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Single Premium

A single premium ULIP offers you the option to make a one-time lump sum payment at the start of the policy term. The entire investment and life cover get paid with a single payment, which is a convenient approach to financial planning.

Regular Premium Payment (annually, semi-annually or monthly)

Some ULIPs offer the option to make regular premium payments. You can pay your premiums annually, semi-annually or monthly, depending on the premium payment term chosen by you at the time of purchase of your plan.

Number of Premium Paying Years

Some ULIPs offer the flexibility to select the number of premium-paying years. This allows you to choose the payment term duration according to your convenience and preference.

5 Benefits of Investing in ULIPs

• Freedom to choose your Life Cover^`:

  In Unit Linked Insurance Policies, you can choose the amount of Life Cover that you want. In most ULIPs, the minimum Life Cover offered is 10 times your annual premium amount. However, depending on the policy and the insurance company, you can select your Life Cover amount as much as 40 times of your annual premium or even higher.

• Freedom to choose your investment type:

  There are two basic types of funds – Equity Funds, Debt Funds and a mix of both called Balanced Funds. Equity Funds include investments such as buying shares of companies. Debt Funds invest in debt instruments. Balanced Funds are those funds that invest equal proportions in both equity and debt funds.
  ULIPs allow you to invest in different funds based on your investment goals and risk appetite. For example, if you wish to grow your wealth and don’t mind taking a risk on your investment, you can invest in equity funds. Similarly, if you wish to get steady returns on your investment, you can invest in debt funds.
  You can also move your money between equity and debt funds by using an option called switch. Most insurance policies offer a fixed number of free switches in a year, and for additional switches, a small fee is charged.

• Liquidity:

  With Unit Linked Insurance Policies, you also get an option called partial withdrawal+, which allows you to withdraw a part of the money invested in your policy. This option helps you to take care of immediate expenses such as your child’s 10th, 12th or graduation fees, going on a family vacation, in case of emergencies, and more. Partial withdrawals are usually free of cost.

• Goal-based planning:

  ULIPs are structured to help you secure your key goals such as the potential for wealth creation, retirement planning or saving for your child’s education. ULIPs also give you the added benefit of knowing that your premium is working towards securing your future goals.

• Tax^{^} benefits:

  Under the Income Tax Act, 1961, you can save tax on your hard-earned money by investing in a ULIP. You can get tax advantage at different stages of your life insurance policy.
  Stage 1: Entry Advantage – You receive tax benefits^{^} on your premium payments, under Section 80C.
  Stage 2: Exclusive Switching Advantage – You can make completely tax-free^{^} debt-equity switches
  Stage 3: Exit Advantage – You also receive a tax free^{^} Maturity Benefit^# subject to conditions of Section 10(10D)

How does a ULIP work?

ULIPs are a category of life insurance plans that provide you with the benefit of growth of your money along with a life cover. They do this by investing a part of your premium towards a life cover for you, and the rest in funds of your choice. Most ULIPs give you the option to choose from multiple equity and debt funds. You can also invest in a mix of both types of funds as per your risk appetite. The returns from your plan will depend on the performance of the fund chosen by you.

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Why Invest in ULIPs?

A ULIP is a life insurance plan that offers the dual benefit of investment to fulfil your long-term goals and a life cover to financially secure your loved ones in case of an unfortunate event. The returns from ULIPs are market-linked. With the right plan and investment strategy, you can earn better returns on your investments.

How to Claim Tax^{^} Benefit on ULIPs?

Premium payments made under the policy are eligible for deductions of up to ₹ 1.5 lakh under Section 80C of the Income Tax Act, 1961. The returns received under the policy are exempt subject to conditions under Section 10(10D) of the Income Tax Act, 1961.

How to maximise returns from a ULIP?

Here are some steps you can take to maximise the returns from a ULIP:

a) Start early:

Starting early gives time for your money to grow and provide you with better returns. Also, a longer investment duration helps to reduce the risk of short-term volatility of the market. Moreover, since a ULIP is also a life insurance policy, starting early ensures that your loved ones have a life cover to rely on from an early age.

b) Invest regularly:

It is important to invest regularly and be consistent. This financial discipline can help you invest a large amount over time, providing greater returns. You can also set standing instructions for automatic premium payments so that your ULIP continues to remain active and provide returns.

c) Take advantage of various fund options:

A ULIP offers you several fund options to choose from. You can choose to invest in equity, debt or balanced funds as per your risk appetite. ULIPs also allow you to switch between the funds as per your requirements. This helps you take advantage of the market conditions to get better returns. You can choose to invest in low-risk debt funds when the markets are volatile and in equity funds when the markets are favourable.

d) Review your portfolio regularly:

Reviewing your portfolio from time to time helps you monitor and track your investments. This enables you to make timely decisions to maximise your returns. You may then choose to increase your investment in the plan or switch between funds to get better returns.

e) Avail tax^{^} benefits:

The premium paid towards a ULIP is allowed as a deduction up to ₹ 1.5 lakh per year under Section 80C^{^} of the Income Tax Act, 1961. The payouts received from the plan are also tax^{^}-free under Section 10 (10D)^{^}. These tax^{^} benefits help to increase the overall returns from the plan

How to Manage ULIP Funds?

Below are some features of ULIPs that help you manage them effectively:

Automatic Switching

ULIPs offer the option of automatic switching between funds. This allows you to modify your ULIP investment portfolio based on market conditions or your changing risk tolerance without active involvement.

Self-Switching

ULIPs allow you to manage your investments and customise the asset allocation based on your changing financial needs and risk appetite. It offers a hands-on approach that allows you to take advantage of market opportunities.

Investment Top-ups

You may have additional amounts available that may be saved with you. The Investment top-up feature allows you to save this surplus amount in your existing investment. This helps you increase your savings as per your changing financial goals.

How is ULIP structured?

When you want to invest in ULIPs, you need to make an initial payment, followed by annual, semi-annual or monthly premium payments. They offer you the option to invest in equity funds~ that offer high returns, debt funds~ that offer steady returns, or a combination of both, depending on your investment needs and risk appetite.

What is ULIP NAV?

Premium payments made under the policy are eligible for deductions of up to ₹ 1.5 lakh under Section 80C of the Income Tax Act, 1961. The returns received under the policy are exempt subject to conditions under Section 10(10D) of the Income Tax Act, 1961.The ULIP Net Asset Value (NAV) is the net value of the units held within the ULIP after deducting the related fund management fees, and operating expenses. It is calculated by deducting liabilities like management fees and operating expenses, from the overall value of the units.

Busting ULIP myths

Below are some common myths regarding ULIPs:

ULIP Myth #1 - ULIPs are costly

ULIP myth buster: You can choose the amount you want to invest in your ULIP. ULIPs allow you to choose your premium amount as per your convenience and requirements. You can also start with a small amount at first and increase your investment over time. The charges you need to pay while investing in a ULIP are also minimal. For example, ICICI Pru Signature does not charge any amount for premium allocation. The mortality charge and the policy administration charges are also returned to you at maturity^*. In other words, with ICICI Pru Signature, your entire premium is invested in the funds of your choice without any deductions. In addition, the plan provides you with a life cover` to secure your loved ones financially in case of an unfortunate event.

ULIP Myth #2 - ULIPs are risk

ULIP myth buster: The risk in a ULIP depends on the funds you choose. Equity funds may provide high returns but also come with high risks. However, if you want to invest in low risk funds, you may opt for debt funds or balanced funds. As an investor, you can choose to invest as per your risk appetite.

ULIP Myth #3 - ULIPs are not flexible

ULIP myth buster: ULIPs offer flexibility in various ways. You can choose the amount you want to pay as premium, the premium payment term and even the frequency at which you want to pay (monthly, half-yearly, yearly, or all at once). You can also choose the funds that you want to invest in and switch between them as per your requirements.

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Which Investor Class Are They Most Suited For?

• Individuals with a medium to long-term investment horizon

  ULIPs are well-suited for investors with medium to long-term financial goals. The investments are market-linked which offer better returns over the long term.

• Individuals with varying risk profiles

  ULIPs cater to many investors with varying risk profiles. You can invest in equity or debt as per your choice. This makes ULIPs suitable for low-risk as well as high-risk investors.

• Investors across all life stages

  You may have financial goals such as buying a house, your child’s education, marriage, starting a new venture and more at various life stages. A ULIP can help you meet long-term financial goals at each life stage.

How to choose the best ULIP

ULIPs are a combination of life insurance and investment instruments. Before opting for a ULIP it is important to keep the following things in mind:

• Know the key features:

  ULIPs offer various features like
  • A life cover²
  • An option to switch funds during the tenure of the policy
  • A top-up option to invest surplus money during the policy tenure
  • Partial withdrawal¹ of funds in times of need

You should check the features offered by each plan and choose one as per your needs.

• Evaluate your goals:

  You may have goals, such as buying a house, starting your own venture, your child’s higher education, and more. Evaluating your goals will help you calculate the amount you will need to achieve them.

• Know the ULIP charges:

  There are various charges like policy administration charges, fund management charges, or more that may be included in your plan depending on the fund you select. It is important for you to understand the different charges you may incur in order to select the right plan.

• Check the tax^{^} benefits:

  Premiums paid are allowed as a deduction up to ₹ 1.5 lakh per annum under Section 80C of the Income Tax Act, 1961. You should check the tax benefits^{^} available to you while choosing a ULIP.

What are the ULIP Charges?

• Administration charges :

  Monthly administration charges are used to cover the operational aspects of managing the policy. These fees are recovered by deducting units from the funds.

• Fund management charges

  Fund management charges are expenses associated with management of the investment portfolio.

• Switch charges

  ULIPs offer a fixed number of free switches in a policy year. Additional switches attract charges that are subtracted by deducting units from the funds.

• Surrender charges :

  Surrender charges are applicable in case of early withdrawals. These charges are a percentage of the fund value and vary based on the duration for which the policy is held.

• Mortality Charges

  Mortality charges are the costs associated with providing a life cover. These charges depend on the age of the life assured and amount of cover.

• Premium Allocation Charge

  Premium allocation charge is calculated as a percentage of the premium amount paid during the initial year of a ULIP plan. It depends on the policy type, premium size, frequency and payment mode.

• Partial Withdrawal Charges

  Withdrawals from a ULIP before maturity attracts Partial Withdrawal charges, as detailed in the policy brochure.

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