The purpose of insurance as deciphered over years has not just been to hedge against risk of untimely death. Insurance plans have been bought for reasons other than protection such as savings for long term financial goals and saving taxes. Unit Linked Insurance Plans (ULIPs) have emerged from this trend and are a category of goal-based financial solutions that offer dual benefits of protection and Investment with various flexibilities to the customer. A Unit linked Insurance Plan is linked to the markets and offers the flexibility to invest the units in equity or debt funds depending upon the customer’s risk appetite. The investment risk is borne by the policy holder.In this respect, a ULIPacts somewhat like a mutual fund with added benefit of life cover and flexibilities
New-age ULIPs: Capped Charges & Better Returns
In the past, ULIPs suffered from certain limitations like high charges, sale keeping in mind a short term horizon, and lack of active involvement by the customer. In 2010, the IRDA issued new guidelines for ULIPs in order to improve the returns for investors by reducing charges and to ensure that the new product is sold and bought as a long-term protection and savings tool. Companies like ours have gone a step ahead by launching a ULIP online which offers lowest charge structure that makes it competitive against not only other ULIP products but also Mutual funds/ELSS schemes.
ULIPs are now more Competitive: Offer Maximum Flexibility
ULIPs are flexible and dynamic by nature. They allow ease of change and offer a high degree of customization as opposed to most other financial instruments that once purchased cannot be modified. Flexible options include
ULIPs Vs MFs: What is the difference?
You would ask how ULIPs are different from mutual funds in this regard. Even mutual funds offer various combinations like hybrid, balanced schemes etc that allow an individual to select a plan according to his need and risk profile. The difference lays in the flexibility that ULIPs offer to the individual. Let us see how it works.
Each mutual fund follows an investment strategy and does not deviate from it. While a particular mutual fund may invest majorly in equities to increase the returns, other mutual fund might invest majorly in debt to reduce the risk. A ULIP offers multiple such fund options to invest, in a single premium policy. Through a ULIP, one can invest in multiple fund options at a single time and also shift from one fund to another without any entry or exit penalties. Customer can choose a combination of these funds and also switch between funds in order to create his/her own investment strategy. So if in future the customer wants to reduce or increase the risk on his portfolio, he/she can shift fund value from equity based funds to debt based funds or vice versa.
This flexible attribute of ULIPs is extremely critical. The nature of product being such wherein there is risk component embedded, it is important to keep your investments protected from the vagaries of a volatile markets. Flexibility to switch funds allows the informed investor to benefit from movements in the stock market and movement of interest rates in the debt market.
Mr. Tripathy joined HDFC Life in 2004 and has been responsible for Marketing Strategy, Brand Planning, Advertising, Communication & Media, Customer Insights, New Product Development, Product Life Cycle Management, Online and Digital Strategy, E-Commerce, Customer Analytics, & Corporate communication. He started his career with GCMMF Ltd. in 1992. Since then he has worked with various reputed organizations like Frito-Lay (PepsiCo), Mattel and Reliance Infocomm before moving on to his current role at HDFC Life.View Complete Profile
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