Ulip & Endowment Archives - Deeva Ventures Pvt Ltd

IRDAI Issues New Guidelines: ULIPs Cannot Be Marketed as Investment Products.

The Insurance Regulatory and Development Authority of India (IRDAI) has issued a new master circular that significantly changes how Unit Linked Insurance Plans (ULIPs) can be marketed. As of June 19, ULIPs can no longer be promoted as “Investment products”. This directive addresses concerns about the misrepresentation and mis-selling of these plans.

What Are ULIPs?

ULIPs are insurance products that combine life insurance coverage with investment opportunities in equities and bonds. Policyholders pay regular premiums, part of which covers their insurance, while the remainder is invested. These investments can be in equities, bonds, or a mix of both, offering a blend of insurance and investment.

Key Features of ULIPs

1. Dual Benefit: Provides both life insurance cover and investment options.

2. Premium Allocation: A portion of the premium goes towards insurance, and the rest is invested.

3. Lock-In Period: ULIPs have a mandatory lock-in period of five years. During this period, withdrawals are not allowed.

4. Flexibility: Policyholders can choose the investment mix based on their risk appetite.

Why the Change?

Earlier this year, there were reports of insurers mis-selling ULIPs by advertising them as purely investment products. This led to confusion among consumers, with many believing that ULIPs were similar to mutual funds or other direct investment products. Additionally, insurers were promoting new ULIPs as New Fund Offers (NFOs), further blurring the lines between insurance and investment products.

The Securities and Exchange Board of India (SEBI) raised concerns about this misrepresentation, prompting the IRDAI to step in with stricter guidelines.

New Advertising Guidelines

According to the latest circular from IRDAI, the following rules now apply to the marketing of ULIPs:

1. No Promotion as Investment Products: ULIPs must not be advertised or marketed as investments.

2. Risk Disclosure: All advertisements must disclose the associated risk factors of linked insurance products.

3. No Guarantees: Ads must state that bonuses or past performance should not be seen as guarantees of future returns.

4. Compliance with Standards: Advertisements for all linked and annuity products with variable payouts must comply with the standards set by the Advertising Standards Council of India.

Implications for Policyholders

For existing and potential policyholders, these changes mean a clearer understanding of what they are purchasing. ULIPs should be viewed primarily as insurance products with an investment component, not as standalone investment products. This helps ensure that consumers make informed decisions based on accurate information.

Conclusion

The IRDAI’s new guidelines are a significant step towards protecting consumers and ensuring transparency in the insurance market. By clarifying the nature of ULIPs and enforcing stricter advertising standards, the IRDAI aims to prevent mis-selling and enhance consumer trust in insurance products.

As always, Policyholders must read the fine print, understand the product features, and assess their financial goals and risk appetite before purchasing any financial product.

What Makes ULIP A Flexible Investment Option

It’s better to bend than to break, this proverb correctly be used to define flexibility. Flexibility refers to adjusting to the changes and the challenges that life throws at you.
Being flexible helps you to tackle and adapt to the changing environment quickly. This ensures that you are ready all the time and can quickly cover lost ground. Flexibility in ULIPs makes them one of the most versatile investments possible.
Flexibility is a vital trait to possess, be it life or investment.
What is Meant by Flexibility in Investment?
You are not the only one that should possess the trait of flexibility. Your investment must also be flexible. The more flexible an investment is, the more it will benefit you.
The world is becoming more and more dynamic, and to cope with such an environment you need an investment that is not rigid and can allow you to customize.
An investment must cover the following things to be called ‘flexible’
1. Freedom to Switch Between Assets
An investment should give you an opportunity to switch between the assets you invest in. At the start of an investment, you are given options to choose from many asset classes, these can be equity, fixed instruments, real estate, etc.
It is natural that in a long-term investment, you would not want to stay invested in one fund throughout. As you move on with your goals, you might need to shift your funds as well. A flexible investment will help you do so.
2. Invest Anytime
A flexible investment gives you the option to invest as you like and not only a single time. Different people have different professions and have different payment capabilities.
For example, if you are a salaried individual, you would prefer to pay regularly. On the other hand, if you have a seasonal business, you would like to pay upfront for the whole policy.
A flexible investment considers these and gives you options to invest at your convenience.
3. Withdraw Money when Needed
Withdrawal facilities go a long way in determining the flexibility of an investment, especially when the investment is for the long term. A flexible investment allows premature withdrawal.
The ability to withdraw from your funds is necessary to meet emergencies as they do not come with notice and can occur anytime. To cater to such obstacles, you can need funds.
Withdrawing money from your fund will make sure that you do not have to borrow or take a loan from the bank.
4. Term of Investment
The term of an investment describes the period for which you will be invested in a particular instrument or option. A flexible investment allows you to choose the term you want, instead of having a fixed tenure.
A different individual can possess different goals. Every goal requires a different time. Thus, investment tenure should be flexible so that you can align your term with the wealth goal you want to achieve.
Investment Flexibility in Unit Linked Insurance Plans
Unit Linked Insurance Plans or simply ULIPs are one of the most flexible investment plans in India. This is one investment that you can use for almost all important financial goals in your life. Whether you want to invest safely to build a specific corpus in five years or want to have a great retirement in 30, ULIP can do it all.
The flexibility concept in Unit Linked Insurance Plans looks something like the following:
a) Choose the Asset Class
b) Fund allocation
c) In terms of choosing the premium payment term
d) The benefits to be received
e) Systematic Withdrawal
1. In Terms of Choosing the Funds
Most of the investments invest in one or two assets in which you have no freedom to choose. ULIP plans, on the other hand, offer you multiple asset classes that you can invest in. Some of the options offered include:
– Equity
– Debt
– Balanced Funds
– Liquid Funds
You have the full freedom to choose where to invest in.
2. Fund Allocation
In ULIPs it is not necessary that you have to select one fund to invest in. You are given the flexibility to invest in more than one fund at a time. Yes, ULIP allows you to allocate your money to different funds.
You can choose to allocate different proportions of your premium to different funds. For example, 50% to equity, 50% to debt.
3. In Terms of Choosing the Premium Payment Term
The premium payment term or the PPT is the duration for which you are required to pay your premiums. ULIPs provide you with multiple ways in which you can pay your premium.
You can choose one of the following ways
– Regular Payment
– Monthly
– Quarterly
– Yearly
– Limited Payment
– Single premium Payment
4. Benefits to be Received
There are two major benefits that are present in the ULIP plan. These are
– Maturity Benefit
– Death Benefit
The majority of the investments present in the market provide these benefits in a lump sum, especially the death benefit.
But with ULIP, you can receive your benefits in lump sum as well as in instalments.
5. Systematic Withdrawal
You can partially withdraw your funds before your policy matures in ULIP. However, you can make use of partial withdrawal only when the lock-in period of the policy is completed and you have attained the age of 18.
Flexibility of Invest 4G
Invest 4G, a ULIP offered by the trusted name of Canara HSBC Oriental Bank of Commerce Life Insurance offers all these flexibilities to you and much more.
Invest 4G | Buy ULIP Online
Here we look at other benefits it offers:
1. Transparency
ULIP is the most transparent investment option currently in the market. It shows you how your premium is allocated, in which assets it is allotted and in what proportion.
It also shows you the full list of charges that are deducted along with the amount as well.
2. Bonus Additions
In Invest 4G, you are rewarded for staying invested in the policy in the form of bonus additions.
It offers the following bonuses
a. Loyalty Additions
b. Wealth Boosters
These additions occur after 5 years of commencement of the policy. A % of your fund value is added to your existing fund as a bonus.
3. Tax Benefits
ULIP offers you tax benefits as well. Invest 4G faces no additional tax on switching of the funds. Thus, you incur zero tax liability for switching from equity to debt or debt to equity. Other investments do incur taxes on the same.
Other tax benefits are present in ULIP too, these are
a. You can avail of a deduction of up to Rs 1.5 lakh towards the premium that you pay for your policy.
b. It is also eligible for exemption u/s 10(10)D
4. Wealth Creation
ULIP is perfect for investors which have a long-term horizon in mind. With ULIP, you can create a huge corpus for yourselves in the long run.
Invest 4G provides you with 4 portfolio management strategies that help you minimize the risk and maximize the returns of ULIPs.
You have the flexibility to choose any of the 4 strategies.
a. Systematic Transfer Option (STO)
b. Return Protector Option (RPO)
c. Auto Funds Rebalancing (AFR)
d. Switch Option (SSO)
These strategies work in a pre-defined manner and help in the creation of wealth. These make sure the policy works in the way you want, without too much involvement.
5. Goal Protection Feature
This is another defining feature of the Invest 4G ULIP. If you opt for this feature then-
a. Your policy will continue to run even after your death
b. The remaining premium will be waived off and are taken care of by the company
c. At the end of the policy, your family will receive the maturity benefit
This feature ensures that the ultimate goal gets fulfilled and the family does not have to worry about the premiums.
Flexibility in ULIP plans can make your money work harder if invested right. All you need is to find a way to keep your money invested for another few years. Another aspect of ULIP flexibility you should aim to use is portfolio management strategies. These strategies are extremely helpful in managing your investment risk when you invest in equity funds.
So, why not take advantage of these features to grow your money higher.
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised to exercise their caution and not to rely on the contents of the article as conclusive in nature. Readers should research further or consult an expert in this regard.

Source: CanaraHsbcLife

Endowment vs ULIP Plan

ULIP or Unit Linked Insurance Plan is a financial instrument that is a combination of insurance and investment. Under a ULIP, the premium paid is divided into two parts.

One part is to provide for your life insurance cover while the other part is put in investment products such as bonds, stocks, or mutual funds.

The life insurance cover depends on the sum insured, the higher the sum insured, the more the premium.

The investment fund comprises units in equities, debts, or hybrid funds. The value of such funds/assets depends on the prevailing market conditions.

The sum insured is usually the original sum insured or net asset value of all units (whichever is higher) or both.

An endowment plan is a traditional life insurance plan which guarantees a lump sum amount/payout post the survival period or on the death of the policyholder.

Apart from providing life cover, an endowment plan helps in creating savings over the investment tenure.

The savings amount is released on the maturity of the policy or to the mentioned beneficiary/nominee.

There are two types of endowment plans, one with profit and the other without profit.

Also, there are multiple variants of endowment plans which are a mixture of life cover, savings, retirement, pension, education, money-back, etc.

Which is Better? ULIP or Endowment Plan?

Criteria	ENDOWMENT PLAN	ULIPS
Type	Insurance cum savings	Insurance cum investment
Lock-in	Depends on the plan and premium payment term, usually 2-3 years	5 years
Investment Decision	Does not have investment decision power for policyholder	Comes with investment options which can be chosen by policyholder
Transparency	Lacks transparency as there is no investment portfolio	Can easily track your entire investment portfolio
Maturity	The policyholder will receive sum assured plus bonuses, if any	Redemption of units at the prevailing unit prices
Fund Switching	You cannot make any changes to the policy	You have the option to make fund switches to the entire investment policy
Withdrawal	There are restrictions and penalties upon withdrawal	You can withdraw from the policy post the mandatory 5 year lock-in period
Returns	Guaranteed fixed amount	Depends on market performance

Why Invest in an Endowment Policy?

Guaranteed Returns

Endowment policies offer guaranteed returns upon maturity/survival/death. The returns offered are independent of market performance and help you create savings.

Bonus

In a participating policy, the insurance company distributes a part of its profit in the form of bonuses to the policyholder. Simple Reversionary Bonus and Terminal Bonus are added to the policy over the investment tenure.

Long Term Financial Goals

An endowment plan offers high returns when invested for the long term. This will help you achieve your long-term goals effectively.

Why Invest in ULIP Plan?

Flexibility: Under a ULIP, you have the flexibility to:
- Switch the investment funds
- Make partial withdrawals
- Make lump sum additions in the form of top-ups

High Returns: Since ULIPs offer different types of investment funds, some of these investment funds are equity-based which offer high returns over the investment period.

Rider Options: You can enhance your ULIP scheme with rider add-ons such as accidental death rider, term rider, and critical illness rider by paying an additional premium.

Transparency: ULIPs offer complete transparency. You can keep track of your investment portfolio. The policy provider keeps you informed of all the charges levied, the number of units issued, etc.

Financial Security: Over the entire investment tenure, ULIPs allow an investor to accumulate a huge corpus which can be utilized for retirement planning, child education, marriage, etc.

Funds Switching: You can easily switch between the investment funds and revise your entire investment portfolio if needed.

About Us

Deeva Ventures, originally established in 2008 as Deeva Agencies, is a top-notch financial company offering a wide range of financial products and delivering tailor made financial services. At Deeva, we believe developing a plan with a professional advisor is one of the most powerful steps you can take in life. Read More…

Useful Links

Quick Links

Quick Contact

Registered Office

AMFI – Registered Mutual Fund Distributor : 109820 | EUIN: E176669 | CIN No: U70102UP2015PTC073452

Call

Category Archives: Ulip & Endowment