ULIPs to Manage your Savings!

 

In Unit Linked policies, the investment risk in the investment portfolio is borne by the policyholder.

Management of savings and building upon the savings options is one of the basic parameters of a healthy financial life for any person. The addition of the possibility of complimenting savings in order to create more funds is even more pleasing! Yet, the question is – how to manage savings in such a way that the ideal of wealth creation is achieved? There are numerous investment options available in the market today and though this implies a broader flexibility, this also means that the chances of a lax investment increase, if proper research is not done into the subject.

To understand the greater possibilities of investment, it is imperative that you must accept the fact that some measure of a calculated risk-taking is involved only for aggressive investors or venture investors. However, same may not be true of the traditional or conservative investors. The defining line in any case is the end-goal of the investment in sight. Whether you are investing for a regular, steady income after retirement (a long term gain) or for an impending responsibility e.g. planning children’s wedding (a short term gain). You might also be thinking about resource-building or asset-creation through investment, which can be a short term or a middle term requirement, depending on the plan of action, urgency and the capital involved etc.

In any of such cases, the idea behind wealth creation may not necessarily focus on SIPs (Systematic Investment Plan) or channeling of capital in Mutual Funds, even though relative benefits may seem numerous. Then there are the other important clauses like safety of investment, quantum and frequency of returns. A major factor that must never be ignored is the risk cover. A SIP may not be the choice when it comes to providing a life risk cover as well as investment benefit. For such a purpose, a ULIP (Unit Linked Insurance Plan) comes to the rescue. It acts as a comprehensive combi-plan, bolstering your savings while covering the risk factor in detail. 

A ULIP allows you the freedom of continuous investing for future returns, while ensuring the financial stability of you and your loved ones. Besides attracting benefits under Section 80C, ULIPs act as capital reinforcements with flexible terms. Moreover, up on maturity, such a regular investment can become the effective channel for wealth creation as well.

HDFC Life presents HDFC Life Click2Invest ULIP- online unit linked insurance plan – that best caters t your investment needs while ensuring that your savings and capital gains remain safeguarded from risk. This plan ensures the financial protection of your loved ones and besides, charges you minimally for this.

How Do I Manage My ULIP Policy?

Today, managing a ULIP is easy. You can opt to self-switch, let your insurance provider automatically switch the funds, or use top-ups whenever you choose.

If you opt to self-switch, you are in charge of your money. You decide how much you’d like to put in which type of market instrument and can move your money around depending on market conditions.

If you rely on automatic fund switching, your insurance provider will have an expert fund manager look after your investment. They might switch your money from one type of investment to another based on market predictions and trends.

Finally, when the market is doing well, you can choose to top-up your ULIP by investing more money.

What ULIP Charges Should I Expect?

Very often, people assume that purchasing and managing a ULIP is incredibly expensive. But, this is no longer the case. Today, insurance providers cannot ask for more than 1.35% of the investment amount as their fund management fee. Additionally, new benefits, such as the return of mortality charges, make ULIPs quite affordable. 

Generally speaking, here’s a look at the various fees that might be attached to your ULIP plan:

Fund Management Fee

As per regulations, this cannot amount to more than 1.35% of your total investment amount. Some providers today charge a flat fund management fee. The amount does not change irrespective of the amount you put into your ULIP.

Premium Allocation Charges

For the first year of your investment, your insurance provider will deduct a small allocation fee from your investment amount. The amount helps the insurance company cover their initial costs of issuing the plan. It’s a one-time charge.

Administration Charges

Every month, your insurance provider pays small administrative amounts to help look after your policy. They deduct the charge directly from your investment. It could be a fixed amount or a variable amount depending on the plan you have picked. Currently, many ULIPs come with zero allocation and administration charges.

Switching Charges

In a ULIP, you are free to switch your money from one type of fund to another. But, your insurance provider will likely stipulate a limited number of free changes. Once you cross this limit, you will have to pay a small amount every time you shuffle your money from one fund to the next. 

Mortality Charges

Essentially, this is the same as your life insurance premium. Since your ULIP also provides live cover, a portion of your total sum invested works as your insurance premium. The amount will depend on your age, medical history and health risk.

Premium Redirection Charges

You have the opportunity to redirect future payments towards your ULIP to safer fund options while maintaining your existing fund structure. Should you opt to do this, you will attract a premium redirection charge.

Partial Withdrawal Charges

ULIPs work best when you allow your money to grow for the entirety of the policy term. But, when disaster strikes, you may need to liquidate part of your investment. Your ULIP will allow you to make a partial withdrawal for a fee as long as you fulfil some predetermined conditions.

Related Articles

• ULIPs for disciplined and long term investing
• All about Withdrawal Conditions for ULIPs
• ULIPs - Must you invest in them?
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