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ULIP: A Good Investment Product Unfairly Judged For Its Charges

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ULIP: A Good Investment Product Unfairly Judged for Its Charged
October 17, 2023

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

In India, the awareness surrounding life insurance is not as widespread as desired. Even among individuals comprehending the concept and significance of life insurance, a particular life insurance product is frequently misconstrued and unfairly evaluated – the Unit Linked Insurance Plans (ULIPs).

A considerable number of people disregard the chance to invest in ULIP plans due to the misconception that the associated charges are exorbitant or unjustified. Nevertheless, this notion is quite distant from reality. Let's delve into understanding what a ULIP truly entails and why it can genuinely serve as a favorable investment option.

What is a ULIP?

A ULIP or Unit Linked Insurance Plan is a type of life insurance policy that combines the advantage of a life cover as well as potential wealth creation through market-linked investments. Like all life insurance policies, you will have to pay a premium for the life cover offered by your ULIP.

In addition to this, you can also choose to invest in different funds like equity funds, debt funds, hybrid funds and more. These investments can be made at monthly, quarterly, semi-annual or annual frequencies — as per your choice. Over the policy term, your investments may grow depending on the market movements, and you will receive the corpus as the maturity payout at the end of the policy term if you survive the period.

Are ULIP Charges Holding You Back?

There are different ULIP charges you will have to pay for your policy, such as the following:

● Premium allocation charges

● Administration charges

● Fund management charges

● Partial withdrawal charges

● Fund switching charges

At first glance, it may appear that there are several charges that could diminish the net returns from your ULIP investments. However, the Insurance Regulatory and Development Authority of India (IRDAI), has capped ULIP charges and restricted them to a nominal percentage of the fund value. This means that you can always count on the fact that your ULIP charges will not exceed a certain limit, thereby ensuring that your corpus is not eroded by investment costs.

Conclusion

Now that you know the truth about ULIP plans and their charges, you can analyse whether they align with your financial goals and make a decision about investing in them. If you do decide to go ahead and include a Unit Linked Insurance Plan in your portfolio, ensure that you read the product brochure and the terms and conditions thoroughly, so you can take advantage of the plethora of features and benefits offered by your preferred ULIP.

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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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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.

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Here's all you should know about life insurance.

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

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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.

Disclaimer

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.

For more details on risk factors, associated terms and conditions and exclusions please read sales brochure carefully before concluding a sale. Unit Linked Life 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, The name of the company, 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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