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Types of ULIP Investments in India

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December 27, 2018

In today's competitive world where saving and investment choices decide the future financial health of the investor and her/his loved ones. ULIPs have emerged as viable investment options and have become very popular over the years. ULIPs are Unit Linked Insurance Plans that offer the joint benefits of insurance coverage and investment benefits through market-linked returns. As per the Income Tax Act, 1961, the payable contributions towards ULIPs are tax-exempt under Section 80C and Section 10D. ULIPs have a lock in period of 5 years before which any withdrawal cannot be made. This makes ULIPs ideal as a long term corpus builder and suitable for long term financial coverage. The premium that the policy subscriber pays towards a ULIP 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.

Insurers offer various types of ULIPs with varying fund options from among which you can choose as per your market preference and risk appetite. Moreover, if a particular fund fails to perform well at the market, you can use the unique fund-switch feature of the ULIPs (there is an upper capping on the number of free switches and varies from insurer to insurer). The fund options may be of several types like:

  1. Monetary funds invested in banks known as cash funds.
  2. Corporate and government bonds and securities - fixed interest funds.
  3. Equity funds
  4. Combination of fixed interest funds and equity funds.

In these fund options, the risk factor varies from one fund to another and generally the cash funds come in the low risk category. ULIPs offer a high level of flexibility through the switch option and you can switch as and when you like. Moreover, ULIPs have an important feature in the shape of top up option, which entitles the policy subscriber to supplement i.e. add to the core value of fund-investment. Any contribution towards this addition i.e. towards the top up is also subject to income taxhttps://www.hdfclife.com/insurance-knowledge-centre/tax-saving-insurance/income-tax-exemptions-fy-2017-18 exemption as per the relevant sections of the Income Tax Act, 1961.

Generally, ULIPs come with a set charge structure, which is a bit complex than what other investment options have to offer. These charges include the policy administration charges (for administration of the policy clauses and units contained therein), premium allocation charges (in the form of a set percentage of the payable premiums), fund management charges, mortality charges, surrender value etc. Any investment in a ULIP must be made with due consideration of your individual financial goals and requirements. Before taking any decision, you must check and compare various plan features being offered by various insurers so that you can have a clear idea of what different insurers have to offer.

HDFC Life offers HDFC Click 2 Invest ULIP- an online plan that offers market linked returns and is aimed at helping you create a beneficial and diverse investment channel for the growth of your funds. For details, click on the mentioned link: https://www.hdfclife.com/savings-plans /click-2-invest-ulip-plan.

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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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