A Unit-linked Non-Participating Life Insurance Plan
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The insurance sector in India has been evolving rapidly. Life insurance penetration has witnessed a surge, from just 2.82% in 2019 to 3.2% in 2020. In addition to the rise in life insurance penetration, the range of life insurance products offered by the industry has also grown over the years. Among the many kinds of life covers available in the Indian insurance market today, ULIPs or Unit Linked Insurance Plans are one of the effective products. They offer several benefits to the policyholder, including life insurance, market-linked wealth creation and tax benefits.
ULIPs or Units Linked Insurance Plans were first introduced in India in 1971. In the decades since, this insurance-cum-investment product has undergone several changes to make it more beneficial to the policyholders. Bajaj Allianz Life ULIP plans have provided returns of about 9-14%** on different fund types, which are 5 year compounded annualized growth rate (CAGR). This is the prime reason why ULIPs are considered as a suitable investment for long term investors. Let’s take a closer look at what ULIP plans are and how they work.
Wondering what is ULIP and why people invest in it? A ULIP or a Unit Linked Insurance Plan is a kind of life insurance plan that gives the policyholder the dual benefit of enjoying a life cover as well as investing in select market-linked funds. In other words, a ULIP plan is a combination of insurance and market-linked investment. Just like with a regular term insurance plan or a savings plan, you need to pay premiums to the insurance provider in order to enjoy the benefit of the life cover, where your premium gets invested in market-linked funds.
A unique feature of ULIPs or Unit Linked Insurance Plans is that you can invest in a variety of funds such as equity funds, debt funds or even a mix of both. At the time of purchasing your Unit Linked Insurance Plan, you can decide on the kind of funds you wish to invest in. Depending on the amount you invest, you will receive a certain number of units of the funds that you choose to invest in. The value of each unit is called Net Asset Value or NAV. Depending on how the value of the assets in these funds increase over the years, you can earn returns on your initial investment and build market-linked wealth over the years.
Another key aspect of ULIPs or Unit Linked Insurance Plans is the lock-in period. ULIPs come with a lock-in period of five years. This feature allows you to remain invested at least for a period of five years, thereby inculcating the habit of disciplined savings and maximizing market linked ULIP returns.
A Unit Linked Insurance Plan has two primary components, namely the insurance component and the investment component. Let us see how each of these components work.
Every Unit Linked Insurance Plan is, at its core, a life insurance plan. ULIP insurance offers a life cover to the insured person which is valid for the policy term chosen at the time of purchase. It ensures that the family of the insured person has some much-needed financial security in case the insured person passes away during the policy term. This is because upon the demise of the insured person, the insurance provider pays out the sum assured under the ULIP policy to the nominee mentioned in the policy. The death benefit can help the surviving members of the insured person’s nominees meet their everyday expenses, pay off any debts that may be pending, and meet their life goals as planned.
The death benefit payouts from Unit Linked Insurance policy also offer tax benefits under section 10(10D) of the Income Tax Act, 1961, subject to provisions stated therein . This ensures that the family and loved ones of the deceased person need not worry about the additional burden of income tax during such a stressful time.
Every Unit Linked Insurance Plan also comes with an investment component. When you invest in a ULIP or Unit Linked Insurance Plan, you can choose to invest your premium in a variety of market-linked funds such as equity funds, debt funds, or a combination of the two. You can choose what funds to invest in based on your risk profile. For instance, if you are young and open to taking on some level of market-linked investment risk, equity funds may be a good choice for you. On the other hand, if you are extremely risk averse, ULIPs offer the option to invest in debt funds instead. For a more balanced portfolio, you can choose to invest in both equity funds as well as debt funds.
The investment component in ULIPs is also quite flexible. This is because ULIP Investment gives you the option to switch the funds you have invested in initially, based on your changing risk tolerance and your life goals. During each policy year, Unit Linked Insurance Plans typically allow you to switch funds free of charge.
The policy term in a ULIP is the period over which the life insurance coverage offered by the policy is valid.
ULIP premium is the amount charged by the insurance provider for the coverage and benefits offered by the policy. You can pay the premium as a lump sum amount in case of a single premium plan, or you can pay the premium periodically at regular intervals on a monthly, quarterly, semi-annual or annual basis as per the plan opted for.
The fund value of a Unit Linked Insurance Plan is the total market value of all the units in the ULIP funds you hold. It is simply the monetary worth of your investments at any given point in time.
The partial withdrawal facility is a ULIP feature which allows you withdraw a part of your investments during the policy term, after the lock-in period. There is generally a predetermined limit on the amount that you can withdraw depending on the terms and conditions of the product.
The premium redirection facility in a ULIP is a feature that you can use to determine how your future premiums will be allocated between your ULIP funds. You can choose to redirect your future premiums partially or wholly from one fund to another, based on market cycles.
ULIP charges are additional fees levied by the insurance provider for different expenses incurred over the course of the policy term. Some common examples of ULIP fees and charges include mortality charges, discontinuance charges, fund management charges, fund switching charges, and partial withdrawal charges.
The surrender value is the amount that you will receive from your insurance provider if you decide to surrender the ULIP policy before maturity. It is paid out after the deduction of any charges that may be applicable.
The top-up premium is an additional amount that you can pay voluntarily over and above your regular premium, in order to increase the amount invested in your ULIP funds.
Fund switching is a unique feature of Unit Linked Insurance Plans, which allows you to switch the funds in your portfolio as and when your financial goals change or as per the market movements. You generally get a specified number of free switches each year as per the features of the plan, after which your insurer may levy fund switching charges. In some ULIP plans, there may be no charges levied for fund switching.
ULIP riders are add-ons that you can purchase at the time of buying your Unit Linked Insurance Plans. You need to pay a nominal additional charge for each rider you purchase. These riders offer additional benefits over and above what your ULIP policy offers. Some common examples of ULIP riders include the critical illness rider, the waiver of premium rider, and the accidental death and disability rider, among others.
The settlement option in a Unit Linked Insurance Plan allows the policyholder to customize how the maturity benefits are paid out by the insurer. With this option, the policyholder can choose to receive the maturity amount in the form of periodic instalments instead of a lump sum payout.
While choosing a suitable ULIP plan one needs to:
ULIP plans cater to a wide variety of customers. To understand who should buy ULIP, one should focus on why I should invest in ULIP. Every individual has his/her own reasons to make an investment. The target audience for ULIPs can be categorized into four segments.
ULIP plans have found numerous takers primarily due to the broad range of market-linked investment funds that it offers and how it can help one to achieve their Life Goals. Most ULIPs have funds consisting of equity and debt funds or a combination of both. Some ULIPs invest higher in equity funds while others invest higher in debt funds. Investors seeking relatively higher returns and are comfortable with a higher risk may invest in equity-oriented funds. On the other hand, risk-averse investors may opt for debt funds that offer more stability when compared to equity funds. Investors can also choose to distribute their savings across equity and debt funds as per their risk appetite. With a wide variety of funds, ULIP plans essentially cater to people with varying risk appetite. Before investing, one should look at the historical NAV of a fund to get an idea of what to expect in future and take a decision. You can always take advice from a subject matter expert or a life insurance consultant and plan for your Life Goals with ULIPs.
Varieties of investment plans are available in the market. Some are targeted at short-term investors while some cater to long-term investors. ULIPs are structured to provide optimum returns for people having a long-term horizon. A ULIP plan offers a variety of equity and debt funds for investment to the policyholders. Equity and debt funds are known to generate returns in the long term. Market fluctuations can affect the value of the investment in the short term, but over a long period, equity and debt funds could deliver desirable returns on investment due to the power of compounding. Moreover, ULIP plans have a mandatory 5-year lock-in period. If the aim is to accumulate funds for long term life goals such as buying a dream house or saving up for your children’s education, then you can consider ULIPs as one of preferred options as it caters to the long term outlook.
Many individuals prefer to have an active role in their investments. To self-manage the investment, one needs transparent data and the option to modify the allocation. The NAVs of all the ULIP funds are made available by the insurance companies, which makes it easier for the policyholder to evaluate and invest in the policy of his/her liking. The NAV of the ULIP funds is updated on a regular basis. Hands-on investors can use features like fund switching or premium redirection to modify their allocation and self-manage their investment as per their knowledge and expertise. Transparent data coupled with the option to modify allocations makes ULIP plans suitable for hands-on investors. ULIPs shows how much percentage in a fund is invested in a particular stock and it gives you a historic performance of the particular fund in comparison to the benchmark returns.
People in different life stages have different needs and ULIP plans can be tinkered to cater to all. It does not matter if you are 20, 35 or 50. Whatever your age is, you are sure to have certain life goals and dreams that you hope to fulfil. You may want to complete your MBA, or perhaps you want to make a down payment on your dream home. Whatever be the reason, to be able to fund your life goals you need a corpus. You can use an investment tool such as a Unit Linked Insurance Plan, or ULIP, to help you save up the money required to achieve your Life Goals.
While you can invest in ULIP at any stage of your life, it is advisable to invest as early as possible. Investing now will have an impact on ULIP returns over a long term. The earlier you invest in ULIP, the greater are the advantages like:
The plan structure can also vary from one Unit Linked Insurance Plan to another. Broadly speaking, there are two kinds of ULIPs based on this category.
A single premium Unit Linked Insurance Plan is a kind of policy where you need to pay a single, one-time premium at the time of purchase. This premium is paid as a lump sum amount.
In a regular premium Unit Linked Insurance Plan, you need to pay the premiums periodically and regularly over the policy term. You can make your payments on a monthly, quarterly, semi-annual or annual basis as per the product features.
Death benefits are paid out to the nominee of the insured person in case of the latter’s demise during the policy term. Unit Linked Insurance Plans can also be classified into the following different types based on the death benefits offered.
Under this type of ULIP policy, the nominee receives the higher of the following two sums as the death benefits as per the terms & conditions of the policy:
This kind of ULIP offers both the sum assured as well as the fund value to the nominee as the death benefit in case of the policyholder’s demise as per the terms & conditions of the policy. Because of this added benefit, Type 2 ULIPs come with a relatively higher ULIP charge.
When you purchase your Unit Linked Insurance Plan, you can enhance the benefits by also buying ULIP riders. Some of the different riders you can purchase with your ULIP plan are listed below.
Waives future insurance premium payments if the policyholder faces any of the underlying situation like death, disability etc. The conditions under which premiums are waived will be specific to the rider opted for.
Provides financial aid to the family of the life assured in case of an untimely death of the life assured due to an accident, during the coverage period.
Provides financial aid to the life assured in case he/she suffers total and permanent disability caused due to accident.
Provides financial aid to the policyholder in case they are diagnosed with a critical illness during the policy term as per the rider conditions.
Provides the beneficiary/nominee with a monthly payout in the event of death of the policyholder for a specified period as per the rider conditions.
ULIPs or Unit Linked Insurance Plans share many features with other kinds of life insurance plans. That said, ULIPs also come with many distinct features that set them apart from other types of life covers. Understanding these features of ULIPs can help you learn how to make the most of your Unit Linked Insurance Plan.
Below are the main features of Unit Linked Insurance Plans and understand the impact they have on your finances:
The fund switching feature of a Unit Linked plan enables policyholders to move their money from one market-linked fund to another within the same plan to manage their returns. Policyholders can choose the funds as per their financial goals and risk tolerance capacity.
In traditional life insurance plans, you typically cannot withdraw any benefits until the end of the policy term. However, in the case of Unit Linked Insurance Plans, there is a partial withdrawal feature that helps you meet any liquidity needs even during the tenure of the policy. This feature comes into effect only after the lock-in period of five years, after which you can partially withdraw your investments as needed as per the policy terms & conditions.
The top-up feature in ULIPs helps you keep pace with your growing life goals by allowing you to increase the amount you invest in your policy each year. With the help of the top up feature, you can increase the investment in your ULIP. So, you get to invest more money in the market-linked funds of your choice. This may increase your chances of earning higher returns over the long term to meet your life goals. If you enjoy a sudden windfall, or earn a pay hike, you can take advantage of the top-up facility to upgrade your investments.
There are some additional ULIP charges associated with your investment. However, you need not worry too much about these ULIP charges, because the Insurance Regulatory and Development Authority of India (IRDAI) has capped them and regulates the costs associated with ULIPs. Some of the common ULIP charges are:
Unit Linked Insurance Plans, unlike traditional investment plans, come with a lock-in period of 5 years. During this period, you cannot make any withdrawals from your investment. Even if you decide to discontinue your policy during the lock-in period, the fund value will only be paid out to you at the end of 5 years, although your insurance coverage will cease right away. The main reason ULIPs have a lock-in period is to help policyholders build the habit of investing consistently. Furthermore, it also allows the ULIP charges to be distributed more equitably, over 5 years. This eliminates the possibility of front loading of ULIP charges and reduces the financial burden on the policyholder.
Owing to their many unique features, Unit Linked Insurance Plans have several advantages. Check out the top benefits of ULIPs that set them apart and make them essential for your portfolio.
Unit Linked Insurance Plans offer you the benefit of asset allocation. Asset allocation refers to the strategy of allocating your capital across different ULIP funds offered under your policy. With ULIPs, you can choose to allocate your funds across equity funds, debt funds or a mix of the two. This allows you to invest in market-linked investments as per your risk appetite and your financial goals.
Unit Linked Insurance Plans also give you the advantage of market-linked wealth generation over the long term. This is because they invest in market-linked assets, which could be susceptible to short-term market volatility, but generally tend to perform well over the long term.
In addition to the benefits outlined above, ULIPs also offer the advantage of tax savings in more ways than one. Check out the details of the tax benefits of Unit Linked Insurance Plans below
When you purchase a ULIP, you need to pay premiums to your insurance provider. These premiums are deductible from your taxable income up to a limit of Rs.1.5 lakhs as per section 80C of the Income Tax Act, 1961 subject to provisions stated therein.
If your investments grow over the policy tenure, they are not taxable as long as the funds remain invested. In other words, you do not have to pay tax on your earnings or gains if they have not been realized.
ULIPs give you the option to switch the funds you invest in during the policy term. These switches are not taxable.
In case of the policyholder’s demise during the policy term, the death benefits paid out by the insurer are tax-free in the hands of the recipient. Furthermore, if the policyholder survives the policy term, maturity benefits are paid out. For ULIPs issued before February 01, 2021, these maturity benefits are exempt from tax subject to satisfaction of conditions mentioned in Section 10(10D) of the Income Tax Act, 1961. However, for ULIPs issued on or after February 01, 2021, the LTCG will be tax-free up to Rs.1 lakh for given financial year for Equity Oriented ULIPs. More ever LTCG gains beyond the exempted limits will be taxable @ 10% for equity oriented ULIPs. For Debt Oriented ULIPs, capital gains tax would be applicable on the income from policy at applicable rates. Further, in case of multiple ULIP policies issued after 1 February 2021, held by a customer, he has the option to choose policies having premium less than Rs2.5 lakh in aggregate to be considered as tax free subject to the provisions of Section 10(10D) of the Income Tax Act, 1961. Only the incremental policy exceeding the premium amount of Rs2.5 lakh limit would be considered as taxable.
The ULIP premiums are fixed, basis the amount you wish to invest monthly/quarterly/half yearly/annually. Post deduction of applicable charges (if any), the remaining amount gets invested in the market-linked funds of your choice. The charge levied to provide life cover is termed as mortality charge. Mortality charges take into account your age, medical history, and any lifestyle diseases.
A ULIP plan calculator is a simple online tool that uses data provided by the investor to give an idea of the expected returns. As ULIPs are long-term insurance cum investment plans, it is advisable to use a ULIP maturity amount calculator before committing to get an idea of the estimated returns. It is easy to understand how ULIP works after using a ULIP plan calculator as it tells you the estimate corpus you can generate based on your inputs.
ULIP calculators have many distinct features that make them very useful for interested individuals.
Every ULIP comes with certain charges. These ULIP fees or charges are levied for various expenses and risks undertaken by your insurance provider. Check out the different ULIP fees or charges that come with your policy, and get a better idea of why and when they are levied.
Once you invest in select ULIP funds, your money and your assets are all managed by skilled fund management experts who decide which stocks or bonds to invest in and how much to invest in each asset. They also monitor the assets and the price changes therein. Ultimately, the expertise of these fund managers helps policyholders earn optimal returns from the market-linked funds they choose to invest in.
In exchange for the services of these fund managers, insurers levy ULIP charges known as fund management charges each year. The Insurance Regulatory and Development Authority of India (IRDAI) has brought out a regulation to cap the fund management charges at 1.35% of the fund value per annum. So, you can rest assured that the ULIP fees and charges for fund management will not pull down your net returns beyond the specified limits.
There are various administrative tasks related to a Unit Linked Insurance Plan, such as regular paperwork and record keeping. To cover the expenses incurred for these administrative tasks, you need to pay policy administration charges. Typically, these ULIP fees and charges are deducted by redeeming the required number of units at the prevailing market price from the account of the policyholder.
ULIPs have an insurance component too, meaning that they offer a life cover to the insured person. So, in case of the insured person’s demise during the policy term, the insurance provider pays out the death benefits under the plan to the nominees mentioned therein. To compensate for the risk associated with the insured person’s life, insurance providers levy a mortality charge on the ULIP.
New-age ULIPs have a beneficial feature called the Return of Mortality Charges (ROMC), wherein the mortality charges levied initially are returned to the policyholder at the time of the ULIP maturity, if they survive the policy term.
Bajaj Allianz Life has also introduced this benefit in the new-age ULIPs issued, so that the overall cost of investment is reduced and the maturity benefits are enhanced.
These ULIP charges are levied as a percentage of the premium, and they are deducted upfront. You need to pay these charges to account for the initial costs that the insurance company incurs when they issue the Unit Linked Insurance Plan to you. These costs include the underwriting expenses and the distributor fees, if any. You can check out the premium allocation charges applicable to your ULIP in the policy brochure or on the website of the insurance provider.
As you have seen previously, Unit Linked Insurance Plans come with a lock-in period of five years. But what happens if you stop paying your premiums before the said period and wish to surrender your ULIP? In such a scenario, the insurance provider will levy policy discontinuance charges.
The amount of ULIP charges levied on premium discontinuance of the policy depends on the year in which you stop paying the premium. Here too, the IRDAI has stepped in and put regulations in place to protect the policyholder from uncontrolled charges. Here is a quick look at the maximum charge that can be levied for regular premium ULIPs, depending on the year of discontinuance of premium.
|Year in which the ULIP policy is discontinued||Maximum surrender charges allowed Maximum charges
allowed for the policies having annualized premium above Rs.50,000/-
|Year 1||Rs. 6,000|
|Year 2||Rs. 5,000|
|Year 3||Rs. 4,000|
|Year 4||Rs. 2,000|
ULIPs also allow you to make partial withdrawals after the 5-year lock-in period is complete. Some Unit Linked Insurance Plans may permit an unlimited number of partial withdrawals. Others, however, may limit the number of free partial withdrawals you can make. If you cross this threshold and want to make more partial withdrawals, these ULIP fees and charges will apply.
When you purchase a Unit Linked Insurance Plan, you can also enhance the benefits you get by buying ULIP riders with the base policy. There are different riders that you can choose from, such as the critical illness rider, the accidental death and disability benefit rider, the waiver of premium rider and more. For these riders, you need to pay additional rider charges.
Another unique feature of Unit Linked Insurance Plans is that they allow you to switch your corpus partially or completely from one fund to another, via the fund switch feature. This helps you modify your portfolio based on market cycles and your own changing goals and risk tolerance levels.
Some insurance providers do not charge anything for fund switches. However, few other Insurance providers offer a specified number of free switches each year. After this limit is reached, if you still want to make a fund switch during the policy year, you will have to pay the fund switch charges as per the terms and conditions of the policy.
As the name indicates, these are additional charges that may be levied for altering the features of your ULIP contract, like the premium payment mode etc.
Earlier, front loading of charges was a massive disadvantage of ULIPs. However, to help policyholders avoid this burden, the IRDAI stepped in and mandated that the ULIP fees and charges should be distributed evenly during the policy period. This eliminates the possibility of front loading of charges and makes ULIPs more convenient for policyholders, since the charges are evenly spread out across.
ULIPs offer a variety of different market-linked funds for the policyholder to choose from. This makes them suitable for all kinds of investors, whether they are aggressive, moderate or conservative in their risk taking capacity Here is a closer look at the primary types of ULIP Funds that are typically offered by insurance providers.
As the name indicates, equity funds in ULIPs invest primarily in the equity market. This involves investing in listed equity stocks. Depending on the kind of stocks they invest in, equity ULIP funds can further be categorized as small-cap, mid-cap, or large-cap funds. The primary objective of equity funds is capital appreciation, since the market-linked returns associated with equity stocks can prove to be on the higher side over the long term.
However, you also need to remember that equity funds typically carry a higher level of risk than other kinds of ULIP funds. So, these funds are suitable for investors who possess a high risk appetite. By taking on a higher level of risk, you increase the possibility of earning higher returns, since equity funds follow a high risk high reward approach.
Debt funds invest in the debt market, which includes a wide range of debt-based securities such as government securities, corporate bonds, and a wide range of other fixed income instruments. As you may have guessed, the possibility of earning a fixed income over the foreseeable future brings down the risk associated with the investment. This is why debt funds carry a lower level of risk.
So, if you are interested in getting the dual benefit of insurance and market-linked investment, but are unwilling to take on the high risk that equity funds possess, you can choose to invest in debt funds instead.
Also known as cash funds or money market funds, these ULIP funds invest in liquid assets such as money market instruments and short-term debt securities that have a high credit rating. Some of the common assets that cash funds invest in include cash and bank deposits, treasury bills and commercial papers. They are highly liquid and easy to redeem, making them ideally positioned to help you meet your short-term goals.
However, money market instruments and other assets that cash funds invest in typically offer lower returns than equity and long-term debt instruments. So, before you choose these ULIP funds, you need to ensure that they are aligned with your life goals.
Hybrid funds rely on a mixed asset allocation to distribute the risk more equitably among your ULIP portfolio. In this case, you can benefit from investments in both equity instruments and debt securities. This kind of asset allocation gives you the advantage of capital appreciation from the equity investments and the benefit of reliable earnings from the debt instruments.
The risk is also more moderate in the case of hybrid ULIP funds, since the high risk from the equity assets is diluted by the lower risk associated with the debt instruments. So, if you are unsure of whether equity or debt may be the right investment for you, you may get the best of both worlds by purchasing a ULIP and choosing a suitable fund.
It is not enough if you simply make your ULIP investment and sit back over the entire policy term. You also need to keep an eye on the performance of the ULIP funds and monitor if and how your capital is growing. Here is why this is an important exercise.
When you invest in a Unit Linked Insurance Plan, you bear the entire risk associated with market-linked investments. Keeping an eye on how your ULIP funds are performing helps you check if the risks are within the limits that you can tolerate.
ULIPs offer a fund switching feature that you can use to keep pace with changing market movements and your changing life goals. By monitoring the fund performance, you can better identify when a fund switch is necessary.
By checking the performance of your ULIP funds periodically, you can also assess if you are on track to meet the financial goals for which you made the investment in the first place. This way, you won’t fall behind on your life goals.
If you have invested in a Unit Linked Insurance Plan from Bajaj Allianz Life Insurance Company, you can check the performance of your ULIP funds online right here.
|Parameter||ULIP||Traditional Insurance Plan|
|Description||Insurance cover along with market-linked investment benefits||Insurance cover with fixed returns. In some plans bonus may be applicable as per the product opted for|
|Objective||Aims to provide both protection and maximize your savings by investing in different market-linked funds||Aims to provide both protection and investment. The investment is mostly in low risk instruments.|
|Returns||Can be high or low depending on the market performance||Returns are generally fixed. Bonus once declared is guaranteed|
|Flexibility||You can switch between market-linked funds of your choice, including the percentage of the money you would allocate to each fund||You cannot choose where to invest your money here. The insurance company invests the money on your behalf|
|Withdrawal||You have the option of withdrawing a certain amount of money after the locking period ends||The option to withdraw a certain amount of money, is not available|
|Lock-In Period||5 years||The plan is locked in till maturity|
With the integration of technology into the insurance sector, it is now possible to purchase a Unit Linked Insurance Plan right from the comfort of your home. Wondering how to buy a ULIP online? That’s very easy, thanks to the hassle-free process on our website.
Check out the steps involved in purchasing your Unit Linked Insurance Plan from Bajaj Allianz Life online.
To buy a ULIP online, head to the Bajaj Allianz Life website at www.bajajallianzlife.com
Locate the ULIP section on the website and check out the different Unit Linked Insurance Plans available for purchase online.
Select the ULIP policy of your choice from the list of different options available.
Click on the ‘invest now’ option and proceed along your purchase journey.
Once this is done, you need to submit some essential personal details such as your name, your mobile number, your gender, date of birth, your email and your pin code.
In the next step, you need to fill out the relevant details of your policy and your investment, such as the policy term, the premium payment term, the amount of investment you wish to make, the investment strategy you prefer and the method of fund allocation based on your life goals and your investment preferences
After submitting these relevant details, you will be able to see the premium that you will be required to pay for your Unit Linked Insurance Plan and the benefits in form of a benefit illustration.
If you wish to, you can modify any of the policy details you previously entered. The premium will change accordingly.
Alternatively, you can retain the policy details, proceed with your purchase and make the first premium payment.
You will then have to fill and submit the proposal form. Thereafter, your Unit Linked Policy will be issued.
One of the main benefits of ULIPs is that they can help you create market-linked wealth over the long term. However, to truly reap these benefits, you need to remain invested for a longer period. The lock-in period feature in ULIPs can help you with this.
Check out how the 5-year lock-in period in ULIPs helps you invest for your long-term goals.
The lock-in period in ULIPs allows you to save consistently over the duration of 5 years in a disciplined manner. This can help you inculcate a good personal finance habit that may continue even after the lock-in period ends. And ultimately, remaining invested for the long term makes it easier to achieve your goals.
Since you cannot withdraw your investments during the lock-in period, the capital you put into the ULIP funds can grow uninterruptedly based on how the market performs. This can, once again, make long-term goals easier to achieve. Without a lock-in period, you may be tempted to withdraw some funds, thereby interrupting how your corpus grows.
Market volatility can have quite an adverse effect on your investments over the short term, depending on the market movement. However, the effects of this kind of volatility are managed over the long term. By staying invested over the lock-in period and even longer, the probability of growth of your corpus benefits and your long-term goals are better placed.
A Unit Linked Insurance Plan is primarily designed to be a long-term investment option. It comes with a lock-in period of 5 years. But ideally, continuing to remain invested even beyond the 5-year lock-in period can be financially beneficial to you.
If you are thinking of surrendering your ULIP plan, here are some reasons you may consider not doing it.
ULIP returns are market-linked. And market-linked returns may be affected by market volatility over the short term, but are typically better over the long term. This is one reason to remain invested throughout the policy term.
If you surrender your Unit Linked Insurance Plan, you not only lose the benefit of market-linked returns, but your insurance coverage also stops. This will leave your loved ones without a financial safety net in case of any uncertainties.
By surrendering your ULIP before the lock-in period ends, you are also giving up the tax benefits that come along with your investment. For ULIPs, premiums are tax-deductible up to Rs.1.5 lakhs under Section 80C of Income Tax Act, 1961 subject to provisions stated therein. These tax deductions under Section 80C will not be available to you if you surrender your policy within the lock-in period. For ULIPs issued on or after February 1, 2021 the maturity amount remains tax free if the aggregate annual premium in any financial year during tenure of the policy, does not exceed Rs2.5 lakh. As per section 10(10D) of the Income Tax Act, 1961, for ULIPs purchased before February1, 2021, the returns on maturity are tax-free. This is applicable only if the annual premium is less than 10% of the capital sum assured for the plans purchased after April 1, 2012 (for the plans purchased before the said date but after 1 April 2003, it is 20%). The death benefit is tax-exempt under section 10(10)D of the Income Tax Act 1961.
If you have just gotten your first job, or if you are in your 20s and contemplating buying a Unit Linked Insurance Plan, you’ll be glad to know that there are several benefits to investing in a ULIP early in life.
Here are the top reasons you should consider while investing in a ULIP when you are younger:
Compounding refers to the re-investment of income to generate additional income over time. The longer you stay invested, the higher will be your wealth accumulation.
When you buy a Unit Linked Insurance Plan early on, the mortality charge is lower. Thus, the amount you get to invest in funds, post deduction of applicable charges, is higher. Also, you get enough time to let the investment grow and reap maximum benefits out of it.
When you are younger, you have the luxury to invest in high risk ULIP funds, which also comes with the potential to generate higher returns over the long term. So, by buying your ULIP early on, you can choose to invest a sizable portion of your capital in equity ULIP funds and benefit from equity market-linked returns.
One of the defining features of ULIPs is the flexibility that they offer. While most other investment avenues do not allow investors to change their asset allocation as and when they need to, ULIPs stand out in this regard. Here is a closer look at the different ways in which ULIPs offer flexibility of investments.
The fund switching feature allows you to switch between different investment funds based on the market outlook. So, if the equity market is performing well and you wish to take advantage of this fact, you can increase your equity fund exposure, thanks to the fund switching option. Similarly, if the maturity date is getting closer, you can protect your returns by switching from equity to debt.
ULIPs also allow partial withdrawals up to a predetermined limit. This feature makes it easier for you to meet any emergency fund requirements. However, keep in mind that it is always better to let your investments remain intact. Making partial withdrawals will reduce the amount you have invested, and could affect the timeline within which you can achieve your life goals.
If you receive a sudden windfall, an inheritance or even a bonus at work, you may put that money to good use with the top-up facility in ULIPs. This facility allows you to increase your ULIP investment, so you can take advantage of favorable market movements.
You can make use of the premium redirection feature in ULIPs to meet your changing financial goals. This feature essentially allows you to modify how your upcoming premiums should be allocated across your existing ULIP funds.
Bajaj Allianz Life is one of the leading private life insurance companies in India. The company is a partnership between two powerful and successful entities in their own right - Bajaj Finserv Ltd, one of India’s most diversified non-banking financial institutions and Allianz SE, one of the world’s leading asset managers and insurers.
Before buying a ULIP plan, it is crucial to ensure that the insurance company will honor its promise in your absence. If your family’s claim is rejected, it will defeat the purpose of buying a ULIP insurance plan. The claim settlement ratio is a critical metric that throws light on the insurance company’s claim settlement record. It is the ratio of the number of claims accepted by the insurer versus the total number of claims filed in a year. Bajaj Allianz Life has a stellar claim settlement ratio of 99.02% for FY 2020-21.
Bajaj Allianz Life offers a host of ULIP plans catering to a wide variety of customers. You can choose from eight different ULIP plans according to your financial objectives and plan to achieve your Life Goals.
Bajaj Allianz Life has set up an extensive network of branch offices and agents. The company serves millions of customers through 509 branches. Along with the physical network, you can also buy Bajaj Allianz Life ULIP plans online from the comfort of your home by logging on to www.bajajallianzlife.com
The term ULIP stands for Unit Linked Insurance Plan. It is a unique financial product that combines the elements of both insurance and market-linked investments.
A ULIP or a Unit Linked Insurance Plan is a type of life insurance policy. Like all life insurance plans, a ULIP also offers death benefits in case of the insured person’s demise.
There is no perfect time to invest in ULIPs. You can invest in them at any point in your life. However, the earlier you start investing in them, the better, since you get to fully utilize the power of compounding to your advantage.
A ULIP, also known as a Unit Linked Insurance Plan, is a financial product that offers the dual benefits of insurance and investment. ULIPs offer the option to invest in different market-linked funds that help you generate returns for your long-term life goals.
Before you go ahead with your investment in a ULIP, there are 5 key things that you should always keep in mind.
ULIPs are a long term investment and yield considerable returns when you stay invested for long-term. It is important to choose the funds you want to invest in wisely, basis your risk appetite, age and financial portfolio in order to mitigate the risks involved. However, since ULIPs are market linked, the returns depend on the market movements and fluctuations.
The trial period or the free look period of a Unit Linked Insurance Plan is typically 15 days from the date of receiving the policy document. In the case of electronic or online ULIPs, the free look period is 30 days. If you are not satisfied with the policy, you can cancel it during this period without paying any additional discontinuance charges. However, the mortality charges deducted, expenses incurred on medical examination and stamp duty charges will not be refunded
In a regular premium policy, the policyholder is required to pay premiums regularly at the chosen intervals. At the time of purchase, policyholders may choose to make premium payments on a monthly, quarterly, semi-annual, or annual basis. The premium payment term is the same as the policy term in regular premium ULIPs.
Choosing a ULIP plan that fits your needs and requirements perfectly is crucial to be able to satisfy your goals. Here’s how you can make sure that you choose a ULIP plan that’s best for you.
The NAV, also known as the Net Asset Value, is the value of an individual unit of a ULIP fund. Since ULIPs invest in market-linked funds, the ULIP NAV is recalculated at the end of every trading session.
Yes, ULIPs offer different kinds of equity funds for the policyholder to choose from. These funds are known as Large Cap, Mid Cap, Small Cap & Multi/Flexi Cap funds based on their investment in across market cap. Investors can choose the equity funds as per their goal and risk profile.
Yes, there are Unit Linked Insurance Plans that offer the single premium feature. In single premiums, you need to pay a lump sum amount as the premium at the time of policy purchase, instead of making regular premium payments over the policy term. Choose between single premium ULIP or regular premium ULIP as per your need and investment capacity to churn out the appropriate benefits.
You can purchase a Unit Linked Insurance Plan by paying the premium through any of the different payment modes available, such as net banking, credit cards, debit cards, or online wallets etc.
Trigger-based portfolio strategy helps you in ‘Securing your Gains’ and maintain your exposure between debt and equity. This strategy is available with some Bajaj Allianz Life insurance products where your portfolio consists of an initial allocation of 75% to equity and 25% to debt. At specific trigger point(s) the allocation is checked and automatically adjusted to the initial allocation.
Wheel of life ensures that a balance is maintained between your ‘years to maturity’ and level of risk on your investments, in a nutshell higher the age lower is the risk exposure. This strategy is available with some Bajaj Allianz Life insurance products, to align your investment risk across the various stages of your life, initially, when you can tolerate higher risk versus later years where you want to safeguard your investment returns.
Unit Linked Insurance Plans offer market-linked returns. Bajaj Allianz Life ULIPs have provided returns of about 9-14%**, which are 5 year compounded annualized growth rate (CAGR).When invested with a long term horizon and in appropriate fund types, basis risk appetite, ULIPs can give expected returns and hence are considered an suitable investment for long term investors.
Although there are several ULIP Benefits that you can enjoy by investing in a Unit Linked Insurance Plan, there are also some risks that you should know about. Since ULIPs invest in market-linked instruments, the risk of market volatility and price movements is inherent to your ULIP investments.
A ULIP policy is essentially a life cover. So, if the insured person passes away during the policy term, the insurance provider pays out the death benefits as per the terms and conditions of the plan, to the nominee mentioned in the policy.
The exact limit on the maximum amount of partial withdrawals in a Unit Linked Insurance Plan varies from one insurer to another, as well as from one policy to another. So, it is essential to read the terms and conditions of your policy before you make your purchase, to understand the limits on the partial withdrawal better.
There is no specific right time to make fund switches in your ULIPs Typically, a switch in your ULIP funds may be necessary in the following cases.
A fund booster is a ULIP benefit offered under some of the Bajaj Allianz Life insurance products that enhances the amount you receive at the time of maturity. This is an incentive for paying your premiums regularly throughout the policy term and stay invested till the end of the policy. If your ULIP offers this feature, and if you qualify for it, you will receive the fund booster on maturity.
ULIPs are suitable for a wide range of investors, no matter their risk tolerance, because they allow investments in equity, debt and several other market-linked funds. So, risk-averse investors can choose ULIP funds that invest in debt, while those who can tolerate more risk can pick equity funds.
Unit Linked Insurance Plans are issued by life insurance companies in India. You can choose a life insurance company with good fund performance record and claim settlement ratio to buy your ULIP from.
The best ULIPs are those that offer you the coverage you need and give you the option to invest in the market-linked funds that can help you achieve your goals. So, there is no clear cut answer to the question of what the best ULIP is. Ultimately, the right ULIP for one investor may differ from the right ULIP for another. So, compare your options to find the policy that is most suitable for your needs and goals.
Yes, if you wish to, you can stop investing in your ULIP. However, if you surrender your policy during the lock-in period of 5 years, the life cover ceases immediately, but the surrender value is paid out only after the 5-year period is complete. If you stop investing in your policy after the lock-in period, you will receive the surrender value right away, but the benefits offered by the policy will no longer be available to you.
ULIPs have the potential to generate returns based on the performance of the market-linked securities they invest in, market conditions and many other factors. To truly enjoy the benefit of these plans, it is advisable to remain invested over the long term, or over the entire tenure of the policy.
That depends on when you surrender or cancel your policy. If you do so within the free look period, your insurer will typically refund the premium after deducting any charges they may have incurred, for medical test, mortality charges and stamp duty charges. On the other hand, if you surrender your policy after the free look period, you will receive the surrender value of the policy, if any. This is calculated as the total premiums paid multiplied by the surrender value factor, net of surrender charges and any other deductions, if any. There is no surrender charge after the 5th policy year
If you wish to invest more than the regular premium in your ULIP, you can make use of the top-up feature in your policy. As per this feature, you can invest a top-up premium in your policy, over and above the regular premium. This comes in handy if you have received a bonus or a windfall and want to use the funds for investment purposes, or if you want to take advantage of market movements and increase your investment in a particular ULIP fund.
Yes, you can. Unit Linked Insurance Plans come with many beneficial features. One of these ULIP benefits is the partial withdrawal feature. You can use this feature to withdraw a portion of your investments after the lock-in period of 5 years. When the question of ‘Can we withdraw from ULIP?’ arises, it is worth considering if the withdrawal is indeed urgent or necessary
Yes, Non-Resident Indians (NRIs) can buy Unit Linked Insurance Plans in India.
Although the exact ULIP returns depend entirely on the market movements during the tenure of your policy and the underlying fund performance, there are some tips that can help you optimize the returns as much as possible. Here is what you can do.
Unit Linked Insurance Plans that provide death benefits and maturity benefits till you attain the age of 99 or 100, depending on the plan that you choose, are termed as whole life ULIPs.
One of the primary reasons why you should opt for such a plan is that it keeps your family protected for the entire period of your life. Also, thanks to such a long period of investment, you also get to optimize the returns that you receive from your investment. And finally, there’s the benefit of prolonged tax savings as well.
If you stop paying the premiums after expiry of the lock-in period, you can convert the policy to paid-up and withdraw the funds that remain in the ULIP. However, if you stop paying the premiums within the lock-in period of a ULIP, your policy will automatically be labelled as a discontinued policy and you will cease to receive all benefits under the plan. You can either revive the policy by paying the missed premium(s) or surrender it. If you surrender the policy before the expiry of the lock-in period, the insurance cover will cease to exist and, you will be allowed to withdraw your funds after deduction of appropriate charges, only after the lock-in period ends
The returns that your ULIP fund investments generate over a specified period of time is termed as absolute returns. It is the difference between the initial value of the investment, and the final value of that investment, over a particular time. Absolute returns are calculated on the Net Asset Value (NAV) of a ULIP. Let us look at an example to understand this better –
Say that you have invested Rs. 10,000 in an instrument today. Five years later, assume that the investment grows to Rs. 16,000. In this case, the investment has grown by Rs. 6,000. So, the absolute returns from the investment is calculated as follows –
Absolute returns = (Rs. 6,000 ÷ Rs. 10,000) x 100 = 60%
Now, in the example given above, if we were to say that the investment grew to Rs. 16,000 in three years instead of five, the absolute returns would still be 60%. Therefore, the period is of little significance when you are calculating the absolute returns. Effectively, what matters is how much your investment has grown.
An endowment plan is a life insurance policy that not only covers the life of the policyholder but also pays a lump sum amount after a specific term (upon policy’s maturity) if the policyholder survives the policy term.
According to the auto transfer portfolio strategy, offered by some Bajaj Allianz Life insurance products, the initial premium payments that you make will be invested in low-risk funds such as bond funds or liquid funds. And at the start of every month, a portion of your fund value will be switched over to other high risk funds chosen by you automatically. This gives you the chance to earn an enhanced return on your investment by taking on moderate levels of risk.
When you make ULIP premium payments, the same are used to purchase units of market-linked funds chosen by you at the time of purchase. The fund value is the total value of all of the units of funds that you own multiplied by the Net Asset Value (NAV) of the fund.
The investor selectable portfolio strategy under some Bajaj Allianz Life insurance plans, allows you to choose the kind of ULIP funds that you wish to invest in. It allows you to switch your allocations between funds as well. As per this strategy, you can even choose to invest in one fund or in multiple different funds in a proportion of your choice.
There are quite a few differences between online and offline ULIPs Firstly, online ULIPs tend to be more cost effective compared to offline ULIPs. This has to do with the fact that online plans don’t involve any intermediaries or agents, which helps keep the costs lower.
A life insurance policy is designed to offer a lump sum payout to the family members of a policyholder in the case of the death of the said policyholder during the tenure of the plan. An annuity plan, on the other hand, is designed to provide policyholders with a regular source of income until the end of their lifetime
No, for policies purchased before 1 February, 2021 there will be no tax implication at the time of switching provided the conditions under Section 10(10D) of the Income Tax Act 1961 are satisfied.
No, in case of the policyholder's death, the money that his/her nominee receives will not be taxed.
The premium threshold of Rs.2.5 lakhs should be inclusive of all premiums for ULIPs including top up premium, add on premium, etc. purchased after 1 Feb 2021.
Yes, subject to satisfaction of other conditions in section 10(10D) of the Income Tax Act 1961, including the condition of sum assured being at least 10 times the annualized premium.
Yes. The same provisions would be applicable for NRI customer for such high value ULIPs. Earlier TDS was applicable at minimum 30% plus surcharge and cess basis the respective slab rate of income. Basis the amendments TDS would be applicable under Section 195 as per applicable rates (10%/15%/20% plus surcharge & cess) depending on the nature of capital assets (Refer point 29 below). Income from such policy will be taxed as a capital gain. Double Tax Avoidance Agreement (DTAA) benefit if available can be obtained by the policyholder subject to the necessary documentation.
Yes, since ULIPs have been defined as life insurance policy, maturity proceeds for high value ULIPs will be subject to TDS @ 5% on net basis for payments to residents under section 194DA and at applicable rates for payments to non-residents under section 195.
Yes, since the premium payable in year 1 of the policy exceeds Rs2,50,000, the policy shall not qualify for exemption under section 10(10D) of Income Tax Act 1961.
Tax benefits as per prevailing Income tax laws shall apply. Please check with your tax consultant for eligibility.
**Past performance is not indicative of future performance