Investment Plans (ULIP)

What are ULIP Plans

A ULIP (Unit Linked Insurance Plan) is a unique investment instrument that seamlessly combines wealth creation and insurance in one product. With an IndiaFirst Life ULIP policy, you get a tool to create a corpus of wealth while having the peace of mind that the same ULIP insurance plan covers your life. While you focus on putting money aside to meet your future needs, a ULIP investment plan works towards generating the returns you need.

As compared to other investment plans, a ULIP plan offers you the advantage of clubbing investment and insurance in one policy. When faced with life's certain uncertainties, a ULIP insurance plan ensures that your family's future is protected in any eventuality.

Under a Unit Linked Insurance Plan, the premiums paid are spread out to cover your insurance and investment needs simultaneously. A part of the premium goes towards the ULIP insurance component to offer you life cover while the ULIP plan is in force. The rest is invested in debt, equity, or a combination of both in alignment with your long-term financial goals.

Depending on your life stage, you can use the corpus created by the IndiaFirst Life ULIP investment plan to meet your retirement funding goals, pay for your child's education, or invest in real estate. Whatever your financial needs may be, a ULIP plan can be customised to get you what you want.

How does a ULIP Plan work?

Insurance savings plans offer dual benefits of insurance and savings. However, the returns from savings plans are moderate because they generally have a guaranteed component and are designed for risk-averse investors. Every guide to choose a ULIP plan will tell you that a Unit-linked Insurance Plan offers market-linked returns. Since ULIP plans invest in capital markets, such plans may offer higher returns than other non-linked plans, especially if you stay invested in the long run.

When you buy ULIP online, the insurer specifies the necessary details of the plan. These details include a death benefit, which is the amount that the beneficiary listed in your plan stands to receive in case of the policyholder's untimely demise during the tenure of the policy.

In case the life assured completes the policy tenure, they receive maturity benefits. In ULIPs, the maturity benefit is the corpus created by investing the premium payments in a mix of market-linked investment funds. As the investor, you can choose which funds you would like your money invested in—equity funds, debt funds, or a balanced combination of both.

Like mutual funds, when you buy ULIP plan online, you are privy to a professional expert fund manager who invests all the ULIP investment funds to get market-linked returns. These investment decisions are backed by sound financial research. Once you opt for a fund/s, you are allotted a certain number of units in that fund, depending on your premium amount and other preferences.

Based on the units of the investment fund, a Net Asset Value or NAV is arrived at. This NAV is assessed and declared by the insurer every day. The present-day NAV is translated into monetary value when the policy attains maturity, pay-outs need to be made, or partial withdrawals are sanctioned.

A ULIP may have many similarities with mutual funds, but it is also an insurance product. Irrespective of how the ULIP investment does, a death benefit/sum assured is guaranteed when you buy ULIP online or offline. Subject to policy provisions, this death benefit is owed to the nominee listed in the policy, ensuring that your loved ones' financial future would be secured in the case of an unfortunate event.

How to Choose the Best ULIP Plan?

In this short guide to choose ULIP plan, learn how to buy ULIP plan in a well-informed and systematic manner. When you decide to buy ULIP plan online, here are a few things to keep in mind:

Consider your financial goals first

A ULIP plan is customisable, so you can choose exactly where your money will be invested. When you buy ULIP online or offline, you are presented with a list of funds that invest in debt, equity, or a combined bag of both. The first step in any guide to choose ULIP plan is to make sure you know your life goals and financial needs so you can buy ULIP plan online in alignment with your needs.

Debt funds present the chance to earn moderate returns with relatively low risk. On the other hand, equity funds offer higher returns but also present a higher risk. You can also choose a balanced mix of both to spread out the risk.

If you have a long-term financial goal that is likely to cost a substantial amount, such as your child's higher education fees, then an equity-heavy allocation may be prudent. If your financial goals include protecting the accumulated value of the funds saved to meet your retirement goals, you will do better to invest in debt-oriented funds.

With ULIPs, you can choose which funds to invest in. You can either make this choice based on an in-depth evaluation of your life goals and risk-appetite or speak to a financial consultant to help you decide before you buy ULIP online or want to switch between funds.

Get substantial life cover

Besides the investment component, the other most crucial benefit is the life insurance coverage you opt for when you buy ULIP plan online. This insurance coverage is your family's safety net in case of an unfortunate incident during the tenure of the policy. Not getting adequate life cover would be a waste of the benefits offered by ULIPs.

While the investment component will help you meet your wealth creation goals, the insurance component serves to ensure that your financial goals meet your family's needs even in your absence. When you buy ULIP online, consider your financial objectives, your family's lifestyle, and then choose the sum assured that will support them if the need arises.

Choose an extended investment period

One of the primary purposes of a ULIP is wealth creation. To generate a substantial corpus, you have to let the power of compounding work on maximising your returns. Staying invested for an extended period is the way to do this. When you buy ULIP plan online, a lock-in period of 5 years is intimated to you. Typically, a surrender value may be earned after 3 years, and partial withdrawals may be allowed after 5 years, depending on policy provisions. Opt for a longer tenure to build wealth for yourself and your family.

Consider the charges levied

It is pivotal that you invest your money with your eyes wide open so you know exactly what you will be getting into and what you stand to gain when you buy ULIP plan online or offline. Insurers levy specific charges common to all ULIPs under the headings of fund management fees, mortality charges, service charges, administration fees, premium allocation charges, discontinuation or surrender charges, etc.  Some insurers levy all of these charges, while others do not. Make a well-informed choice after considering the charges when you buy ULIP online.

Get maximum tax exemption benefits

Consider all the tax benefits you can get under different sections of the Income Tax Act of 1961 before you buy ULIP plan online or offline

What are the Benefits of a ULIP Policy?

ULIPs are dynamic financial instruments that offer investors the dual benefits of investment and insurance. There are many ULIP policy benefits that serve to bolster your investment portfolio. In the past, life insurance was mostly seen as an assurance or a guarantee, but not as an investment. To ensure your financial future, it is essential to get life insurance and to put your money to work by investing in the right financial instruments. The dual features of ULIP plans meet both these needs and get you closer to lasting financial security.

While there are many valuable features of ULIP plans, here are the most crucial ULIP policy benefits you should know about:

Single plan, dual ULIP benefits

The investment component is one of the essential features of ULIP plans. The money you invest in ULIPs is diverted to several market-linked financial instruments so that you can gain the most ULIP benefits from the policy. Along with creating a corpus of wealth, getting life insurance is another critical ULIP plan benefit. The comprehensive life insurance coverage offered as ULIP benefits give you the peace of mind that your life and your family's financial future are covered during the tenure of the policy.

Maturity ULIP benefits

With a ULIP plan, you have signed up for a unique financial instrument that offers you many ULIP plan benefits. When a policyholder has paid regular premiums to keep the policy in force, they receive maturity ULIP benefits upon surviving the tenure of the policy. At maturity, the policyholder gets the current value of the ULIP fund along with loyalty additions and bonuses, if any are announced.

Death ULIP benefits

In case of the policyholder's unfortunate demise during the tenure of the policy, the nominee/beneficiary listed in the policy receives the predetermined sum assured as death benefits of ULIP policy. Depending on the benefits of the ULIP policy chosen, you can ensure that the beneficiary gets the sum assured along with the fund's present-day value, or whichever amount is higher as ULIP policy benefits.

Regularity in savings

While everyone knows the importance of saving regularly, the truth is that most people do not divert the required amounts towards saving with the idea that it can be done later. Saving money, however much possible, regularly and consistently is the key to long-term financial security and success. One of the benefits of ULIP policy is that it teaches the habit of saving regularly by putting away premium payments. Then, you can relax and reap the wealth creation benefits of ULIP policy.

Fund switch ULIP plan benefits

The features of ULIP plans allow for great flexibility and customisation, depending on your financial goals and needs. The flexibility of investment is one of the prime ULIP policy benefits.

With Fund Switch ULIP plan benefits, you can choose how your money moves. In a ULIP plan, a significant chunk of your premium is earmarked for investment purposes. This money can be diverted towards low-risk debt funds, higher-risk equity funds, or a balanced mix of both.

Depending on your chosen plan's ULIP policy benefits, you can switch between fund types to get the most ULIP benefits. Typically, you can make a fixed number of changes without an additional charge in a given financial year. You can refer to the ULIP benefits in the policy document to understand whether your chosen plan offers to switch between funds for free.

Premium redirection ULIP plan benefits

Another investment flexibility offered as ULIP benefits is the ability to redirect where a specific premium amount will go. Not only can you specify which funds you would like your premium to be redirected to, but you can also demarcate the percentage of the premium that you would like allocated to each fund of your choosing.

Partial withdrawal ULIP policy benefits

Every ULIP policy is locked-in for a period of five years. While the lock-in period may seem limiting, it serves a particular function. At the start of the investment, the value of the funds is low, and it takes time for your fund value to increase. The lock-in period offers enough time for your ULIP to grow and gives you substantial returns and ULIP benefits. After the lock-in period ends, you can opt for partial withdrawal of your fund value to meet emergency needs.

Top-up ULIP plan benefits

Most ULIP plans create space for future additions to the money already being invested, so you may be allowed to put in additional single premiums as and when you have the money to do so.

Market-linked benefits of ULIP policy

Seen over a long period of time, the trajectory of the market has always been upwards. With a ULIP policy, you have the opportunity to make the most of this upward trajectory. You get to invest a portion of your money in market-linked debt or equity funds, depending on your risk appetite.

Wealth boosting ULIP benefits

Everyone would like to get something extra in return for their investment. Besides regular ULIP benefits, a ULIP investment also offers chances to boost the wealth you have created in the form of fund boosters and loyalty additions. These additions are given to you as a reward for staying invested for an extended period of time. At maturity, some ULIP plans also provide a return of the mortality charges levied.

Tax benefits of ULIP

Depending on the relevant tax conditions as specified by the Indian government, you may get some tax exemptions and ULIP benefits under Section 80C and 10(10D) of the Income Tax Act of 1961. These ULIP benefits are subject to the provisions made under the IT Act and may be amended periodically

Features of ULIP Plans

The many features of ULIP (Unit Linked Insurance Plan) make it an ideal investment. 

Investment choices: Invest as per your risk appetite - in equity funds if you want desire aggressive returns, debt funds for conservative returns, or balanced funds for a mix of both. 

Easy switching: Switch between ULIP funds to meet changing market movements or financial priorities. This helps maximise returns and safeguards your investments from downturns.  

Long-term investment: The 5- year lock-in period keeps you compulsorily invested for a long term, which earns better dividends.  

Partial withdrawal: Need funds for a goal or another investment? Certain amounts are withdrawable depending on the stipulations of the unit linked plan. 

Top-ups: Add funds to your unit linked investment plan to generate high returns or plan for a future goal. 

Convenient premium payment: Pay premiums in monthly, half-yearly, annually, or a single instalment, which enables you to manage your money better. 

Saves tax: Enjoy tax benefits on ULIP premiums paid as well as the amount received onat policy maturity. 

What are the different types of funds offered by ULIPs?

1. 1) Equity Fund: Equity plans offer higher returns in ULIP as the funds are invested in equity shares of different companies. These plans are high-risk as share price fluctuations can impact your portfolio.  

2. 2) Debt Fund: Your capital is invested in safer options such as debentures, government bonds, corporate bonds, and fixed income bonds. The risk is low to moderate and the returns are lower than equity. 

3. 3) Balanced: Funds are invested in both, equity and debt, to reduce risk and give you reliable returns. 

4. 4) Liquid: This unit linked insurance plan invests in highly liquid money market instruments such as treasury bills, call money, and certificates of deposit (CD). Shorter maturity periods and strong credit ratings make these attractive to low- risk investors. 

What are the IndiaFirst Life ULIP Plans to Choose from?

Different types of ULIP plans are categorised based on the ULIP funds, end-use, and types of death benefits offered to policyholders.

Based on ULIP funds, there are three primary types of ULIP plans:

• Equity—policyholder's premium is diverted to funds investing in the equity market. These types of ULIP plans may offer high returns, but they are also subject to higher risk.
• Debt—policyholder's premium is diverted to funds investing in the debt market. These types of ULIP plans may offer low to moderate returns, and they are subject to low risk.
• Balanced—policyholder's premium is balanced between funds investing in the equity and debt market. These types of ULIP plans serve to minimise investor risk.

Based on death benefits offered to policyholders, there are two types of ULIP policy:

• Type 1—in the event of the death of the policyholder during the tenure of the policy, these types of ULIP plans pay the sum assured or the ULIP fund value, whichever is higher, to the beneficiary.
• Type 2—in the event of the death of the policyholder during the tenure of the policy, these types of ULIP plans pay the sum assured plus the ULIP fund value to the beneficiary.

Based on the policyholder's end-use, there are different types of unit-linked insurance plan, including retirement ULIP, child education ULIP, wealth creation ULIP, health-related ULIP, group ULIP, etc.

Whatever your financial need may be, IndiaFirst Life Insurance offers various types of ULIP policy that can be customised for you. Compare the benefits of different types of Unit Linked Insurance Plan while factoring in your age group, financial goals, and risk appetite. IndiaFirst Life Insurance offers you a range of flexible alternatives:

IndiaFirst Life Wealth Maximizer Plan

• Investment + insurance product
• Market-linked fund options
• Unlimited free switches
• Long-term wealth boosters
• Systematic partial withdrawal option
• Top-up premium facility
• Tax benefits

IndiaFirst Money Balance Plan

• Investment + insurance product
• Automatic trigger-based investment
• Flexible premiums
• Partial withdrawal facility
• Tax benefits

IndiaFirst Smart Save Plan

• Investment + insurance product
• Market-linked fund options
• Switching and redirecting facilities
• Transfer to liquid fund option
• Tax benefits

How to manage ULIP Funds

• You can manage ULIP funds to manage your returns on ULIP by:  

• Self-Switching: Switch between funds to maximise your returns on ULIP, depending on your risk appetite, future financial goals, or market performance. 

• Automatic Switching: Need an expert to manage your unit linked insurance? A fund manager who understands your financial goals makes prudent decisions based on your parameters. 

• Investment Top-Ups: Have additional savings? You can add that to an already performing unit linked investment plan to grow your wealth further. 

Steps to Buy Unit Linked Insurance Plan (ULIP) Online

• Visit the insurer’s official website. 

• Study and compare the various ULIP investment plans for the one that best meets your financial goals. 

• Select the policy tenure and premium payment amount that is affordable. 

• Click to make the payment either by net banking, credit card, debit card, or online wallet. 

• Make the payment and receive the unit linked insurance plan by email.    

Different ULIP charges involved in Unit Linked Insurance Plan (ULIP)

The charges of a Unit Linked Insurance Plan vary from plan to plan, but the common ones are 

• Premium allocation charges – a one-time charge applied on the first premium you pay 

• Mortality charges – the charge towards providing the life cover and which is calculated basis your age, health status and other parameters 

• Fund management charges – a percentage of your fund’s value paid to the fund manager 

• Fund switching charges – a fee charged for switching between funds 

• Premium redirection charges – a fee charged for directing future premiums into another asset class 

• Rider charges – a charge for adding riders for added security  

• Policy administration charges – a monthly policy maintenance charge  

• Partial withdrawal charges – charged if a partial withdrawal is made before the lock-in period 

• Surrender or discontinuance charges – applied on policies discontinued before their tenure 

• Miscellaneous charges - smaller amounts charged for any changes in policy term, premium payment mode, sum assured, etc. 

Myths about investing in Unit Linked Insurance Plan (ULIP)

Myth 1: ULIPs are risky. 

Fact: A unit linked insurance plan offers market-linked returns, but you can choose between various plans to capitalise on or offset risk. While equity plans are high risk-high return, debt, balanced and liquid funds are low to moderate risk offering more conservative dividend. 

Myth 2: ULIPs give low returns 

Fact: ULIP returns depend on the unit linked plan you select, basis your risk appetite. Debt, balanced and liquid funds give moderate to low returns compared to equity, but the risk is also lower. Additionally, your portfolio strategy, fund switching, and investment tenure also affect returns. 

Myth 3: ULIPs are expensive 

Fact: A unit linked plan was initially expensive. However, various regulatory norms have reduced their charges to make them attractive.  

Myth 4: ULIP life cover is not assured 

Fact: ULIP returns are market-linked but the life cover is not. Life cover is determined at policy purchase and is payable irrespective of how the investment component of your unit linked insurance plan performs. 

Myth 5: ULIPS cannot be surrendered before maturity 

Fact: Unit linked plans can be surrendered before maturity but not before mandated 5-year lock-in period. If you do, it will result in penalty charges and tax implications.