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How to Use the Top Up Facility in ULIPs

November 04, 2016

In an age where the number of insurance companies has soared inconceivably high, your insurance agent is capable of providing you with a host of policies to choose from. However, the final decision to select the right insurance plan rests entirely with you.

When the time comes to go in for a long-term, investment-driven plan such as a ULIP (Unit Linked Insurance Plan), it is important to understand how they work.

Considered to be a modern-day scheme, a ULIP provides its policyholder with a top-up facility to help individuals manage their financial plans more efficiently. In comparison, most traditional policies fail to do so.

To help you better understand ULIP’s top-up concept, let’s take the simple example of a prepaid mobile number. When you recharge your prepaid number, it increases the talk time but not necessarily its time validity. The ULIP top-up facility works similarly. It allows the policyholder to invest an amount on top of his prevailing premium. However, this only raises the fund value and not the sum assured. It is important to remember that there is a limit on the amount you can pay as a top-up premium.

The top-up option can only be availed if the regular premiums have always been paid on time through the course of the policy term. And, as long as the top-up premium doesn’t exceed 25% of the regular premiums paid until that time, you will not have to purchase an insurance cover with the top-up premium. Also, the charges levied on top-premiums are very nominal and range between 1-3%.

If you're wondering about how these top-up premiums are beneficial to you, here are a few ways in which you can use the premiums to your advantage:

  • While investing in a policy, make sure that you go for a policy which demands minimum premium. By doing so, once your ULIP renders you with good returns, you may utilise the top-up facility to direct further investment.
  • Since there are no inflated charges levied on the top-up premium, you only need to pay minimal charges.
  • You can also invest the top-up premium in the debt bracket if your existing premiums are in the equity bracket.
  • Top-ups are possibly a ULIP’s most simple and convenient tool, attempted at making your investments worthwhile. While choosing a ULIP, remember to choose a policy that furthers your investment plan. Lastly, don't forget to make the most of the ULIP’s top-up facility.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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