Whether you invest or not, you must have heard of Unit Linked Insurance Plans or ULIP plans. These unique investment-cum insurance products have come a long way in India. Before getting into trends and updates, let us have a look at what a ULIP actually is.
What is a ULIP?
In a ULIP, a part of the premium is utilised for a life cover, while the other part is invested in various market funds chosen as per your risk appetite and investment horizon. ULIPs are unique not just in their structure but also in terms of returns. On one hand, you have the security of a life cover which will provide for a payout in the event of your death. At the same time, you can also grow your wealth with steady returns from your investments.
As an investment option, ULIPs have faced a rollercoaster of a journey. Their share in the total new premium declined to 12% in 2017 from 54% in 2010. However, starting 2018, there has been a renewed interest in ULIPs, thanks to a lot of new-age, low-cost online plans. The IRDAI (Insurance Regulatory and Development Authority of India), and fund houses have together brought about major changes in the structure of ULIP plans to make them lucrative for investors. Here's a look at the major ULIP trends from the past year.
ROMC ULIPs
One of the main concerns with ULIP investments earlier was that the life insurance cover will eat into one's investment returns. This concern was addressed by insurers offering return of mortality charges. Mortality charges are basically the charges that your insurer deducts for providing you the life cover. A lot of insurers have begun a practice wherein the total amount of mortality charges deducted are added back to the fund value upon maturity.
Exemption from LTCG tax
In Budget 2018, a Long Term Capital Gains Tax was introduced on stocks and equity funds. ULIPs, being insurance tools, were spared from this tax. This gave them an edge over mutual funds, ELSS, and a lot of other investment options. This, coupled with ROMC, only gave ULIPs an edge not just as tax-saving instruments, but also as investments offering good returns.
Elimination of charges
Another important reason for a number of investors being averse to ULIPs was that there were a host of charges associated with the investment. These mostly included the following.
-Premium allocation charge-Switching charge (charge for switching funds in expectation of better returns)
-Policy admin charge
-Revival charge
-Partial withdrawal charge
-Medical examination charge
-Fund management charge
-Discontinuance/surrender charge
-Miscellaneous charges
Due to the rising demand of ULIP plans, a lot of fund houses began cancelling the numerous charges associated with the plans and instead, began increasing the scope of returns for investors. Earlier, comparison of fund performance for selecting ULIPs was futile because of the plethora of charges. With online ULIP investments carrying minimal charges, investors find it easier to compare and make informed choices.
Why ULIPs?
-A ULIP offers you the best of both worlds- investment and insurance. It eliminates the need for handling two different instruments at once.-It is very easy to switch and redirect your investments with a ULIP. You can switch them almost anytime you feel like your chosen fund is not performing well or is too risky or too safe.
-Although ULIP investments are ideally long-term investments, you can exercise partial withdrawals when you are in urgent need of funds. This only adds to the flexibility of ULIPs.
-They are great for long term financial goals like education, buying a house, marriage, etc.
Ushering in the new year, you can safely take it as a great time to invest in ULIPs. They are easier, more flexible, and more promising. Especially if you are a new investor, they can be a great place to begin with the right balance of potential returns and safety of investments. If you are ready to secure a sweet online deal for your next ULIP investment, head straight over to the Invest 4G plan!
Invest 4G
The Canara HSBC Oriental Bank of Commerce Invest 4G plan is a protection and savings-oriented ULIP which provides you with an amazing scope of options that includes 7 different fund options, 4 different portfolio strategies, and 2 different death benefit options. The icing on the cake are Loyalty Additions and Wealth Boosters. The best part is that this investment package is just a few clicks away.
Conclusion
A term plan is a vital addition to any working person's financial plans. They are flexible, come with affordable premiums, and provide long-lasting protection for the ones you love. A term plan protects your families from unpredictable financial emergencies. One such term plan that is tailor-made for you and your loved ones is the iSelect+ Term Plan from Canara HSBC Oriental Bank of Commerce. The iSelect+ Term Plan offers extensive protection at premiums that fit everyone's budgets. You also benefit from flexible premium payment options, joint spousal cover, 4 different riders available and return of premiums benefit!
