In recent times, the importance of having the right insurance can’t be reiterated enough. Those who have seeked help from a financial planning firm or a certified financial advisor must already know how integral it is to have the right kind of insurance in order to secure their financial future. Many of us may have been covered with some amount of insurance from our employers, while others may have bought insurance for themselves and their family members. 

However, buying insurance is no child’s play. There exists a multitude of options floating around the market and it’s a tedious task to filter and select the ones that meet your needs. In addition, there are numerous schemes extending insurance covers for specific events like accidents, sudden illnesses etc. Without the right guidance, many individuals lose money and their peace of mind simply because their insurance policy failed to support, when they needed it the most. 

Apart from the standalone life insurance cover, there exists an alternate way to add insurance cover along with an investment plan. ULIPs or Unit Linked Insurance Plans carry such a dual responsibility in offering life insurance cover alongside an investment plan which can complement one’s financial portfolio.A characteristic feature of ULIPs is the ability to switch between debt and equity depending on your risk appetite and experience. 

Currently we have 24 life insurance companies in India. With the improved regulations in place, we are now looking at the 4th generation of ULIPs. The last generation came into being in 2015, where online fund management charges were capped. The new ULIPs are showing signs of being good investment options for seasoned and apprentice investors alike. 

Let’s take a look at what makes ULIPs so relevant in today’s scenario:

1. Multiple Investment Options – As mentioned earlier, you have a number of options to choose from when you invest in ULIPs. To start with, your investment can be either equity based, debt based, or even a mix of the two, depending on your appetite for risk. 
2. Easy Management – ULIPs are great investment vehicles for new investors as they are extremely easy to manage. If you have invested in a good ULIP plan with a reliable fund manager, handling your money becomes exponentially easier and more efficient. 
3. Liquidity – You can make partial withdrawals whenever you want (limits will vary with the product you choose). This becomes especially helpful when you need money during an emergency or a critical life situation. 
4. Transparency – ULIPs have evolved as one of the most transparent investment options available in the market today. With regular fund updates and access to NAV and historical data, you can rest assured that you are making a legitimate investment whenever you decide to put money into one. 

What Financial Goals Can ULIPs Help Me Achieve?

1. Planning For Retirement – The high flexibility of ULIPs allows you to plan effectively for your retirement. Many people take advantage of being able to switch between debt and equity and can plan their investments at different life stages to ensure financial stability once they retire. A commonly used tactic is to focus on equity when you’re younger and gradually moving to a more debt-based portfolio as you near retirement. 
2. Your Child’s Future – The ability to make partial withdrawals and formulate a good mix of debt and equity makes ULIPs one of the most efficient financial vehicles when it comes to returns. By maximising your returns you can grow a fair amount of capital which can be used to support your child’s education. 
3. Important Life Milestones – Like the two situations mentioned above, ULIPs can be used to provide financial security at various stages of your life. Seasoned investors will regularly consult their financial planners to chalk out a plan which allows for partial withdrawals at the right times, and also allows you to invest with the intention of getting high returns in tandem. 

What’s New In 2020?

The IRDA has recently made some regulatory changes to ULIPs. Let’s take a quick look at what they are – 

1. All ULIPs now have a 5-year lock-in period as opposed to the previous rule of 3-year lock-ins. 
2. Stricter regulatory norms have been introduced to avoid the intervention of unlicensed individuals/organisations in insurance sales. Corporate agents also have to abide by a strict code of conduct while selling or managing such products. 
3. New rules have been enforced for the minimum sum assured from linked and non-linked products. For example, irrespective of your age, the death benefit is now 7 times the annualised premium, and for single premium policies, the sum assured is 125% of the single premium. 
4. For policies with terms less than or equal to 10 years, the net reduction in yield will now not exceed 3% at maturity, and for those with terms longer than 10 years, the value shall not exceed 2.25%. 
5. Higher levels of transparency are now a norm across all ULIP products. Before 2010, commission charges were high and it was quite a challenge to understand the best option out of the ones available. Due to this, there were many discontinuations and policy lapses. The new regulations ensure that investors are aware of all changes and updates to the policy, as well as having access to historical data to better understand their investment.