ULIPs are one of the many policy options available in the market for smart policy-holders who want insurance as well as the best value for their money.
But, what is a ULIP?
ULIP stands for Unit Linked Insurance Plan. ULIPs are plans providing a combination of insurance as well as investment. Hence, ULIPs offer a dual benefit.
The premium is paid by the policyholder monthly or annually, depending on the scheme. The term of the policy also varies from plan to plan.
ULIP are offered by various providers like HDFC, Bajaj Allianz, Kotak, and even LIC ULIP plans have turned up in the market recently.
Over the tenure of a ULIP, which ranges from 5 to 10 to 15 years, units are accumulated as the policyholder goes on investing.
Why should you choose a ULIP Plan?
A part of the premium is for the life insurance plan while the other part is invested, much like a mutual fund.
The investment options in a ULIP plan are either equity or debt . Even though the former entails more risk, the returns are higher while the latter is safer with comparatively low returns.
ULIP plans introduced recently offer much higher returns than those introduced earlier, with investment returns going up to 10% and higher, whereas traditional insurance plans only offer 4% to 6% interest.
The best ULIPs in the market in 2018
The Union Budget 2018 excluded insurance products from the new LTCG tax which is imposed on equity mutual funds.
As a result, ULIPs have now become a smart option to invest in for the tax benefits they offer.
Here are the best ULIPs being offered by various providers which you should definitely consider investing in:
Max Life Insurance – Online savings Plan
The primary advantage of this plan is that it comes in two variants. Policyholders can choose the one that suits their needs better.
The first option, called Wealth ULIP plan, offers you great returns as you can opt for a sum assured as high as 20-times the annual premium.
The second variant is called Child ULIP plan, and as the name suggests, it is suited for those who want to make an investment for their child’s future.
In the event of the policy-holding parent’s death, the Child ULIP plan offers a monthly assured sum of 1% that will be paid to the family to help meet a child’s school fees and other recurring expenses. It will also fund the future premium, i.e. Waiver of premium benefit.
It is meant for customers with higher incomes, as the company does not recommend this product for lower income groups.
The plan does not charge premium allocation charges or policy administration charges which make it more desirable.
The plan offers higher cover under Wealth ULIP, but in the other case, an annual premium of Rs. 1 lakh will fetch a life cover of only Rs. 20 lakh. The policyholder will need a term cover to boost the protection portfolio.
As multiple features are offered under both the variants, it is important to do proper research before getting into a ULIP plan, also because ULIPs are not easy to exit.
Edelweiss-Tokio Life Insurance – Wealth Plus
Wealth Plus by Edelweiss Tokio Life is a low-cost ULIP as it does not charge premium allocation or policy administration charges.
The core expense for a policyholder is the fund management charge and mortality charges for providing the life cover.
Additional units are allocated at the rate of 1% in the initial five years as an incentive, and then enhanced to 3%, 5% and 7% in subsequent five-year blocks to get the policyholders to stay invested in the plan for a longer term.
What this means is that at a premium is Rs. 1 lakh, the insurer contributes an additional Rs. 1,000 annually during the first five years. This amount will go up to Rs. 3,000 and Rs. 5,000 (premium boosters) from years 6-10 and 11-15 respectively.
Without mortality charges the total expense ratio for the product comes to 1.14%. However, you cannot rely entirely on this policy to meet your insurance needs, because even if you pay a premium of Rs. 5 lakh a year, your life cover will be limited to Rs. 50 lakh which is a drawback.
Bajaj Allianz Life Insurance – Goal Assure
This ULIP is attractive due to a unique feature: the mortality charge is returned on maturity of the policy.
The ULIP does not levy premium allocation charges and the fund management charges are also not very high.
The fund boosters in the policy, as well as loyalty additions, for long-term policyholders (10-20 years) end up enhancing the total corpus.
The minimum tenure for the policy is 10 years, but for substantial benefits, one must continue the policy for longer than that.
HDFC Life Insurance – Click2Invest
Launched in 2014, this ULIP not only offers zero premium allocation charges but also zero policy administration charges.
Fund management charges and mortality charges, however, have to be paid by the policyholder. Also, the policy lacks the feature that offers a return of mortality charges.
There are 8 variants of the policy and the premium-payment options are plenty. Also, it offers flexibility to choose your policy term.
As the name suggests, the policy is only offered online but adds to the convenience of the buyers.
With a simple structure and fewer complications, it is an easy-to-understand ULIP and the policyholders are not likely to be disappointed.
The rate of return of the policy is about 6.16%.
SBI Life Insurance – eWEALTH
Offered by a government-funded bank, it is not surprising that eWealth offers great returns on small premium- returns of Rs. 1 lakh on an annual premium as low as Rs. 10,000, making it suitable for everyone.
The policy is exempt from policy allocation charges or premium allocation charges as well.
It offers two options in the policy, titled, Growth ULIP and Balanced ULIP.
The buying process is quite easy since it is online, making accessible for the buyers.
The ROI offered by the policy is also above 6%, if a policyholder maintains the ULIP for over 10 years.
Get a ULIP now!
With the coming up of LIC ULIP plans, buying a ULIP has become even more accessible as LIC is the most relied-upon life insurance provider in the country.
With so many options available in the market, everyone can find a ULIP that suits their need.
Proper research will allow you to get great returns on your investment along with a life cover.
The balance achieved by ULIPs in giving you cover as well as returns is remarkable, making it a great option for buyers.