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Table of Content
In this policy, the investment risk in the investment portfolio is borne by the policyholder.
Unit linked insurance plans are a hybrid investment and insurance product for the same premium. Part of your ULIP premium goes towards your life insurance. The latter part of it goes towards investing in market-linked investment products of your choice. However, when it comes to more details regarding this split, many are curious about how exactly the ULIP premium is utilized. Here is the exact manner in which the premium charged by your insurance company is utilized as an investment as well as insurance through your ULIP.
One part of your premium is invested in providing risk coverage to the nominee in your policy. This is in the form of life cover in the event of your - the policyholder's - death. This insurance premium will aggregate and earn interest over time, especially since ULIPs have a lock-in period of five years. Hence, in the event of the policy holder's death, the same ULIP premiums are used towards a death benefit. This may equate to the value of the fund, be a separate Sum Assured, or be a combination of both of these. Normally, around 105% of the premiums are paid out as a death benefit to the nominee. This will be specified in your policy documents.
A part of the premiums is allocated towards market-linked products - typically mutual funds. The premiums are directly invested in funds of one's choosing - be it equity, debt, or hybrid funds that offer both. Based on individual risk profiles, and your pre-existing financial portfolio, you can tune your ULIP investments to balance your income stream. However, if you ever need to switch between funds, ULIPs give you the flexibility to do so.
When part of their ULIP premiums is paid towards a market-linked fund, the policyholder will be allocated units in that mutual fund based on the amount that has been invested. The total value of all the units across a plethora of fund choices that have been selected by the investor for their ULIP investments will be paid out once the policy matures.
Keep in mind that there are certain costs associated with the market linked and insurance aspect of ULIPs. These costs are as follows:
Your premiums go towards a life insurance component as well as a mutual fund investment with ULIPs. HDFC Life Click 2 Wealth gives you market linked benefits along with insurance coverage as three different options - a single person life cover, premium waiver option, and retirement planning option. This way you can customize your insurance just like you customize your market-linked investments via your ULIP, to ensure you are truly getting the ideal policy tailored to your needs.
*Return of Mortality Charges (ROMC) on Maturity. In case of Premium Waiver option, Mortality charges pertaining to only the Life Assured would be refunded. ROMC will not be available for the policies where the Waiver of premium benefit is triggered due to the death of the Proposer.
ARN:ED/11/20/21329
The Linked Insurance products do not offer any liquidity during the first five years of the contract. The policyholders will not be able to surrender/withdraw the monies invested in Linked Insurance Products completely or partially till the end of fifth year.
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