2024-05-14 5 Min read
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Unit Linked Insurance Plans, better known as ULIPs, are a cost-effective investment avenue. If you are seeking a policy that offers the dual benefits of investment and insurance, then ULIP plans can be the right way forward. Unit Linked Insurance Plans (ULIPs) function as market-linked financial instruments that provide you the flexibility to allocate your premiums among various investment funds, such as equity, debt, or balanced funds. The choice of funds can be based on your risk appetite and financial objectives.
Understanding ULIPs
ULIPs are a type of life insurance product. However, along with protection, they offer the unique advantage of market-linked returns. Let’s understand how ULIPs work, as only then would you be able to utilise them to acquire wealth.
Depending on your coverage needs, you choose a ULIP for a specific tenure. During this tenure, you pay a premium to the insurer. A fraction of the premium is allocated to life insurance coverage, with the remainder invested in a selection of funds (such as equity, debt, or balance) according to your preference. If you, the insured individual, die during the term of the policy, your appointed nominee receives the death benefit. In case you outlive the policy tenure, you receive the maturity benefit, which is the accumulated fund value.
One of the key reasons for the popularity of ULIPs is their flexibility. A ULIP insurance plan allows you, the investor, to switch between funds, potentially garnering market-linked returns over the long term. However, it’s essential to thoroughly understand the associated charges, risks, and investment objectives before you consider ULIP insurance as an investment option.
Depending on your coverage needs, you choose a ULIP for a specific tenure. During this tenure, you pay a premium to the insurer. A fraction of the premium is allocated to life insurance coverage, with the remainder invested in a selection of funds (such as equity, debt, or balance) according to your preference. If you, the insured individual, die during the term of the policy, your appointed nominee receives the death benefit. In case you outlive the policy tenure, you receive the maturity benefit, which is the accumulated fund value.
One of the key reasons for the popularity of ULIPs is their flexibility. A ULIP insurance plan allows you, the investor, to switch between funds, potentially garnering market-linked returns over the long term. However, it’s essential to thoroughly understand the associated charges, risks, and investment objectives before you consider ULIP insurance as an investment option.
Choosing the best ULIP policy in India
When it comes to choosing the right investment option, sadly, there is no set answer. Every investment product is a wealth plan that is designed to offer you returns. However, different individuals have different expectations from each product that they choose. What works best for them depends on their financial goals. But when you wish to pick the best ULIP plan in India, you surely need to consider SUD e-Wealth Royale.
SUD e-Wealth Royale is a low-cost ULIP, this is because there are no allocation charges and return charges. It is said to be one of the best unit linked insurance plans, as even with modest contributions, your policy has enough potential to help you build a safe and strong financial future for yourself and your loved ones. Now, let us understand how this policy helps you maximise returns.
You know by now that in a ULIP, in case the insured individual survives the term of the ULIP policy, the maturity benefit is payable. The fund value is calculated on the basis of the current NAV. What makes e-Wealth Royale all the more attractive is that along with the fund value, the plan provides you with a return of charges. Let us take a look:
1.Return of Policy Administration Charges (RoPAC):
Premium Administration Charges (PAC) is a fee charged by the insurer each month for administering the plan. e-Wealth Royale, however, offers an additional feature of RoPAC, making it one of the best ULIP plans. It stands for Return of Policy Administration Charges. Under RoPAC, the total PAC charger is added back to the policy units at the end of the 10th policy year. In case the policy is prematurely discontinued, RoPAC is not offered.
2.Return of Mortality Charges (RoMC)
Mortality charges are another type of charge deducted by the insurance company in return for the coverage provided under the ULIP plans. However, at the end of the policy tenure, the total mortality charges deducted are added back to the policy units by e-Wealth Royale. This is not applicable if the policy is discontinued before maturity.
3.Return of Additional Risk Benefit Charges (RoARBC)
Policyholders with the Platinum Plus Plan are eligible for RoARBC benefits. It stands for Return of Additional Risk Benefit Charges. Under RoARBC, the ULIP policyholder receives all the additional risk-benefit charges deducted so far at the end of the policy term. In case the policy is discontinued for any reason prior to maturity, RoARBC is not applicable.
Apart from the return of charge, the SUD e-Wealth Royale ULIP insurance plan also aids in wealth creation because of the following special additions:
1.Loyalty Additions
Loyalty addition is a reward offered to the policyholders. After the end of the lock-in period of 5 years, the succeeding policy year (6th year onwards) is offered a loyalty addition of 0.10% of the average fund value considering the past 12 months. An extra unit is allocated. Loyalty addition is not offered in case the policy terminates or the ULIP plan tenure ends.
2.Wealth Boosters
Wealth Booster will be added to the fund by way of creation of extra units every 5th policy year starting from the end of 10th policy year. Each Wealth Booster shall be equal to 3% of average fund value of the last 24 months.
SUD e-Wealth Royale is a low-cost ULIP, this is because there are no allocation charges and return charges. It is said to be one of the best unit linked insurance plans, as even with modest contributions, your policy has enough potential to help you build a safe and strong financial future for yourself and your loved ones. Now, let us understand how this policy helps you maximise returns.
You know by now that in a ULIP, in case the insured individual survives the term of the ULIP policy, the maturity benefit is payable. The fund value is calculated on the basis of the current NAV. What makes e-Wealth Royale all the more attractive is that along with the fund value, the plan provides you with a return of charges. Let us take a look:
1.Return of Policy Administration Charges (RoPAC):
Premium Administration Charges (PAC) is a fee charged by the insurer each month for administering the plan. e-Wealth Royale, however, offers an additional feature of RoPAC, making it one of the best ULIP plans. It stands for Return of Policy Administration Charges. Under RoPAC, the total PAC charger is added back to the policy units at the end of the 10th policy year. In case the policy is prematurely discontinued, RoPAC is not offered.
2.Return of Mortality Charges (RoMC)
Mortality charges are another type of charge deducted by the insurance company in return for the coverage provided under the ULIP plans. However, at the end of the policy tenure, the total mortality charges deducted are added back to the policy units by e-Wealth Royale. This is not applicable if the policy is discontinued before maturity.
3.Return of Additional Risk Benefit Charges (RoARBC)
Policyholders with the Platinum Plus Plan are eligible for RoARBC benefits. It stands for Return of Additional Risk Benefit Charges. Under RoARBC, the ULIP policyholder receives all the additional risk-benefit charges deducted so far at the end of the policy term. In case the policy is discontinued for any reason prior to maturity, RoARBC is not applicable.
Apart from the return of charge, the SUD e-Wealth Royale ULIP insurance plan also aids in wealth creation because of the following special additions:
1.Loyalty Additions
Loyalty addition is a reward offered to the policyholders. After the end of the lock-in period of 5 years, the succeeding policy year (6th year onwards) is offered a loyalty addition of 0.10% of the average fund value considering the past 12 months. An extra unit is allocated. Loyalty addition is not offered in case the policy terminates or the ULIP plan tenure ends.
2.Wealth Boosters
Wealth Booster will be added to the fund by way of creation of extra units every 5th policy year starting from the end of 10th policy year. Each Wealth Booster shall be equal to 3% of average fund value of the last 24 months.
Strategies for affordable wealth accumulation
Wealth accumulation is every investor’s dream. When you invest your hard-earned money in a unit linked insurance plan, you wish to acquire enough wealth for a better tomorrow, not just for yourself but also for your loved ones.
1.Choosing the right strategies:
With SUD Life e-Wealth Royale, you have the option to choose from 2 unique investment strategies. This choice has to be made at the time of policy purchase, so make sure to understand both the strategies properly and make the right decision.
● Self-managed investment strategy
As the name says, under the self-managed investment strategy, policyholders are their own managers. As a policyholder, you choose funds to invest in as per your risk appetite and future financial goals. With e-Wealth Royale, you get the option to invest in 8 different types of funds. These are:
1.Blue chip equity fund
2.Balanced plus fund
3.Growth plus fund
4.Income fund
5.Gilt fund
6.Mid-Cap fund
7.Money Market fund
8.Dynamic fund.
● Age-based investment strategy
Risk appetite may differ for different people, especially from different age groups. As you age, usually, the risk appetite also decreases. So, under the age-based investment strategy, your insurer distributes your invested funds as per the risk slab. Funds are divided between two types of funds: gilt fund and blue chip equity fund. As you age, the fund also changes to adjust the risk capacity.
2.Making careful withdrawals
While premature withdrawals can affect your fund value, you can follow a systematic withdrawal approach when in need of some extra cash. Just like your investment strategy, the withdrawal strategy should also be the same to ensure the continuation of returns for longer. After the end of the lock-in period of 5 years, you can begin withdrawing as per your needs. However, keep in mind that with the SUD e-Wealth Royale ULIP insurance plan, only 4 partial withdrawals4 a year are free, after which you are charged INR 100 per partial withdrawal.
3.Making the most of the flexibility in terms
The term PPT in a ULIP plan refers to Premium Paying Terms. PPT and the policy term are two essential terms of the policy administration charges which can be increased subject to the maximum limit permitted under the policy. Here are the rules for increasing/decreasing policy term and PPT:
● The policyholder can increase the policy term in multiple of one year (to the maximum policy term allowed)
● The policyholder can increase the PPT in multiple of one year (to maximum PPT changes allowed)
● A decrease in PPT or policy term is not permitted
● An increase in PPT or policy term can be carried out after all the due premiums are paid.
4.Understand fund switching
Fund switching is a way out of maximising returns or mitigating financial risks. This means you can switch your chosen ULIP fund if you doubt the future returns of the plan as expected or the better performance of some other funds. However, keep in mind that the free fund switching allowed is limited to 12, after which you need to pay fund switching charges per change. After free switches exhaust, you will be charged INR 100 per fund switching.
5.Enjoy tax benefits
Tax benefits are an added perk of ULIP insurance. All the policyholders can enjoy the tax benefits as offered under the Income Tax Act. These are:
● Section 80C
As per the Income Tax Act of 1961, under Section 80C, you can avail a tax deduction of up to INR 1.5 lakhs on the premium paid towards ULIPs.
● Section 10(10D)
The Finance Act 2021 brought certain changes to the ULIP taxation system under Section 10(10D) of the Income Tax Act of 1961:
1.The death benefit remains tax-free
2.For policies purchased before 1st February 2021, the maturity benefit remains tax-free
3.For policies purchased after 1st February 2021, the maturity benefit is taxable if the total premium paid exceeds INR 2.5 lakhs, be it for one ULIP or an aggregate of multiple ULIP premiums
4.If the premium exceeds the INR 2.5 lakh limit, the maturity benefit is taxable at 10%.
1.Choosing the right strategies:
With SUD Life e-Wealth Royale, you have the option to choose from 2 unique investment strategies. This choice has to be made at the time of policy purchase, so make sure to understand both the strategies properly and make the right decision.
● Self-managed investment strategy
As the name says, under the self-managed investment strategy, policyholders are their own managers. As a policyholder, you choose funds to invest in as per your risk appetite and future financial goals. With e-Wealth Royale, you get the option to invest in 8 different types of funds. These are:
1.Blue chip equity fund
2.Balanced plus fund
3.Growth plus fund
4.Income fund
5.Gilt fund
6.Mid-Cap fund
7.Money Market fund
8.Dynamic fund.
● Age-based investment strategy
Risk appetite may differ for different people, especially from different age groups. As you age, usually, the risk appetite also decreases. So, under the age-based investment strategy, your insurer distributes your invested funds as per the risk slab. Funds are divided between two types of funds: gilt fund and blue chip equity fund. As you age, the fund also changes to adjust the risk capacity.
2.Making careful withdrawals
While premature withdrawals can affect your fund value, you can follow a systematic withdrawal approach when in need of some extra cash. Just like your investment strategy, the withdrawal strategy should also be the same to ensure the continuation of returns for longer. After the end of the lock-in period of 5 years, you can begin withdrawing as per your needs. However, keep in mind that with the SUD e-Wealth Royale ULIP insurance plan, only 4 partial withdrawals4 a year are free, after which you are charged INR 100 per partial withdrawal.
3.Making the most of the flexibility in terms
The term PPT in a ULIP plan refers to Premium Paying Terms. PPT and the policy term are two essential terms of the policy administration charges which can be increased subject to the maximum limit permitted under the policy. Here are the rules for increasing/decreasing policy term and PPT:
● The policyholder can increase the policy term in multiple of one year (to the maximum policy term allowed)
● The policyholder can increase the PPT in multiple of one year (to maximum PPT changes allowed)
● A decrease in PPT or policy term is not permitted
● An increase in PPT or policy term can be carried out after all the due premiums are paid.
4.Understand fund switching
Fund switching is a way out of maximising returns or mitigating financial risks. This means you can switch your chosen ULIP fund if you doubt the future returns of the plan as expected or the better performance of some other funds. However, keep in mind that the free fund switching allowed is limited to 12, after which you need to pay fund switching charges per change. After free switches exhaust, you will be charged INR 100 per fund switching.
5.Enjoy tax benefits
Tax benefits are an added perk of ULIP insurance. All the policyholders can enjoy the tax benefits as offered under the Income Tax Act. These are:
● Section 80C
As per the Income Tax Act of 1961, under Section 80C, you can avail a tax deduction of up to INR 1.5 lakhs on the premium paid towards ULIPs.
● Section 10(10D)
The Finance Act 2021 brought certain changes to the ULIP taxation system under Section 10(10D) of the Income Tax Act of 1961:
1.The death benefit remains tax-free
2.For policies purchased before 1st February 2021, the maturity benefit remains tax-free
3.For policies purchased after 1st February 2021, the maturity benefit is taxable if the total premium paid exceeds INR 2.5 lakhs, be it for one ULIP or an aggregate of multiple ULIP premiums
4.If the premium exceeds the INR 2.5 lakh limit, the maturity benefit is taxable at 10%.
Conclusion
SUD e-Wealth Royale is a versatile investment avenue that can address diverse financial objectives, combining capital growth and life insurance coverage. This ULIP policy is an attractive addition to portfolios prioritising both wealth accumulation and protection. The flexibility to choose investment funds aligns with varied financial goals, offering a balanced approach if you are seeking growth and security within a single financial product.
Reference: SUD Life e-Wealth Royale (UIN: 142L082V01)
Reference: SUD Life e-Wealth Royale (UIN: 142L082V01)
Reference
1.https://www.sudlife.in/Products/SUDLife_e-Wealth_Royale_Brochure.pdf
2.https://www.businesstoday.in/magazine/insurance/story/tips-to-invest-in-new-ulips-with-lower-cost-than-mf-charges-143685-2015-02-04
3.https://www.financialexpress.com/money/3-reasons-why-you-should-choose-ulips-for-accumulation-of-wealth-2340434/
2.https://www.businesstoday.in/magazine/insurance/story/tips-to-invest-in-new-ulips-with-lower-cost-than-mf-charges-143685-2015-02-04
3.https://www.financialexpress.com/money/3-reasons-why-you-should-choose-ulips-for-accumulation-of-wealth-2340434/
Disclaimer
1 Policy Administration charges are charged only for first 10 years and will be added back to the fund value at the end of 10th policy year and will continue to form part of the fund value. On maturity, the mortality charges deducted throughout policy term will be added to the fund value. These benefits are not applicable for surrendered or discontinued policies however it is applicable if the policy is Reduced Paid-up or is in the Revival period. Return of mortality charge will be excluding any extra mortality charge & GST/any other applicable tax levied on the mortality charges deducted as per prevailing tax laws.
2 Loyalty Addition will be added to the fund by way of creation of extra units and shall be equal to 0.10% of avg. fund value of last 12 months. The benefit will be added only if all due premiums under the policy are paid up to date and in case of revival, no addition will be made w.r.t past policy anniversary. The benefit also not payable post completion of PPT or surrendered or discontinued policies. Wealth Booster will be added to the fund by creation of extra units and shall be equal to 3% of avg. fund value of last 24 months. The benefit is not applicable for surrendered or discontinued policies.
3 Every additional switch will be charged ` 100/- per switch. This charge will be recovered by cancellation of appropriate number of units. Unused switches cannot be carried forward to future policy year(s).
4 Partial withdrawal are not allowed during the first 5 policy year or in case life assured is minor. It is allowed from 6th policy year or when life assured attains age 18 whichever is later. Partial Withdrawals will not be allowed which would result into termination of policy.
Unit Linked Life Insurance Products are different from the traditional insurance products and are subject to risk factors. The premium paid in Unit Linked Life Insurance policies are subject to investment risks associated with capital markets and the NAVs of the units may go up or down based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions. The policyholder can withdraw the invested amount only after the completion of five plan years. Star Union Dai-ichi Life Insurance Company is the name of the Insurance Company and SUD Life e-Wealth Royale is only the name of the unit linked life insurance contract and does not in any way indicate the quality of the contract, its future prospects or returns. Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document of the insurer. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their prospects and returns.
SUD Life e-Wealth Royale | UIN: 142L082V02 | A Unit–Linked Non-Participating Individual Life Insurance Plan Star Union Dai-ichi Life Insurance Company Limited | IRDAI Regn. No: 142 | CIN: U66010MH2007PLC174472
Registered Office: 11th Floor, Vishwaroop I.T. Park, Plot No. 34, 35 & 38, Sector 30A of IIP, Vashi, Navi Mumbai – 400 703 | Contact No: +91 22 7196 6200 | 1800 266 8833 (Toll Free) | Timing: 9:00 am – 7:00 pm (Mon – Sat)| Email ID: customercare@sudlife.in | Visit: www.sudlife.in | For more details on risk factors, terms and conditions, please refer to the sales brochure carefully, before concluding the sale. |Trade-logo displayed belongs to M/s Bank of India, M/s Union Bank of India and M/s Dai-ichi Life International Holdings LLC and are being used by Star Union Dai-ichi Life Insurance Co. Ltd. under license.
2 Loyalty Addition will be added to the fund by way of creation of extra units and shall be equal to 0.10% of avg. fund value of last 12 months. The benefit will be added only if all due premiums under the policy are paid up to date and in case of revival, no addition will be made w.r.t past policy anniversary. The benefit also not payable post completion of PPT or surrendered or discontinued policies. Wealth Booster will be added to the fund by creation of extra units and shall be equal to 3% of avg. fund value of last 24 months. The benefit is not applicable for surrendered or discontinued policies.
3 Every additional switch will be charged ` 100/- per switch. This charge will be recovered by cancellation of appropriate number of units. Unused switches cannot be carried forward to future policy year(s).
4 Partial withdrawal are not allowed during the first 5 policy year or in case life assured is minor. It is allowed from 6th policy year or when life assured attains age 18 whichever is later. Partial Withdrawals will not be allowed which would result into termination of policy.
Unit Linked Life Insurance Products are different from the traditional insurance products and are subject to risk factors. The premium paid in Unit Linked Life Insurance policies are subject to investment risks associated with capital markets and the NAVs of the units may go up or down based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions. The policyholder can withdraw the invested amount only after the completion of five plan years. Star Union Dai-ichi Life Insurance Company is the name of the Insurance Company and SUD Life e-Wealth Royale is only the name of the unit linked life insurance contract and does not in any way indicate the quality of the contract, its future prospects or returns. Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document of the insurer. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their prospects and returns.
SUD Life e-Wealth Royale | UIN: 142L082V02 | A Unit–Linked Non-Participating Individual Life Insurance Plan Star Union Dai-ichi Life Insurance Company Limited | IRDAI Regn. No: 142 | CIN: U66010MH2007PLC174472
Registered Office: 11th Floor, Vishwaroop I.T. Park, Plot No. 34, 35 & 38, Sector 30A of IIP, Vashi, Navi Mumbai – 400 703 | Contact No: +91 22 7196 6200 | 1800 266 8833 (Toll Free) | Timing: 9:00 am – 7:00 pm (Mon – Sat)| Email ID: customercare@sudlife.in | Visit: www.sudlife.in | For more details on risk factors, terms and conditions, please refer to the sales brochure carefully, before concluding the sale. |Trade-logo displayed belongs to M/s Bank of India, M/s Union Bank of India and M/s Dai-ichi Life International Holdings LLC and are being used by Star Union Dai-ichi Life Insurance Co. Ltd. under license.
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