6 Myths About Investing in ULIPs

Unit Linked Insurance Plans (ULIP) is the investment product that offers savings with insurance. However most people are sceptical about investing in ULIPs because of the misconception and myths associated with the product’s objectives, liquidity, returns, functioning, and pricing.

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Disclaimer: #The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CAGR 8%; ₹50,45,591 @ CAGR 4%. *Tax benefits and savings are subject to changes in tax laws. All plans listed here are of insurance companies’ funds.

Top ULIP Funds
Fund Name
AUM
Returns (in %)
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10 Year
8,243 Cr
Returns
26.67%
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30.89%
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19.18%
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3,314 Cr
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25.37%
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16.33%
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6,109 Cr
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19.67%
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21.74%
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15.69%
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38,633 Cr
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17.58%
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21.94%
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2,845 Cr
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16.62%
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21.16%
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14.9%
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Fund Name
AUM
Returns (in %)
3 Year
5 Year
10 Year
843 Cr
Returns
17.84%
Returns
19.63%
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14.82%
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268 Cr
Returns
13.38%
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15.17%
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12.02%
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365 Cr
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12.16%
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10.93%
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559 Cr
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9.66%
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12.01%
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10.61%
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323 Cr
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10.51%
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12.41%
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10.55%
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Fund Name
AUM
Returns (in %)
3 Year
5 Year
10 Year
237 Cr
Returns
7.14%
Returns
7.99%
Returns
8.4%
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811 Cr
Returns
6.06%
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6.83%
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7.84%
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478 Cr
Returns
5.81%
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6.81%
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7.62%
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231 Cr
Returns
7.25%
Returns
7.9%
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7.54%
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895 Cr
Returns
6%
Returns
6.57%
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7.52%
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Disclaimer :
Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in

Here, we clear some of myths linked to ULIPS:

MYTH 1: ULIPs are costly.

  • Reality: Because of the high premium allocation and fund management charges, many people consider ULIPs as a costly investment instrument. However, this was a thing of the past. Earlier, the charges were as high as 6-10%, but now IRDAI brought down the annual charges to 3% for the first 10 years of holding and 2.25% for more than 10 years of holding. Now low cost ULIPs have charges much lower than before and are affordable to all.

MYTH 2: ULIPs are risky instruments.

  • Reality: The reason that the money in ULIPs is only invested in the equity market makes it a risk instrument. However, the intensity of risk associated with ULIPs can be selected on the basis of funds with different objectives. . You can invest in a conservative fund by settling for a debt-oriented fund or opt for an aggressive fund if you are a risk-taker. It also gives you an option for selecting a mix of equity and debt fund known as a balanced fund. Additionally, you have the option of switching funds depending on your risk appetite and need of time.

MYTH 3: ULIPs are not for investing surplus funds.

  • Reality: If not at the beginning, you can, at any time top up the ULIPs when surplus funds are available. The top-up premium can be paid anytime during the tenure of the existing ULIP policy and offers the same tax benefits as regular premiums.

MYTH 4: ULIPs cannot be discontinued.

  • Reality: After completion of the lock-in period of 5 years, you can, at any time discontinue investing in ULIPs. n doing so, you will not be required to deposit any type of surrender charges.

MYTH 5: Life cover decreases with market volatility.

  • Reality: Many people have the misconception that because ULIPs are linked to equities, the market returns affect the life cover. However, the life cover remains the same and ULIPs either pay the complete life cover or the fund value, whichever is higher, if the investor dies.

Invest more and Get more with ULIP Plan Invest more and Get more with ULIP Plan

MYTH 6: ULIPs do not have health and accident cover

  • Reality: Since ULIPs offer insurance cover along with investment, just like any other insurance plan it too has rider options such as Accidental Death Benefit (ADB), Waiver of Premium (WOP), Family Income Benefit, Hospital Cash Benefit (HCB), etc. In case of such extremities or calamities, one can benefit from the partial withdrawals to meet their additional cash requirements.

ULIPs have been in market since long and have been offering good returns. This modern and traditional investment mix offers flexibility of switching funds along with easy withdrawal for your current requirements making it a necessary investment tool in your financial planning. If you do not wish to get into the hassles of individual planning, a ULIP with few riders may be the solution.

You may also like to read : ULIPs Are A Little Tricky But Easy To Make Good Money

Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
*All savings are provided by the insurer as per the IRDAI approved insurance plan.
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
+Returns Since Inception of LIC Growth Fund
¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

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