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The first ULIP was launched in India in 1971 by Unit Trust of India (UTI).

[1] With the Government of India opening up the insurance sector to foreign investors in 2001[2] and the subsequent issue of major guidelines for ULIPs by the Insurance Regulatory and Development Authority (IRDA) in 2005,[3] several insurance companies forayed into the ULIP business leading to an over abundance of ULIP schemes being launched to serve the investment needs of those looking to invest in an investment cum insurance product.

Working Principle[edit]
A ULIP is basically a combination of insurance as well as investment. A part of the premium paid is utilized to provide insurance cover to the policy holder while the remaining portion is invested in various equity and debt schemes. The money collected by the insurance provider is utilized to form a pool of fund that is used to invest in various markets instruments (debt and equity) in varying proportions just the way it is done for mutual funds. Policy holders have the option of selecting the type of funds (debt or equity) or a mix of both based on their investment need and appetite. Just the way it is for mutual funds, ULIP policy holders are also allotted units and each unit has a net asset value (NAV) that is declared on a daily basis. The NAV is the value based on which the net rate of returns on ULIPs are determined. The NAV varies from one ULIP to another based on market conditions and the funds performance.

Features[edit]
ULIP policy holders can make use of features such as top-up facilities, switching between various funds during the tenure of the policy, reduce or increase the level of protection, options to surrender, additional riders to enhance coverage and returns as well as tax benefits.

Types[edit]
There are a variety of ULIP plans to choose from based on the investment objectives of the investor, his risk appetite as well as the investment horizon. Some ULIPs play it safe by allocating a larger portion of the invested capital in debt instruments while others purely invest in equity. Again, all this is totally based on the type of ULIP chosen for investment and the investor preference and risk appetite.

Charges[edit]
Unlike traditional insurance policies, ULIP schemes have a list of applicable charges that are deducted from the payable premium.[4] The notable ones include policy administration charges, premium allocation charges, fund switching charges, mortality charges, and a policy surrender or withdrawal charge.[5] Some Insurer also charge "Guarantee Charge" as a percentage of Fund Value for built in minimum guarantee under the policy.

Risks[edit]
Since ULIP returns are directly linked to market performance and the investment risk in investment portfolio is borne entirely by the policy holder, one needs to thoroughly understand the risks involved and ones own risk absorption capacity before deciding to invest in ULIPs.

traditional plans or conventional plans are the oldest types of insurance plans available. These plans cater to customers with a low risk appetite. Hence investment returns are not very high with a major part of the investible funds being diverted to debt instruments. They usually invest in low risk return options and offer guaranteed maturity proceeds along with declared bonuses. These plans do not allow you to choose investment avenues. Your funds are invested as per the strategy and discretion of the company. Your premiums are invested in a common 'with profits' fund and therefore you cannot track your individual portfolio.
Introduction In Unit Linked Insurance Plans, the investments made are subject to risks associated with the capital markets. This investment risk in investment portfolio is borne by the policy holder. Thus, you should make your investment choice after considering your risk appetite and needs. Another factor that you need to consider is your future need for funds. HDFC Standard Life offers you a variety of unit-linked insurance products to suit your goals - be it for your retirement planning, for your health, for your child's education and marriage or for investment purposes. Which Investor Class Are They Most Suited For?

Those who wish to closely track their investments: Unit linked plans allow policy takers to closely monitor their portfolios. They also offer the flexibility to switch your capital between funds with varying risk-return profiles. Individuals with a medium to long term investment horizon: Unit linked plans are ideal for individuals who are ready to stay invested for relatively long periods of time. Those with varying risk profiles: Across the seven funds offered, the equity component varies from zero to a maximum of 100 per cent. Thus there is a choice of funds available to all types of investors - from risk-averse investor to those investors who have strong risk appetite. Investors across all life stages: This plan category offers a variety of plans which can be opted for depending upon the life stage you are in and your needs and financial liabilities at that point in time. How Is It Structured? In a Unit Linked Plan, the premiums you pay are invested in the funds chosen by you after deducting allocation charges and charges including those for managing funds, policy administration and for providing insurance cover are deducted from the funds by cancelling certain units. The value of each unit of a fund is determined by dividing the total value of the fund's investments by the total number of units. Advantages Of A Unit Linked Plan?

Market linked returns: Unit linked plans give you an opportunity to earn market-linked returns as part of the premiums are invested in market linked funds which invest in different market instruments including debt instruments and equity in varying proportions.

Life protection, Investment and Savings: Unit linked plans offer the twin benefits of life insurance and savings at market-linked returns. Thus, you have the opportunity to invest your money to earn higher returns, while taking care of your protection needs. Investing in unit linked plans helps to inculcate a regular habit of saving and investing, which is important for building wealth over the long term. Flexibility: Unit Linked Plans offer you a wide range of flexible options such as
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The option to switch between investment funds to match your changing needs. The facility to partially withdraw from your fund, subject to charges and conditions. Single premium additions to enable the policy holder to invest additional sums of money (over and above the regular premium) as and when desired, subject to conditions.

Servicing A Unit Linked Plan


Single Premium: The policy holder is required to pay the entire premium amount as a lump sum at the beginning of the policy term. Regular Premium Payment (annually, semi-annually or monthly): The policy holder has to pay the pre-determined premium amount periodically i.e. annually, semi annually or monthly, depending upon the premium payment term opted for. Number of Premium Paying Years: This depends on the term of the policy that you have chosen. In most cases, the policy term and the number of premium paying years (in case of regular premiums) are the same. However, some policies give the insured the option of choosing the number of premium paying years. Charges The following charges are deducted from your policy towards the cost of benefits and administration services provided by HDFC Standard Life Insurance -

Administration charges: A fee is charged for administration of your policy every month. Administration charges are deducted by cancelling units proportionately from each of the funds you have chosen. Fund management charges: These charges are towards meeting expenses related to managing the fund. This is charged as a percentage of the fund's value and is deducted before arriving at the net asset value of the fund. Switch charges: You can switch between the funds available to suit your changing needs and goals. In a policy year, a fixed number of such switches are available free of cost. Subsequent to this, each switch would attract a certain charge. These charges are deducted by cancelling units proportionately from each of the funds you have chosen. Surrender charges: These charges are levied for premature encashment of units. They are charged as a percentage of the fund value and depend on the policy year in which the policy has been surrendered. Mortality Charges: Depending upon the age, and the amount of cover, these charges are levied towards providing a death cover to the insured. Premium Allocation Charge: This charge is deducted as a fixed percentage of the premium received, and is usually charged at a higher rate in the initial years of a policy. This charge varies depending upon whether the policy is a single premium or regular premium policy, the size of the premium, premium frequency and payment mode. Partial Withdrawal Charges: Lump sum withdrawals are allowed from the fund after the lapse of three years of the policy term and subject to pre-specified conditions. However, such withdrawals attract charges, as mentioned in the respective policy brochures. Switching Between Funds

HDFC Standard Life Insurance offers you the flexibility to switch between funds available under a unit linked plan. You may wish to switch between equity and debt funds, in times when there is market volatility or interest rate fluctuations. At times, changes in your financial standing, liabilities or risk profile may also require that you change your investments accordingly. Making Withdrawals You may also make partial withdrawals from your funds after a certain specified period, subject to a partial withdrawal charge. The withdrawal amount should be at least the minimum prescribed withdrawal amount and the fund must not fall below the minimum fund value after the withdrawal. You can make a full withdrawal of your policy before its maturity date. However, surrender charges will be applicable in this case. ULIPs from HDFC Life Having known the various advantages that ULIP offers, it is advisable to choose the right plan depending on your age group and the corresponding goals at various life stages. HDFC Life offers different ULIPs which are just right for you and can help you meet your specific financial objectives.

ULIPs for Children:


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HDFC SL YoungStar Super II

HDFC SL YoungStar Super Premium

ULIPs for Savings & Investment:


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HDFC SL ProGrowth Super II

HDFC SL ProGrowth Flexi

HDFC Life ProGrowth Plus

HDFC Life Smart Woman Plan

HDFC SL ProGrowth Maximiser

HDFC Life Invest Wise Plan

HDFC SL Crest

Group ULIPs:
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Group Unit Linked Plan Gratuity

Group Unit Linked Plan Leave Encashment

Woman ULIPs:
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HDFC Life Smart Woman Plan

Comparison Between Unit Linked Insurance Plans And Conventional Plans Comparison between Unit Linked Plans and Conventional Plans

Unit Linked Insurance Conventional plans Plans Type Description Unit Linked Insurance Conventional Plans are Plans offered by insurance traditional insurance plans. companies allow policy They usually invest in low holders to direct part of risk return options and offer their premiums into guaranteed maturity different types of funds proceeds along with declared (equity, debt, money bonuses. market, hybrid etc.) Here the risk of investment is borne by the policyholder.

Key Features Flexibility of investment:

Unit Linked Plans give These plans do not allow you you flexibility to invest as to choose investment per your risk profile, avenues. Your funds are financial commitments invested as per the strategy and convenience. You can and discretion of the choose to invest either in company. equity, or in debt or in hybrid fund and even change your investment strategy. Transparency: Most Unit Linked Plans Your premiums are invested allow you to track your in a common 'with profits' portfolio. They also fund and therefore you regularly intimate cannot track your individual regarding the percentage portfolio. of the premium that is

invested along with the charges levied. You are also kept informed about the value and number of fund units that you hold. At the time of maturity At the time of maturity you Maturity you redeem the units get the sum assured plus benefits collected at the then bonuses, if applicable in the payout: prevailing unit prices. plan. Some plans also offer you loyalty or additional units annually or at the time of maturity. Unit Linked Plans allow Conventional plans do not Partial you to make withdrawals allow you to withdraw part withdrawal: from your fund, provided of your fund. Instead, some the fund does not fall policies offer you the facility below the minimum fund to take a loan against your value and subject to other investment. conditions. Available. You can Not available since the the Switching change your investment investment decision is taken options: fund decision by by the insurance company. switching between the funds as being offered by the policy. Unit Linked Plans specify These plans do not specify Charges the charges. under various the charges involved. structure: heads. Available. The single The top-up facility is not Single premium Top- premium top-up facility available. allows you to invest an up extra amount over and above your regular premiums in your unit linked plan. Benefit Unit Linked Plans Conventional plans offer Snapshot give you flexibility of fixed premiums linked to
investment

the sum assured.

They allow you to track your portfolio. Unit Linked Plans offer the benefit of a single premium top up which allows you to invest ad hoc additional amounts

The maturity benefits for these plans include the sum assured plus bonuses, if applicable

Unit Linked Plans allow partial withdrawals, subject to conditions and switching between funds by paying some charges, if necessary. Unit Linked Plans give you the option of a premium vacation.

Comparison Between Unit Linked Insurance Plans And Mutual Funds Comparison of Unit Linked Insurance Plans and Mutual Funds

Unit Linked Insurance Plans

Mutual funds

Type A mutual fund pools the Description Unit Linked Plans refer to Unit Linked Insurance Plans money from investors and offered by insurance uses it to invest in various companies. These plans allow securities according to a preinvestors to direct part of their specified investment premiums into different types objective. of funds (equity, debt, money market, hybrid etc.) Key Features Objective: Unit Linked Plans are long Mutual funds are ideal term plans offering you a dual investment tool for the short benefit of insurance and to medium term. investment. All Unit Linked Plans offer Only investments in tax Tax Benefit: tax benefits under section saving funds are eligible for 80C. section 80C benefits. Switching Unit Linked Plans allow you No switching option is to switch your investment available. If you are not options: between the funds linked to satisfied with the the plan. This enables you to performance of the fund you change the riskreturn. can exit completely from the same by paying exit charges, if applicable. There are no additional Additional Some of the Unit Linked Benefits: Plans give you an additional benefits issued by mutual benefit or loyalty benefit by funds. issuing extra fund units. You can easily sell mutual Liquidity: Unit Linked Plans have limited liquidity. One needs to fund units (except for ELSS stay invested for a minimum and funds that have a period of time as specified in minimum lock-in period)

the policy before redeeming the units. Charges in a unit linked plan Mutual fund charges include Charges structure: include mortality charges for an entry load, the annual the life insurance provided. In fund management charge and addition, premium allocation an exit load, if applicable. charge, fund management charge and administration charges are applicable. Benefit Dual benefit of Investment tool suitable Snapshot: investment and insurance for short to medium

Suitable for the long term Option to switch between the funds is permitted. Offers tax benefits

term.

Easy exit possible. Tax benefit available only on tax saving funds

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