How to Choose the Best ULIP Plan in India?

A ULIP or Unit Linked Insurance Plan is an investment scheme that unlike a pure life insurance policy serves the purpose of both investment and life insurance under a single plan. And the net premium paid by you is further invested in any of the chosen funds – equity, balanced, debt, etc.

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Top ULIP Funds
Fund Name
AUM
Returns (in %)
3 Year
5 Year
10 Year
1,663 Cr
Returns
26.72%
Returns
27.01%
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20.76%
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2,894 Cr
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24.45%
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22.83%
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18.66%
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2,337 Cr
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23.41%
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19.4%
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17.94%
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961 Cr
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20.27%
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18.65%
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6,464 Cr
Returns
19.12%
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17.41%
Returns
16.85%
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Fund Name
AUM
Returns (in %)
3 Year
5 Year
10 Year
11,380 Cr
Returns
24.25%
Highest Returns
Returns
23.2%
Returns
21.58%
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1,340 Cr
Returns
30.17%
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23.17%
Returns
19.65%
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5,651 Cr
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29.27%
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26.75%
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19.47%
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4,058 Cr
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26.02%
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19.28%
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5,938 Cr
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18.51%
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18.52%
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Fund Name
AUM
Returns (in %)
3 Year
5 Year
10 Year
241 Cr
Returns
13.58%
Returns
14.47%
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12.81%
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344 Cr
Returns
13.28%
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12.53%
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12.17%
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523 Cr
Returns
10.86%
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10.83%
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11.04%
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836 Cr
Returns
13.3%
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11.91%
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11.02%
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21 Cr
Returns
13.59%
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11.77%
Returns
10.81%
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Fund Name
AUM
Returns (in %)
3 Year
5 Year
10 Year
487 Cr
Returns
19.06%
Highest Returns
Returns
16.57%
Returns
16.12%
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243 Cr
Returns
7.25%
Returns
8.16%
Returns
9.18%
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777 Cr
Returns
5.17%
Returns
7.26%
Returns
8.29%
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305 Cr
Returns
5.9%
Returns
7.06%
Returns
8.07%
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466 Cr
Returns
4.96%
Returns
7.46%
Returns
8.05%
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The time when the mutual funds and share market were dominating the investment portfolio, ULIPs were launched by the insurance providers to attract the customers with high investment returns. Currently, ULIPs are one of the most popular investment products that insurance companies are providing to the investors.

Here is a quick guide to choosing ULIPs, and how they help you meet your financial goals:

How to Select the Best ULIP Plan in India?

  • Select ULIP Fund Options As Per Your Goals

  • Opt for Required Amount of Life Insurance Cover

  • Stay Invested for a Long Term with ULIPs

  • Stay Invested for a Long Term with ULIPs

  • Know the ULIP Charges

  • Check-out the Tax Benefits

  • Check-out the Features of ULIPs

Mentioned below are the things that you should keep in mind to choose the best ULIP plan in India:

  • Select ULIP Fund Options as Per Your Goals: ULIPs give you an option to invest in debt funds, equity funds, or a mix of both the funds. Equity funds provide you a high growth potential for the long term, whereas, the debt funds save your wealth. So, as per your goals and risk appetite, you can select to invest in either debt or equity. Moreover, you can move your money between these funds in ULIP according to your requirements.

  • Opt for Required Amount of Life Insurance Cover: ULIPplans are designed to help investors meet their long-term financial goals such as children’s higher education, marriage, etc. In addition to that ULIPs also provide financial cover to the dependents in case of the demise of the policyholder. So, keeping all your future needs in mind, it is essential to select the right amount of life insurance cover as well.

  • Stay Invested for a Long Term with ULIPs: Along with life insurance cover, ULIPs also help in wealth creation and in achieving your financial goals. If you keep investing for long term in ULIPs, then your insurance provider can offer you bonuses as Wealth Boosters and Loyalty Additions to further boost your wealth.

  • Know Your ULIP Charges: Below are the five charges that come along with ULIPs:

    • Premium Allocation Charges

    • Policy Administration Charges

    • Fund Management Charges

    • Mortality Charges

  • Tax Benefits: ULIPs also provide tax saving benefits as per the Income Tax Act, 1961.  Below are the tax –exemption benefits that you can avail with a Ulip plan:

    • Entry Benefit: You get tax benefit on the payment of your premium u/s 80C, 80D, and 80CCC.

    • Earning Benefit: The money growth that you get is not taxable.

    • Switching Benefit: You can make the switches between the equity and debt funds without paying any tax.

    • Exit Benefit: You also get tax exemption on the maturity amount.

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    • Check-out the Features of ULIPs: The last thing to consider while selecting the best ULIP plans in India is its features:

      • Redirection of Premium: ULIPs give you an option to invest your future premiums in different funds of your choice apart from your base funds.

      • Top-Ups: there is an option to invest any surplus money either multiple times or once in your existing plan.

      • Fund Switches: You should know the number of free switches provided in your selected ULIP plan. This is because most of the insurance providers offer free switches between debt and equity funds.

      • Partial Withdrawals: Under this feature, you get an option to partially withdraw your money invested in ULIPs. However, this feature is generally activated after completion of the lock-in period.

    How Do ULIPS Work?

    The working of ULIP is simple. You pay the premium for ULIPs and different investors pay the premium for investing in the same portfolio as yours. Further, the insurance provider pools this money and invests the money after deducting the expenses as per the fund type selected. The fund wherein the money is invested can be debt, equity, or balanced. The complete financial corpus is then divided into units with the specific face value.

    The insurance provider allocates certain ‘Units’ to every investor concerning the money invested. The value of this unit is called Net Asset Value or NAV. Every insurance provider has a manager for funds known as a fund manager for keeping the track of the fund invested. As per the performance of the market, the NAV either decreases or increases that result in lower or higher NAV.

    Upon ULIP maturity, the insurance provider pays the fund value as per the value of the market. In any unforeseen situation such as death, the insurance provider pays the higher of available fund value or sum assured.

    ULIPs Lock-in Period and Charges

    The best ULIP plans in India have a mandatory lock-in period of five years. This means you can withdraw from a ULIP after completing five years. The different charges that are levied as fee in ULIPs are:

    • Policy Administration charges

    • Fund Management charges

    • Surrender charges

    • Premium Allocation charges

    • Mortality charges

    • Discontinuation charges

    • Fund Switching charges

    What is NAV in ULIPs?

    Net Asset Value is also known as NAV It is the price/unit of a ULIP. When you pay the premium of his/her ULIP scheme, you are purchasing individual units of that specific scheme. The price per unit of a Unit Linked Insurance Plan is thus known as Net Asset Value.

    Eligibility Criteria to Buy ULIPs

    • It is essential to meet the criteria of entry age as mentioned in the ULIP scheme that you are buying.

    • You should adhere to the premium payment mode of the plan.

    Required Documents for ULIPs

    • Proof of Income: To purchase the best ULIP plan in India, you have to have valid income proof with you. The income proof can include a bank statement, salary proof, IT return, etc.

    • ID Proof: Aadhar card, PAN card, voting card, etc.

    • Address Proof: Aadhar card, driving license, passport, voting card, etc.

    • Proof of Age: Passport, Aadhar card, driving license, voting card, etc.

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    Reasons to Purchase ULIPs

    The reasons to buy a ULIP plan are given below:

    • Liquidity: You can liquidate your ULIP scheme very easily after the lock-in period of five years through the option of surrender. You can as well make partial withdrawals after completion of the lock-in period.

    • Transparency: ULIPs provide complete transparency to its policyholders. You will be made aware of various charges through the documents of the policy. You will also be informed about different types of funds wherein your money is invested and the allocated number of units.

    • Low Charges of Surrender: If you want to surrender your ULIP plan, then you can do the same after completing five years of the lock-in period. However, if you want to surrender your ULIP scheme before the completion of five years, then you will have to pay the surrender charges. Over time, the surrender charges for ULIPs have gone low, which makes it easier for an investor to exit the fund in the situation of an emergency.

    • ULIP Provides Life Cover: ULIPs provide life insurance cover along with a component of investment. In this way, you secure the future of your loved ones and also boost your wealth.

    • Option to Customize: ULIPs are highly customizable plans. You can easily make switches within the list of funds offered by your insurance provider.

    • Offers Dual Benefits: As mentioned above ULIP is a product that offers dual benefits of insurance and investment.

    • Provides Systematic Savings: Some people want to postpone their savings for some of their major future requirements such as education of child or payments of the future mortgage. This may be avoided by purchasing a ULIP that ensures you save for your future requirements.

    The Final Words:

    Once you know how to choose the best of Ulips, it is important to go through the benefits and features of your ULIP policy. Therefore, it is advised to read your policy documents carefully. This will help you in making the right decision.

    *All savings are provided by the insurer as per the IRDAI approved insurance plan.
    *Tax benefit is subject to changes in tax laws. Standard T&C Apply
    ^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
    ~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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