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Best Ulip Plans

Are you dissatisfied with your investments? Are you looking to secure your financial future with the best investment option in the market? Well, look no further - we are here to help you with ULIP plans!

ULIP, a Unit Linked Insurance Plans (ULIP) is an investment tool that allows investors to combine their ambitions of investment and insurance into one. ULIPs help users invest in the capital market (Equity or Debt) based on their risk profile. Typically, ULIPs are long term, goal-oriented investment tools.

Get all the information you need to make the correct decision on investing in ULIPs. Take your time, read everything, and be sure of your choice. Read about the features, benefits, return rates, and how various options work on Coverfox. What’s more? Complete your investment journey in less than 3 minutes!

Remember, it’s always best to compare ULIPs and buy online, hassle-free!

What is ULIP?

Is this your first time investing? Or, for that matter, the first time buying an insurance plan? Regardless of the answer, let us give an option that combines the goodness of both insurance and investment - the (ULIP)

In ULIP plans, a portion of the amount you pay gives you insurance cover. Your investment’s second half goes into the capital market. Simply put, the best of both worlds. So, how do insurance companies do it?

Well, these firms have various investment funds, into which you can pool money based on wealth creation goals. The returns you get from these investments would be on how much RISK you’re willing to take - also called a risk profile.

Your ULIP policy’s investment part goes into bonds, equity, debts, market funds, or hybrid investment options based on your risk appetite. To keep the fund investments and their performance transparent, insurance companies declare the Net Asset Value (NAV) daily.

So how much money do you finally get, you ask? There are two different scenes in your life –

You are Alive and Kicking: If you’re alive at the end of the ULIP tenure, you will get survival benefit, i.e., maturity amount depending on your investment units’ market price.

You are Resting in Peace: If you have moved on to the Afterlife, your nominee will receive higher of the sum assured or the investment fund value or both depending on the ULIP variant you have invested in.

Before we forget, there’s a lock-in period of FIVE years before you cannot pull-out money from your investment plan.

Example: The Investor pays a premium of Rs. 30,000 for a policy tenure 30 years. The returns are indicative and related to the market.

How Does a ULIP work?

Before you start investing, it is essential to have a basic understanding of ULIP plans. So, let’s take you through its working. When you pay the premium for a plan, a part of it provides life cover, and the remaining amount goes into the investment pool. This part of the original premium becomes your premium for the ULIP plan.

The amount gets invested into the fund of your choice. The insurer (insurance company) has various investment funds with varying risk levels in which you can select - equity, debt, or balanced funds or hybrid funds.

The insurer allocates 'Units' to each investor in proportion to the invested money. This amount is the 'NAV' or Net Asset Value. But who looks after the entire fund? Well, fund managers keep track of the invested funds. Based on market performance, the units NAV increase or decrease.

“On the maturity of the ULIP, the insurer pays you the fund value depending on the market value.” Confused? Don’t be. It merely means you will get the NAV of the units assigned to you on maturity.

If an unforeseen situation - like death - arose, the insurer pays your nominee the higher of the sum assured or the fund value.

What are the Types of ULIP Plans?

Haven’t you ever realized that you need to figure out the type of shirt you need before you buy one - Formal, Party Wear, Casual T-Shirts, etc. Similarly, before purchasing a ULIP, you need to understand the type of plan you would ideally like to buy.

You must match your investment goal with the type of plan you opt to invest in. Don’t worry! We have you covered on that front as well! Here’s are the two types of ULIP which you can choose from to support your family and begin your financial security journey. The types of ULIPs are as follows -

  • Type-I ULIP: Under Type-I ULIP, the nominee gets the higher of Fund Value or Sum Assured, in the event of the death of the policyholder.
  • Type-II ULIP: Consider a better plan with a higher premium, Type-II ULIPs compensate the policyholder’s nominees with both Sum Assured and Fund Value, after their demise.

Investment Funds available under ULIPS

ULIPs have a wide variety of investment funds available for investing your money. How large is your risk appetite? Are you ready to take risks to make large profits? Based on the answers to this question, you can choose from the various investment funds available with the insurer.

Primarily there are 4 investment options available:

  • Equity-Based - This type of ULIP primarily invests in equities and stocks of large corporations trading in the market. The fund offers high returns but comes with a greater risk. It is suitable for investors with higher risk tolerance.

  • Debt Based - This is a type of ULIP which primarily invests in government bonds, debt securities, bonds issued by the central government, and RBI. Such a plan provides moderate returns and comes with low risk.

  • Liquid-Based - These are short term ULIP schemes which invest in money market instruments, treasury bills, and call money.

  • Balanced Funds - These ULIPs are a combination of equity, debt, and liquid funds. This fund offers moderate returns at minimal risk.

ULIP Plans for your Life Goals

ULIP plans can also be categories by purpose, you can invest in a ULIP for each and every goal of your life:

  • ULIP for Retirement: In this type of plan, the premium collected as part of ULIPs is immediately invested in an annuity post retirement.

  • ULIP for Wealth Collection: Assures millennials in their late twenties and early thirties of investments to meet future goals.

  • ULIP for Children Education: These funds support your child’s development in the event of your (policyholder’s) untimely demise.

  • ULIPs for Health Benefits: This plan supports you during your most critical emergencies.

What are the most critical features of ULIPs?

Before you buy any electronic device, like a mobile phone, check the most important features it comes with, don’t you? Well, you should follow the same rule for investment options - especially a ULIP plan.

Are you wondering what features give these investment options an advantage over traditional options? Don’t worry! We have you covered here. Check out some distinctive features of the plan below:

  • Insurance + Investment: A ULIP scheme offers dual benefits of insurance and investment, the only one of its kind. The premium you pay is in two parts - a premium for the insurance policy and an investment sum distributed among capital market options - based on how much risk you’re willing to take to maximize the investment returns.

  • Flexibility in Investment: Consider a situation where you’d previously invested the whole of your investment amount into Bonds. However, you change your mind and now want to invest in other capital market instruments. ULIPs offer you the flexibility to readjust the ratio of the amount you wish to invest in different investment tools at any point in time.

  • Top-Up: If you’ve been praying to get the total investment amount unvested increased, UIP top-ups provide you with the opportunity to do just that. Increase the investment in ULIPs by a specific amount.

  • Exemptions: The plan is free from tax in three stages - the original amount invested, the returns from the list, and total fund withdrawal. You can also claim tax exemptions under section 80C of the Income Tax Act.

What are the benefits of the ULIP Policy?

There are plenty of situations in our lives where we need to adjust financial goals to achieve our life’s purposes. ULIP policies provide the perfect choice for many of us in achieving them. Here are the benefits of various types of these plans -

  • Tax Benefits - All ULIP investments are non-taxable. The government cannot tax even the returns you get through ULIPs, and they are entirely YOURS.
  • Free-Look Period: Are you dissatisfied with your current plan? Don’t worry! Top ULIP plans allow you a 15-day window within which you can cancel your project without any charges.
  • ULIP Riders - Just like traditional policies, ULIPs too offer riders to increase the scope of protection under your ULIP insurance plan, at a minimal premium increase.
  • Fund Management - ULIPs don’t require that you manage your investment. Specific fund houses place managers in charge of your accounts, and you can instruct them on your preferred investment portfolios.
  • Flexibility - ULIP insurance is known for its flexibility. Change your premium amount, your life cover plans, or even your fund option as and when you feel ready to. Don’t wait for the end of your policy.
  • Risk Control - Want to opt only for stable investments? Control the risk your investment is exposed to by only allowing fund houses to invest your money into options that give stable returns.
  • Transparency - Get complete control on WHAT you spend your money on in the policy. From policy changes to investments made - everything is transparent.

Why Should You Buy a ULIP?

Here are five reasons why you should buy one of India’s safest investment tools :

  • Disciplined Savings - They come with a mandatory lock-in period of 5 years. It means that you need to invest regularly for five years. It will inculcate a habit of savings.

  • High Returns offer better returns than other investment instruments, such as FDs and saving schemes.

  • Flexibility - The investment tool offers flexibility. You can easily switch funds during the investment term. You are allowed four free switches in a year.

  • Dual Benefit - These options offer a tax benefit of up to Rs. 1.5 lakhs under Section 80C of the Income Tax Act, 1961, along with life insurance cover.
  • Fewer Charges - Most of the charges associated with ULIPs, such as administration charges, management fees, and fund operating expenses, are covered by default after ten years.

What should you check before you buy a ULIP plan?

Here are the five things to check before buying a ULIP scheme:

  • Saving tax is essential but do not let it be the sole motivator of buying a ULIP scheme. You might end up buying an unsuitable ULIP simply because of improper tax planning.
  • ULIPs are a fund. Like all other funds, it comes with a wide range of fund management charges and expense ratios. Make sure you look into all the costs and fee structure before buying a ULIP. It will help you understand the premium amount available for investment.
  • Only buy a ULIP scheme if you are looking for a long term investment horizon of 5-7 years. Even better if you are looking for a 10-year plan. ULIPs only provide maximum returns over the long run.
  • Opt for a ULIP that offers a maximum sum assured. It will ensure that the mortality charges are low, and your family nominee receives good compensation post your demise.
  • Always buy a ULIP scheme as per your financial capacity and risk appetite. ULIP is a market-linked instrument down the line, and the returns are subject to market risks and economic crises.

What are the Types of ULIP Charges?

There are several types of ULIP Charges - Some hidden, others more visible. Get to know WHAT you spend on in a ULIP with our data below:

  • Premium Allocation Charge -Wondering why your total investment is never really the amount that goes into a fund? Well, it’s because of the PAC. Hee fee goes toward expenses incurred in issuing the ULIP plan initially - the underwriting and distributor fees. It also includes renewal expenses.
  • Mortality Charges - These charges provide compensation to an insurance company if a ULIP policyholder doesn’t live up to the age determined. The mortality per policy is dependent on the policyholder. It is also reliant on factors such as policy premium, the sum assured, etc.
  • Policy Administration Charge - The fund house usually charges a specific amount to the policyholder for the cost incurred in paperwork, reporting, and other administrative charges.
  • Fund Management Charges - Every fund within a ULIP policy requires maintenance. Before arriving at the NAV, the insurer charges this amount to manage the funds and fulfill the investor’s requests. Generally, FMCs
  • Partial Withdrawal Charges - You can opt to withdraw parts of the funds from your total investment but at a specific cost. PWCs charge a particular amount depending upon the sum started by the investor.
  • Fund Switching Charges - The charge is levied when an investor wants to shift his investment between two fund options.
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