Questions You Should Ask Before Investing In ULIP

Life insurance has come a long way since the mid-1900s when it was first launched. Rising awareness and consumer expectations have brought about a revolution in the life insurance sector. While earlier life insurance plans were rigid with a long-term perspective, today Unit Linked Insurance Plans (ULIPs) provide the much-needed flexibility and also a shorter tenure investment opportunity.

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7.7 Crore
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4.2 Crore
Policies Sold
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.

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843 Cr
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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

Even ULIPS has undergone many changes in their charges and structure when SEBI intervened some years back. The version of ULIPs offered today is revamped and offers some of the best benefits. Investing in ULIPs has never been so gratifying as it is today and you, as an investor stand the chance to reap the benefits.

Though investing in a ULIP is good, there are certain things you should know or rather some questions you should ask before you invest in a ULIP. Are you investing in a ULIP blindly? What are the questions you should ask? Let us see –

Is the Plan Suitable for Your Requirement?

The most important question is whether the plan fits your financial goals. Though a ULIP provides flexibility in the form of partial withdrawals, such withdrawals are allowed only after 5 years. Moreover, though the returns in a ULIP are good, holding the plan for a longer tenure is important to achieve such returns. So, measure the plan against your financial requirements before you buy.

What are the charges?

A few years back when SEBI had not intervened, ULIPs had colossal charges deducted from the premium which resulted in very low yields. Thanks to the changes made, ULIPs now have a very low charge structure that maximizes returns. Charges under a ULIP are in the form of Premium Allocation charge, fund management charge, mortality charge, administrative charge, etc. Though the other charges are inevitable, many plans do not levy the premium allocation charge. So, study the charge structure of the plans available and buy one with the lowest charges.

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What is the Coverage Available?

The determination of the Sum Assured under ULIPs depends on the amount of premium paid by the policyholder. The premium coverage is expressed as a multiple of the annual premium or single premium paid. The multiple allowed varies from plan to plan and so assess the coverage available in the plan under consideration.

What are the Historic Returns of the Portfolio?

A ULIP provides good returns by virtue of diversification. The funds available in the plan have a diversified portfolio comprising of multiple companies. Since ULIPs are subject to market risks and the returns are not guaranteed, it is important to check the historical returns generated by the funds so far. This would give you an estimated, though not accurate, the trend of returns generated and expected.

What are the Flexibility Conditions?

ULIPs find favor with investors due to the flexibility they provide. Talk about switching, partial withdrawals, premium redirection, top-up facility, etc., a ULIP has ample scope of flexibility. Every plan provides this flexibility but they are subject to some conditions. For instance, there is a cap on the frequency of free switches, a limit to free partial withdrawals, etc. So you should find out what is the limit of free facilities in the plan you are considering buying.

Are There Any Extra Benefits Available?

Gone are the days when ULIPs provided death and maturity benefits. Nowadays, insurers are increasingly providing the features of guaranteed additions and loyalty additions which add a fixed percentage of returns to the existing fund value at certain intervals. More and more plans are promising these benefits and they should also form a part of your consideration when you are buying a ULIP.

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Final Thoughts

These questions usually take care of any and every query you might have when you are investing in a ULIP plan. You should not invest solely based on the plan’s promotional campaign or at the behest of your agent. Ask these questions and compare the multiple plans available in the market. If it seems confusing to approach a broker, they have multiple plan options and are better placed in meeting your queries than your independent agent.

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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