the crux is to take an informed decision after duly considering various possibilities that may be there, after duly matching the options with the kind of a financial guarantee that you require. One such credible option involves Investing in a ULIP. ULIP stands for a Unit-Linked Insurance Plan and is, in short, a joint medium for insurance as well as investment with focussed benefits regarding the investment plans and the coverage options.

In the purview of detail, ULIPs are Unit Linked Insurance Plans that serve as joint instruments for insurance coverage and investment through a variety of fund options. ULIPs come with a lock-in period of 5 years and therefore, enable financial discipline through regular investments which makes them ideal for long term financial goals. When the policy holder pays the due premium, it is divided into two parts - one part is channelized towards the premium towards the insurance coverage while the other serves as investment towards the multiple fund options. This means that a part of the payable premium is meant for maintaining the insurance coverage i.e. the life coverage while the other is meant for driving the investment bit through the various fund instruments.

ULIPs offer the feature of fund switches between multiple fund options. This means that the policy holder can switch between fund options depending on how a particular fund is performing at the market. The insurers provide this switch option free of any cost up to a maximum of 10 or even 12 switches. After this, a nominal fee for switching between funds is charged. Therefore, ULIPs are very flexible in terms of the customer’s preferences and offer a credible flexibility that allows the policy holder to make informed decisions. ULIPs also have the feature of permissible switches between various fund options that makes them very flexible and the subscriber gets to choose the fun option as per her/his risk appetite. Besides, investments in a ULIP come with tax benefits under Sections 80C and 10D of the Income Tax Act, 1961 and are also exempt from LTCG taxation.

Before taking the decision to invest in a ULIP, you must keep in mind the various charges that are involved. In a ULIP, there are several charges involved, which are further categorized as policy administration charges (for administration of the policy terms and clauses and administering the invested units), premium allocation charges (pre-decided part of the payable premiums), fund management charges (for managing the fund options), mortality charges and the surrender charges. A ULIP offers diverse fund options which can be debt, equity or hybrid instruments. This wide range of options, coupled with the switching option makes ULIPs stand apart from mutual funds or even traditional plans. This is because in terms of market-leverage, ULIPs tend to be on a higher scale than mutual funds and traditional plans.

HDFC Life offers - a market-linked, fund based investment cum insurance mode that offers the joint benefits of both, with nominal charges. Click on HDFC Life Sanchay Plus Plan for more Details.

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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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