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An explanation of whole-life ULIPs

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An explanation of whole-life ULIP’s
January 30, 2023

Table of Content

 

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

When an investor thinks of a whole life plan one of the strong investment avenues they can consider is a whole life ULIP or a whole life Unit Linked Insurance Plan. As the name suggests this plan combines the benefit of insuring you for your whole life (tenure may differ across plans) as well as invests the corpus created into assets that may be chosen by you i.e. Debt or equity linked plans.

What is whole life ULIP investment?

ULIP Plans have a policy called a whole life ULIP Policy. This policy has the benefit of insuring the policyholder for his entire life span upto a defined age limit .Whole life ULIP Plans have a dual effect of providing life insurance as well as investment. Part of the premiums paid is used as charges for the life insurance policy and the remaining part is invested as per the wishes of the policyholder.

What are the benefits of investing in whole life ULIPs?

Whole life ULIP plans are made in a way that they provide several benefits to their holders. Some benefits are:

  • Whole life Insurance Protection:

    Whole life ULIPs are in place upto a defined age limit or death whichever is sooner. Whole life ULIPs provide a maturity benefit and a survival benefit if the insured individual lives beyond the age limit. They look after the insured person's family in the event of his death and provide a regular income if that's the preference of the policyholder.

  • Flexible premium payment options:

    Whole life ULIPs have flexible payment options. The policyholder has the choice to decide if they want a plan with premium payments that are yearly for the entire duration of the policy or a fixed number of years

  • Creating Investments and wealth:

    A certain percentage of all the premiums paid into the whole life ULIP policy goes towards investments as chosen by the policyholder. These investments could be equity investments or debt investments. Depending on the earnings made by the insurance company in making these investments, policyholders may be the recipient of bonus amounts in addition to the promised maturity amount.

  • Surrender value and loan against surrender value:

    After a certain number of years, the whole life ULIP policy earns a surrender value. This surrender value makes it easier for the policyholder to liquify his investment in case of need of funds. The policyholder can also easily get  loans from financial institutions. The final amount will depend on current value of corpus or type of fund. to tide him over unexpected expenses without liquifying his policy.

  • Tax Benefits:

    The premiums paid by the policyholder towards the Whole life ULIP plans are eligible for tax deduction under Section 80C of the Income Tax Act.1 This allows the policyholder to save tax on the amount invested in whole life ULIP plans.

Is There Only One Type of Whole Life Insurance Policy?

There are several types of Whole life ULIPs. There are :

Participant whole life ULIPs: - based on Money utilization - where in participant plans there is an investment on behalf of the policyholder and non-participant is when there is no investment on behalf of the policyholder but face value and the premium remains.

Level premium, limited premium, single premium or indeterminate premium whole life ULIPs: - based on the frequency of premium payments – where the policyholder can pay premiums based on their fund inflows. In Level premium they can pay the same premium for the entire duration of the policy, in Limited premium they pay for a certain number of years only, Single Premium they pay the premium in a  single payment and indeterminate premium where initially premium payments are low and then increase.

The flexibility and options provided by whole life ULIPs with the insurance makes it a very credible and safe investment for people and is the reason why they are so popular amongst investors.

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.

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ARN: ED/09/22/29580

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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

1  The above stated tax benefits are subject to the provisions & conditions mentioned in the existing Income Tax Act, 1961. Tax Laws are also subject to change from time to time

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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