IN ULIPS, THE INVESTMENT RISK IN THE INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER
What is ULIP (Unit Linked Insurance Plan)?
ULIP is an insurance product that combines insurance and investment benefits in a single plan. ULIP, or Unit Linked Insurance Plan, offers life cover` which is a major benefit over the traditional wealth creation tools. It not only helps your money grow but also protects your loved ones’ future from life's unexpected turns.
How ULIPs work?
The investment component of ULIPs allows investors to invest money in the asset classes and funds of their choice – equity, debt, and balanced.
On surviving the term of the ULIP, the policyholder receives the maturity value and can use the money for various financial goals.
In addition to this, the life insurance component of a ULIP offers a death benefit in the unfortunate event of the policyholder’s demise during the term.
In such cases, the nominee is paid the entire sum assured amount even if the investment value of the plan is lower.
Benefits of ULIPs
Flexibility of Investment
You will have flexibility and control of your money through the following ways:
- Fund Switch – An option to move your money between equity, balanced and debt funds
- Premium Redirection – An option to invest your future premium in a different fund of your choice
- Partial Withdrawal## – An option that allows you to withdraw a part of your money
- Top-up – An option to invest additional money to your existing savings
Premiums paid for ULIP plans is eligible for deduction up to ₹ 1.5 lakh per annum under Section 80C of the Income Tax Act, 1961. The maturity proceeds of the ULIP are also tax-free~ subject to conditions prescribed under Section 10(10D) of the Income Tax Act,1961. If the ULIP investor dies during the term of the ULIP he/she will be entitled to the death benefit specified in the ULIP policy and the amount received on death is also tax-free~ subject to the conditions specified under Section 10(10D) of The Income Tax Act 1961. Switching between funds under ULIP policies are also tax-free~ .
ULIPs inculcate the habit of regular and disciplined savings, which is the key to successful long-term financial planning. With regular premium payments, you can enjoy the benefits of wealth creation for your loved ones.
Potential for Growth
There is a potential of earning higher returns from the power of equity and debt funds. This will help you achieve your life-goals such as buying a new home, your dream car, funding your child’s higher education and much more.
ULIPs provide the protective benefit of a life cover`, which protects your family financially in case of an unfortunate event.
Greater Rewards for Staying Invested***
Your money grows further as the insurance company adds to your savings through bonuses/ additions and are available to you in ULIPs in different forms such as, Loyalty Additions^^ and Wealth Boosters^.
How to calculate returns with a ULIP Calculator?
Several factors can impact your ULIP returns. These can include:
The length of your policy term can impact your overall returns. Staying invested for the long term may fetch you better returns as your money has more time to compound.
A higher investment amount will ultimately generate a higher maturity value.
Type of fund
Equity funds carry high risk but also deliver relatively higher returns. Balanced funds can deliver moderate returns and medium risk in comparison. Finally, debt funds may offer the lowest returns and risk out of the three.
Rate of return
The return rate will determine the fate of your profits. The higher the return rate, the higher would be your yield and vice versa.
Calculating your returns based on these factors may be hard. But a ULIP calculator can help. A ULIP calculator is an excellent online tool to calculate and plan your ULIP investment. ULIP have many different features that can help you understand your investment better. You can use it to compute your expected returns and the total maturity value. This can help you choose an appropriate investment amount based on your future goals, budget, time horizon, and other similar factors, mentioned above.
Types of ULIPs
Below are some key types of unit linked insurance plans
Single Pay Plans
Single pay ULIPs allow you to pay the entire premium for the plan in one go. You can pay the premium at the beginning of the policy term and enjoy the features of the plan for the rest of the tenure. This can be a convenient option if you do not want to go through the hassle of paying regular premiums over the years. You can also consider this plan if you want to invest a lump sum amount to meet your financial goals.
Regular Pay Plans
Regular Pay ULIPs are those where Premium Payment Term and Policy Term are the same. Premium Payment Term is the duration for which you pay your premiums. Policy Term is the duration for which your policy remains active. Depending on your plan, you may choose to pay your premiums monthly, half-yearly, or yearly, as per your convenience. With regular pay plans, you can make small, regular premium payments over time, thereby going easier on your pocket.
Why should you invest in ULIP?
With ULIPs, avail the benefits of both Investment and Insurance
ULIPs not only help you secure your goals but also secure your family by providing a life cover if something happens to you.
Designed to address key financial goals, ULIPs help you invest your money in a disciplined manner.
Under the Income Tax Act 1961, you can save taxes on your money at different stages of your ULIP policy.
ULIPs give you an option to invest in equity, debt or a mix of both. Choose a plan according to your risk profile and investment objectives.
ULIP Myth Busters
There are many myths around ULIPs. Let’s find out the truth about them:
ULIPs are costly
ULIPs are risky
Your life cover could reduce in ULIPs
ULIPs give low returns
ULIPs are not flexible
ULIPs had a high investment cost when they were initially introduced.
However, over the years, several regulatory norms have reduced their charges. In 2010, the Insurance Regulatory and Development Authority of India (IRDAI) had announced that the annual charges for a ULIP would be capped at 3% for the first 10 years of a policy. It would be 2.25% for a policy longer than 10 years.
The fund management charges (FMC) were also reduced and capped at 1.35%.
The risk involved in a ULIP can change based on the funds you select. ULIPs offer a range of funds like equity, debt, and balanced funds. You can choose from these as per your risk appetite. So, it would be wrong to say that all ULIPs are risky.
If you prefer high risk, you can invest in equity. However, if you want low risk, you can consider debt funds. Balanced funds will offer your moderate risk. So, choose carefully.
A ULIP is a twin tool that offers life insurance and investment. Your life cover` is chosen at the time of purchase and has no impact on your investment value. The two are independent of each other. So, no matter how your investment fares, your loved ones will always have the financial security of life insurance.
Just like the risk, the returns also vary based on your chosen ULIP funds. Equity funds can deliver relatively higher returns, whereas debt funds offer comparatively low returns. Balanced funds can offer the best of both with moderate returns. Your ULIP returns will ultimately depend on the funds$ you choose.
Moreover, investing in a ULIP for the long term may offer the highest returns compared to short-term investments. Additionally, your returns will also be affected by your portfolio strategy, fund switching, reviewing methods and frequency, time horizon, consistency, and more.
ULIPs are very flexible products. They let you switch between funds multiple times during the policy term. You can also use a top-up to enhance your fund’s value. Moreover, you can withdraw your funds partially after the lock-in period without any charges to cover your financial needs. All in all, ULIPs offer tons of flexibility to accommodate your changing financial requirements and goals.
No matter what your need is, we have a solution
Take a look at the wide range of Unit Linked Insurance Plans that we offer:
ICICI Pru Signature
Designed for the preferred customer like you, ICICI Pru Signature offers life cover to secure your family along with flexible investment options to help you achieve your goals.
- Financial protection for your loved ones with life cover`
- Return of all Premium Allocation charges more than onceπ
- Choice of 4 portfolio strategies and wide range of funds$
- Enjoy policy benefits till 99 years of age with Whole Life policy term option
ICICI Pru1 Wealth
A single premium plan with the potential to create wealth for your multiple goals while providing life cover to protect your loved ones.
- Invest only once and enjoy benefits for entire policy term
- 100% amount invested in wide range of funds
- Enjoy a life cover` to protect your family`s dreams
- Get Wealth Boostersθ as a percentage of your single premium at the end of the policy term
SmartKid with ICICI Pru Smart Life
A plan that grows your investments, secures the educational milestones of your children and provides life cover`.
- Easy access to your money&
- Choice of lump sum payout and waiver of premiumϕ in case of an unfortunate event
- Get Rewardsλ (Wealth Boosters and Loyalty Additions) for long term investments
ICICI Pru SmartLife
A plan that safeguards your family’s future with life cover` along with potential to create wealth, even when you are not around.
- Choice of investment strategy to suit your needs
- Security of your loved ones with premium waived in your absence
- Enjoy the safety of a life cover` based on your desired level of protection
ICICI Pru Guaranteed Wealth Protector
Achieve your dreams with the best of both worlds - the potential for high returns without the risk of losing your money*.
- Assured Benefits* on the money you invest
- Premium Payment as per your comfort
- Rewards of Wealth Boosters^ and Loyalty Additions^^ for long term investments
- Safety of a life cover`
ICICI Pru Life Time Classic
Fulfill your family’s dreams and desires with the growth potential of equity or debt along with a life cover to safeguard their future in your absence.
- Choice of portfolio strategies to suit your needs
- Easy access to your money
- Enjoy the safety of a life cover` based on your desired level of protection
- Rewards α (Wealth Boosters and Loyalty Additions) for long term investments
How to manage returns from ULIPs?
Invest for long-term
ULIPs are a long term investment and hence you should only invest in them with a long term time horizon. Note that the minimum lock-in period is 5 years, so you must be prepared to invest for at least that long.
Having said that, ULIPs do offer systematic withdrawals at various milestones of your life. So, you can take your funds if you require them for specific goals or need money unexpectedly for an emergency.
Switch funds whenever necessary
Many ULIPs give the option of systematic transfers from debt to equity ULIP funds. If you pay an annual premium, this can initially be invested in a debt fund and systematically be transferred to an equity fund.
This is very similar to the highly popular Systematic Transfer Plans (STP). Consider using it to reduce your investment risk.
Adopt the lifecycle-based strategy
Several ULIPs offer a lifecycle-based strategy that automatically splits your money between equity and debt based on your age. Consider adopting this strategy if you are investing in the ULIP for your retirement.
Review the performance of your funds and make changes if required
You should periodically review the performance and prospects of your ULIP funds. You should switch out of ULIP funds which have underperformed or funds whose asset class is overvalued.
You can do this by switching out of an equity ULIP fund and moving into a debt ULIP fund. Switching between funds is tax-free~.
It may attract some costs but many ULIPs give a certain number of free switches to investors every year.
How to find the best ULIP plans?
Investment strategies offered:
Many ULIPs offer investment strategies such as Systematic Transfer Plans and lifecycle based investing. Look for ULIPs that offer the strategies most suited to your goals.
Claim Settlement Ratio:
This figure tells you what percentage of claims have been paid out by the insurance company. The higher the ratio, the better. ICICI Pru Life has a claim settlement ratio** of 98.7%.
This ratio tells you whether the insurance company will be able to honour its claims in the future. Once again, look for a high ratio for solvency. The IRDA requires insurers to have a solvency ratio of at least 1.5. ICICI Prudential Life Insurance has a solvency ratio# of 2.17.
Performance of ULIP funds:
ULIPs are an investment as well as insurance products. You should review the performance of ULIP funds over long term. Remember that ULIPs can have equity, balanced and debt funds suitable for investors/policy holders with different risk appetite and investment time horizon. ULIP equity funds offer high returns with high risk and debt funds offer lower returns with lower risk. The performance of ULIP funds should compared with their respective benchmarks over long time periods (eg: Nifty 50, BSE100, NSE 500, BSE 200 or Crisil Composite Bond Index).
Go for a ULIP with affordable charges. The typical charges associated with a ULIP include a premium allocation charge, policy administration charge, fund management fee, mortality charge, discontinued premium charge and switching charge.
- A unit-linked insurance plan is a product that offers a combination of insurance and investment payout.
- Unit-linked insurance plans are long-term investment instruments with a minimum lock-in period of 5 years.
- ULIP offers a life cover` that offers where a sum assured amount to the nominee if the policyholder passes away during the term of the policy.
Frequently Asked Questions
Is Unit Linked Insurance Plan safe?
ULIPs or Unit Linked Insurance Plans are safe instruments given a long-term investment horizon. You can choose to invest in low-risk debt funds, high-risk equity funds, or a mix of both as per your risk appetite. You can track your investments from time to time and switch between the funds as per your requirements. You can also withdraw money from the plan as per your requirements after the lock-in period of five years. These features provide you the necessary flexibility and make ULIPs safe to invest in.
Is partial withdrawal taxable in Unit Linked Insurance Plans?
Partial withdrawals## from ULIPs or Unit Linked Insurance Plans are tax-free~ subject to conditions prescribed under Section 10(10D) of the Income Tax Act, 1961.
Is GST applicable on ULIPs?
Yes, a GST~ of 18% is applicable on the charges in case of ULIPs. GST is not applicable on investible portion.
Can I stop paying premium for my ULIP after 5 years?
ULIPs have a lock-in period of 5 years. If you do not wish to continue after 5 years, you can surrender your policy. However, ULIPs provide you with a life cover that protects your loved ones financially, and help you grow your money to fulfil your dreams. Hence, it is always recommended to continue your policy till the end of the term.
Is ULIP a good investment?
A ULIP is both an insurance policy and an investment. Besides providing life cover, ULIPs can help you achieve your life goals with the power of market linked returns. ULIPs inculcate the habit of regular and disciplined savings, which is the key to successful long-term financial planning. With regular premium payments, you can enjoy the benefits of wealth creation for your loved ones.
What is the right time to invest in ULIPs?
There is no right time to invest in ULIPs. The earlier you start, the faster you can achieve your goals.
Is income from ULIP taxable?
The maturity proceeds of a ULIP is tax-free~ subject to conditions prescribed under Section 10(10D) of the Income Tax Act, 1961. If the ULIP investor dies during the term of the ULIP, the death benefit specified in the ULIP policy and the amount received on death is also tax-free~ subject to conditions prescribed under Section 10(10D) of the Income Tax Act.
How do I maximise my ULIP return?
You can practice the following to maximise your ULIP return -
- Start early
- Invest regularly in a disciplined fashion
- Pay premiums on time
- Take advantage of various fund options and strategies
- Review your portfolio regularly and make changes in funds$ or portfolio strategy as required
- Add top-ups to your fund to strengthen it
What is minimum lock in period for ULIP?
Investing in a ULIP is meant for the long-term. Though ULIP have 5 year lock-in period, to reap more benefits from the ULIP, you should continue and stay invested for longer periods such as 10-20 years.
What is fund value in ULIP?
Under a ULIP, the policyholder can choose from a set of funds to invest in according to their risk appetite and goal. The total monetary worth of the fund units owned by the policyholder is termed as fund value. For instance, if the policyholder owns 15000 units at the current price of ₹ 20 per unit, then the fund value is 15000 X ₹ 20 = ₹ 3 lakh
How can I track my ULIP fund value?
ULIP fund value can be calculated by multiplying the number of units in each fund by the Net Asset Value (NAV) of the fund on that day. The NAVs are published on the respective company’s website and many financial newspapers. You can also track your fund value by signing into your secured account on our website.
Can I cancel my ULIP plan?
Yes, if you are not satisfied with the terms and conditions of your policy, you can cancel it within -
- 15 days from the date it is received, if the policy is purchased through solicitation in person
- 30 days from the date it is received, if the policy is an electronic policy or is purchased through distance marketing
People like you also read ...
ICICI Pru Signature
π The total of Premium Allocation Charges (excluding Top-up premium allocation charges) deducted in the policy net of taxes will be added back to the Fund Value at the end of 10th policy year. The same amount will be added again at the end of every 5th policy year thereafter.
ICICI Pru Signature UIN: 105L177V06
ICICI Pru LifeTime Classic
αThe Company will allocate extra units as below provided all due premiums have been paid:
|Premium payment term||Loyalty Additions||Wealth Boosters|
|(End of year 6 and 7)||(End of year 8 and onwards)||(End of every 5th year, starting from the end of 10th policy year)|
|5 years – 6 years||0.10%||0.10%||1%
|7 years – 9 years||0.15%||0.30%||1%|
|10 years and above||0.15%||0.30%||2%|
For single pay policies with a policy term of 5 years, a loyalty addition of 0.25% of the average of daily Fund Values, including Top-up Fund Value, if any, in that same policy year, will be payable at the end of the fifth policy year.
Each Loyalty Addition will be a percentage of the average of daily Fund Values including Top-up Fund Value, if any, in that same policy year as mentioned in the table above.
Wealth Boosters will be a percentage of the average Fund Values including Top-up Fund Value, if any, on the last business day of the last eight policy quarters.
Loyalty Additions and Wealth Boosters will be allocated among the funds in the same proportion as the value of total units held in each fund at the time of allocation.
The allocation of Loyalty Additions and Wealth Boosters is guaranteed and shall not be revoked by the Company under any circumstances.
If the premium payment is discontinued anytime after 5 years, the number of years for which premiums have been paid will be considered as the premium paying term for the purpose of deciding the Loyalty Additions & Wealth Boosters to be paid for the rest of the policy term as per the table above.
The Policyholder can have funds in only one of the Portfolio Strategies.
ICICI Pru LifeTime Classic UIN 105L155V08 (A Unit Linked Life Individual Product)
ICICI Pru Guaranteed Wealth Protector
*On Maturity, you will receive an amount which is higher of Assured Benefit or fund value. Assured Benefit will be 101% of total premium paid, which is applicable only on maturity of the policy and does not apply on death or surrender.
ICICI Pru Guaranteed Wealth Protector UIN 105L143V02 (Unit Linked Non-Paticipating Individual Life Insurance Plan)
ICICI Pru1 Wealth
θ The company will allocate extra units at the end of the policy term, provided monies are not in the DP fund. Wealth Booster will be allocated among the funds in the same proportion as the value of total units held in each fund at the time of allocation. The allocation of Wealth Booster units is guaranteed and shall not be revoked by the Company under any circumstances.
|Policy Term||5 Years||10 Years|
|Wealth Booster||2.50% of Single Premium||2.75% of Single Premium|
For 10 year policy term, wealth booster will be 2.75% of single premium including top up premiums less partial withdrawals if any.
ICICI Pru1 Wealth UIN 105L175V03 (A Unit Linked Life Individual Product)
SmartKid with ICICI Pru Smart Life
λ The Company will allocate extra units as below provided all due premiums have been paid:
|Loyalty Additions||End of every policy year, starting from the end of the sixth policy year||0.25%|
|Additional Loyalty Additions||End of every policy year, starting from the end of the sixth policy year if the premium for that year has been paid||0.25%|
|Wealth Boosters||End of every fifth policy year, starting from the end of the tenth policy year||One Pay: 1.50%
Limited Pay/Regular Pay: 3.25%
Loyalty Additions, Additional Loyalty Additions and Wealth Boosters will be equal to the above percentage of the average of the Fund Values on the last business day of the last eight policy quarters.
These units will be allocated among the funds in the same proportion as the value of total units held in each fund at the time of allocation.
Allocation of Loyalty Additions units, Additional Loyalty Additions units and Wealth Boosters units is guaranteed and shall not be revoked by the Company under any circumstances.
The above additions will not be added if your monies are in the DP Fund.The Policyholder can have funds in only one of the Portfolio Strategies.
ϕ Under this benefit, following the date of death of life assured, provided all due premiums have been paid, units equivalent to the installment premium will be allocated by the company on subsequent premium due dates.
& Partial withdrawals are allowed after the completion of five policy years provided monies are not in DP fund. You can make unlimited number of partial withdrawals as long as the total amount of partial withdrawals in a year does not exceed 20% of the Fund Value in a policy year. The partial withdrawals are free of cost. DP Funds refer to Discontinued Policy fund and consists of money from lapsed policies. SmartKid with ICICI Pru Smart Life UIN: (A Unit Linked Life Individual Product)
` Life cover is the benefit payable on death of the Life Assured during the policy term.
$ Past performance is not indicative of future performance.
Unit linked insurance products are subject to market risk, which affect the Net Asset Values & the customer shall be responsible for his/her decision. The names of the Company, Product names or fund options do not indicate their quality or future guidance on returns. Funds do not offer guaranteed or assured returns.
# As per IRDA Annual Report 2020-21.
** Claim statistics are for Financial Year FY2023 and is computed basis individual claims settled over total individual claims for the financial year. For details, refer to our Annual Report for FY2023.
~ Tax benefits under the policy are subject to conditions prescribed under Section 80C, 10(10D),115BAC and other provisions of the Income Tax Act, 1961. Goods & services tax, cesses if any will be charged extra as per prevailing rates. Tax laws are subject to amendments from time to time. Please consult your tax advisor for more details.
*** These bonuses are added to your savings as a reward for staying invested for a long time.
^^ Loyalty Additions will be allocated as extra units at the end of every policy year, starting from the end of the sixth policy year, provided monies are not in DP Fund. Each Loyalty Addition will be equal to 0.25% of the average of the Fund Values on the last business day of the last eight policy quarters.
^ Starting from the end of 10th year, Wealth Booster will be allocated as extra units to your fund value once every 5 years. Wealth Booster will be a percentage of the average of the Fund Values on the last business day of the last eight policy quarters. The Wealth Booster percentage would be 1.50% for Single Pay and 3.25% for Regular Pay and Limited Pay policies.
## Partial withdrawals are allowed after the completion of five policy years provided monies are not in DP Fund. You can make unlimited number of partial withdrawals as long as the total amount of partial withdrawals in a year does not exceed 20% of the Fund Value in a policy year. The partial withdrawals are free of cost. DP Funds refer to Discontinued Policy fund and consist of money from lapsed policies.
Unit Linked products are different from traditional insurance products and are subject to the risk factors.
The premium paid in ULIPs are subject to investment risks associated with capital markets and the NAVs of the units may go up or down based on the performance of fund and factors influencing the capital market and the insured is responsible for his/ her decisions. ICICI Prudential Life Insurance is only the name of the Life Insurance Company and Unit Linked Insurance is only the name of the unit linked insurance product and does not in any way indicate the quality of the product, its future prospects and returns.
Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the Insurance company.
The various funds offered under this product are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns.
SmartKid with ICICI Pru Smart Life UIN 105L145V08 (A Unit Linked Life Individual Product)