A combination of insurance and investment, Unit Linked Insurance Plans (ULIP) typically offer market-linked returns in addition to life insurance cover. The first ULIP was launched by Unit Trust of India in 1971. Private companies, however, made a foray into the segment in 2000.
In the recent past, several top insurance companies including Bajaj Allianz, HDFC Life, and Reliance among many others launched online ULIPs, which are, by and large, considered cheaper (in offline ULIPS, insurers typically charge lower premium, as it does not involve any commision for agents). Also, experts believe that ULIPs are sought-after during a stock market upsurge.
Types of Reliance ULIP plans
Reliance Life Insurance currently offers the following two plans
As per the Reliance classic plan II, you can make long-term investments by diversifying with various funds which could provide a hedge against market risks. This plan helps you protect the investment with a life cover. You can also avail of several tax benefits under this plan.
Why you should opt for Reliance classic plan II
Under Reliance classic plan II, you have greater flexibility in terms of your investment in that you could choose from five investment funds, namely, two equity funds, two debt-oriented funds and one balanced fund. You could also select your premium payment mode.
Benefits of Reliance classic plan II
- Offers top up facility for your investments.
- You can use 52 free switches under five investment funds.
- Systematic Transfer Plan (STP) to deal with volatile equity market.
- Customers can change investment patterns.
- You get the Fund Value at maturity.
- You can make partial withdrawals in case of an emergency after five policy years.
Sumit, a 30-year-old teacher, opts for Reliance Classic Plan II with an annual premium of Rs.50,000, policy term of 15 years and a life cover of Rs. 5 lakh. He decides to invest in Life Corporate Bond Fund 1, a relatively safe investment. After some years, however, Sumit, switches to Life Equity Fund 3. He also opts for premium redirection so that his future premiums are also invested in the equity-oriented fund. Consequently, he gets high returns on his investment.
Under Reliance Pay Five Plan, you make just five yearly premium payments, which make it attractive for consumers. You can also choose from five investment funds, two equity funds, one balanced fund and two debt-oriented funds.
Why you should opt for Reliance pay five plan
Consumers could use 52 free switches from five investment funds. You could also utilize premium redirection to change the investment pattern of your future premiums.Benefits
- Reliance Pay Five Plan offers easy liquidity in that you get the Fund Value at maturity under the base policy as well as top-ups.
- In the event of an emergency, customers can make partial withdrawals from the fund after five years.
- The plan protects your family with a base life cover.
- You can enhance your life cover by opting for a higher sum assured.
- You can also opt for Systematic Transfer Plan (STP) to deal with volatile equity market.
Sanjeev opts for Reliance Pay Five Plan with an annual premium of Rs.1 lakh, a policy term of 15 years and a life cover of Rs. 10 lakh. Sanjeev decides to invest in Life Corporate Bond Fund since he finds the equity market volatile. At the end of the tenth policy year, Sanjeev’s father is hospitalized. To meet the rising medical expenses, Sanjeev surrenders his policy and receives the complete fund value according to the date of surrender.
According to experts, several agents, more often than not, sell short tenure ULIPs during a surge in sensex, which might work against the customer who will not get optimum returns in such a scenario. Experts also suggest that customers should stay invested in ULIPS for a longer period of time to start getting returns akin to mutual funds. Also, it is important to review mortality rates. Since mortality rates are not included in the cost, they can reduce returns in cases of high sum assured and for senior citizens who opt for ULIPs.Optimum Utilization
Analyse your financial requirements and how you can best fit into the plan depending on your salary, expenses and goals. The highlight of ULIPs are the switch benefits. Customers can shift their investments across various assets such as balanced, equity and debt funds at a nominal or no cost, in some cases. However, watch out for the premium allocation charges which typically benefit agents and does not contribute to your portfolio in any manner.
Other Reliance Life Insurance Plans
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GST of 18% is applicable on life insurance effective from the 1st of July, 2017