To any earning Indian, Insurance is a prime necessity and a milestone in financial planning. Most of the investors went in for savings coupled with life cover, with a simplistic argument that Life Insurance was not to be considered as a vehicle to earn a return on investments, but to protect the financial future of the family in the absence of the insured. It is quite natural for you to fall for it, but what if there is a vehicle that would offer life cover in addition to investment benefits? In fact with just this premise Unit Linked Insurance Plan or ULIPs as popularly known, was devised, where your investment was directed to vehicles that provided market linked returns. From a modest beginning with a reputation of being a costly investment, it has now evolved into an attractive investment option. Due to a nudge from the IRDAI, ULIPs have been revamped to match the current trends to emerge as New Age ULIPs.
What is New Age ULIP?
The re-design of ULIP did not necessarily translate into a paradigm shift in the investment climate, mainly due to lack of awareness among the budding investors. It can be defined as an instrument that combines savings with life cover and investment benefits with the allocation of funds in market-linked asset classes. It is a smart fusion of insurance and investment scheme within a single plan helping you build wealth over the long term, and the portfolio is as actively managed like a mutual fund to reach this goal.
How does a new age ULIP operate?
Being a combination product, the money you pay for New Age ULIPs is broken into two, of which the larger part goes into an investment for growing your wealth, while the minor part is earmarked for life insurance cover. All New Age ULIPs offer 2 to 8 fund options for investment at a nominal asset management charges.
Key features of N-ULIP:
The prime features of New Age ULIPs make it attractive to the discerning investor who makes your decision making all the more simple. The primary features that stand out are:
1: Freedom to choose: You are offered to choose amongst the 2 to 8 fund options comprising of large-cap, mid-cap, multi-cap, balanced, debt, etc. helping you to build a diverse portfolio. Thus, you are practically allowed to direct fund allocation.
2: Switch Facility: You are free to switch your investments from one fund to another according to your choice. Most insurers permit four free switches per policy in a year, after which there is a nominal charge. This helps you to maximize your returns switching from a poorly performing fund to a more profitable one.
3: Flexibility: New Age ULIPs offer you the option to alter the tenure of your policy and also change the sum assured as per your choice, after completion of a lock-in period of 5 years.
4: Withdrawal facility: You are offered the facility to redeem funds in case of a financial crisis partially. In some cases, the withdrawal amount can be as high as 95%.
5: Flexible settlement: There is a facility where you can decide to receive your maturity benefit in installments for up to 5 years in predetermined amounts.
6: Reasonable Charges: New Age ULIPs come with a list of charges that are applied, and it evens out over some time in the long run. The applicable charges are:
• Administration Charges: A fixed value percentage of the premium is recovered as charges monthly.
• Premium Allocation Charges: A percentage of premiums is deducted at the time of payment.
• Fund Management Charges: The deduction of this charge is based on a percentage of fund value.
7: Savings on Tax: The tax exemptions on New Age ULIPs are one of the major attractions of this plan. At the time of investment, you enjoy exemption up to Rs.1.5 lakhs under Section 80C of the IT Act 1961. Earnings are exempted under Section 10(10D) in cases where the assured sum is ten times more than the premium. This also makes it free from Long Term Capital Gains. You are also free to move funds between cash, debt and equity funds without attracting any additional tax liability.
8: Free Insurance Cover: The factor that determines Mortality Charge is your risk appetite and age and is termed as the insurance component of your premium. In the New Age ULIPs, some insurers return this charge on maturity, practically extending free insurance to you.
Best New Age ULIPs to invest in FY 2018-19:
Now you are in a position to appreciate that this investment option is emerging as one of the best investment avenues in the market with triple benefits of insurance, investment and tax savings. It will not be out of place to shortlist a few plans that have earned a place in the market to enable you to keep them in your projected plans Based on returns and investor sentiments, some of the schemes under New Age ULIPs is worth looking at for investment in the Financial Year 2018-19 are:
1: HDFC Standard Life – Balanced Life Super II: Among the many plans of this insurer who offer a variety of funds to choose from, this plan has been a popular star performer. In the year 2017, it gave a return of 21.73% and looked promising in the future.
2: Future Generali Life- Future Dynamic Growth Fund: Amongst the many New Age ULIPs offered by this company for achieving long term goals, this plan returned 21.22% in 2017.
3: Bajaj Allianz Life – Asset Allocation Pension Fund: This fund gave an absolute return of 20.04% in the year 2017. Bajaj Allianz offers to return the mortality charges on maturity, practically making insurance free for you.
4: Kotak Mahindra Life- Balanced Fund: A popular investment destination, you were given a return of 20.41% in 2017. Along with other New Age ULIPs on offer, this fund has by its good return in a short while, made a place for itself.
5: Canara HSBC Life Insurance- Balanced Fund: A very sought after plan on offer by Canara HSBC, it returned 21.75% in 2017. This insurer offers an array of equally attractive plans in this category which is quite a lure for investors for their consistent performance.
Bottom Line:
While admitting that the New Age ULIPs are truly an investment avenue apt for the present times, it is to be remembered that it is for you if you are financially planning for the long term only. It is especially attractive not only for the superior returns but also for the unique features ingrained in the plan making it versatile. The success of any investment requires strategic planning, and New Age ULIPS does offer ample scope for you to indulge in it.
