RESUME APPLICATION PAY PREMIUM
Fund Performance

Fund Performance

Knowledge Center

Knowledge Center

About Us

About Us

Tools and Calculators

Tools & Calculators

Quick links

Mobile (Download app)
  • Webpages
  • Documents
  • HDFC Life ClassicAssure PlusInvestment
  • HDFC Life ClassicAssure PlusInvestment
  • HDFC Life ClassicAssure PlusInvestment

For NRI Customers

(To Buy a Policy)

(If you're our existing customer)

For Online Policy Purchase

(New and Ongoing Applications)

Branch Locator

For Existing Customers

(Issued Policy)

Fund Performance Check

RESUME APPLICATION PAY PREMIUM

What do you want to do?

Quick links

Mobile (Download app)

Download HDFC Life App

Buy plans, track your policy, make renewal payments & monitor fund performance with HDFC Life App, Download Now!

Apple Logo Go to Google Play Store

Top ULIP Myths That You Must Stop Believing In

down-arrow
February 17, 2017

Table of Content

 

Unit Linked Insurance Plans (ULIPs) offer you the unique, dual benefit of investment and insurance in a single product. However, there are several misconceptions surrounding these products due to lack of proper understanding of product features & benefits. Here, we've addressed some of the common myths associated with ULIPs. We hope this will help you make more informed decisions.

Myth 1: ULIPs have high costs

Reality: Do you believe that ULIPs are very expensive? Let us start by understanding the structure of a ULIP. Every time you pay premium towards a ULIP to a life insurance company, the premium is invested in funds of your choice after deducting charges for services provided such as life insurance cover, fund management, etc.

Effective September 1,2010 the Insurance Regulatory and Development Authority of India (IRDAI) capped charges (excluding life insurance cover charges) that a life insurance company can charge on a ULIP at 2.25% if a customer stays in the product for more than 10 years1.

In addition, to these caps the emergence of online plans such as HDFC Life Click 2 Invest ULIP means that the costs of buying ULIPs online is even lower than ever before.

Myth 2: ULIPs are risky instruments as they offer market-linked returns

Reality: The life insurance cover that you buy stays fixed in a ULIP. A typical ULIP will offer you multiple fund options. At the time of purchasing the policy, you can make a choice of the fund you wish to invest in. Depending on the level of risk you are willing to take, you can opt among other choices for equity, debt funds or a balanced fund that is a mix of equity and debt. For example HDFC Life Click 2 Invest ULIP provides you with 8 fund choices. You also have the facility to switch your corpus between funds or to direct future premiums to new funds. All this is possible in a single ULIP without the need for buying another product.

Myth 3: ULIPs do not provide good returns

Reality: In ULIPs, the return is determined by the nature of movement of underlying asset class - equity, debt etc and choice of fund. A good selection of funds and sensible switching at the right time can get you optimal returns from the market. Most importantly, ULIPs provide you with not only an opportunity to invest and build funds, but also insurance cover. If you take this into consideration while considering the overall benefits, you will realise that the returns that ULIPs provide are quite competitive.

Myth 4: It is not easy to exit a ULIP once it has been purchased

Reality: It is important that you purchase a ULIP only medium to long term goals. To encourage disciplined savings for these goals, ULIPs come with a lock-in period of five years after which you have the option to surrender your existing policy. If you make a full withdrawal before the policy matures, you will not incur any surrender or exit load charges; rather, you will be paid your fund value. However, it's not a good idea to surrender the policy midway unless you have no other source of funds. ULIPs require you to remain invested for the long-term if you want to reap maximum returns through capital appreciation. In fact, the power of compounding will typically kick in only if you stay invested in a ULIP in line with your life goals defined at the time of purchasing of policy.

Myth 5: ULIP life cover decreases if the market dips

Reality: Just because ULIPs are generally linked to the equity market, it does not mean that the life cover will decrease if the market plunges. The life cover does not get affected by market fluctuations at all. If you are no more, your existing ULIP policy will either pay the total life cover or the fund value, whichever is higher, to your beneficiaries.

Myth 6: ULIPs do not allow investment of surplus funds

Reality: You can top-up your existing ULIP policy-over and above your premium-using any surplus funds available with you and get tax benefits just as you would in case of regular premiums. You can pay the top-up premiums as many times you wish during the tenure of the policy.

ULIPs from HDFC Life are ideal for achieving your long-term financial goals. Plans such as HDFC Life Click2Invest - ULIP serves as wealth creation solution over the long term. As a policyholder, you are also entitled to life cover, which means assured financial protection for your family in case you are no more.

Source:

  1. http://www.morningstar.in/posts/36257/mutual-funds-or-ulips-where-must-you-invest.aspx

Related Articles

 

Click to Invest in ULIP Plans

Term Plan Articles Term Plan Articles

Investment Articles Investment Articles

Savings Articles Savings Articles

Life Insurance Articles Life Insurance Articles

Tax Articles Tax Articles

Retirement Articles Retirement Articles

ULIP Articles ULIP Articles

Health Plans Articles Health Plans Articles

Child Plans Articles Child Plans Articles

Popular Calculators Popular Calculators

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.

LinkedIn profile
Author Profile Written By:
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.

LinkedIn profile
Reviewed By Reviewed By:

Here's all you should know about life insurance.

We help you to make informed insurance decisions for a lifetime.

How Rising Interest Rates Impact Your Investments—and What You Should Do About It

How Rising Interest Rates Impact Your Investments—and What You Should Do About It

How rising interest rates impact your investments and ways to adapt. Stay informed to make smarter financial decisions and protect your financial future.

Preserving Your Investment: How New Tax Rules Affect Real Estate Sales Before 2024

Financial Freedom for Women Entrepreneurs: Unlocking Success with the 50-30-20 Strategy

Baby Steps to a Secure Future: Financial Planning and Wealth Management

Essential financial planning and wealth management strategies for families. Secure your future and confidently navigate parenthood with these key insights.

Baby Steps to a Secure Future: Financial Planning and Wealth Management
How Loyalty Additions Work In A Unit Linked Insurance Plan Previous
4 Reasons to Invest In ULIP Plans Today Itself Next
HDFC life
HDFC life

HDFC Life

Reviewed by Life Insurance Experts

HDFC LIFE IS A TRUSTED LIFE INSURANCE PARTNER

We at HDFC Life are committed to offer innovative products and services that enable individuals live a ‘Life of Pride’. For over two decades we have been providing life insurance plans - protection, pension, savings, investment, annuity and health.

Popular Search

Popular Searches