ULIP policies are long-term investments that offer investors multiple benefits like insurance coverage, wealth creation, and tax savings. These plans can be purchased directly from the insurance company through the online mode or via an agent or distributor. When an investor buys a ULIP Plan online, there is no commission payable to an intermediary, resulting in significant savings. Also, there is no or little premium allocation charge on the online policies, thereby implying that a larger portion of the premium is being dedicated to wealth creation. Let us find out more about online ULIPs, their advantages, and how they differ from offline options.
What is a ULIP?
The answer to What is a ULIP Policy is that it is a unique insurance policy that offers investors an added opportunity to invest their funds and create wealth. This is made possible by segregating the premium paid by an investor into two, with the first part being used up for insurance coverage while the second being invested in different funds with different investment goals. The fund allocation is done by the investor based on their goals and risk appetite. A ULIP also provides investors with the option of switching their fund allocation from one fund to another in response to a change in their goals or risk appetite or the performance of a fund or the expectation from the markets. These policies also come with tax benefits, wherein the premiums paid, including the top-up premiums and the maturity amount, are exempt from income tax.
What Makes Online ULIPs Lucrative?
Here are some benefits of buying ULIPs online:
- Cheaper- Online purchase does away with the intermediaries, thereby reducing the purchase cost and resulting in a higher allocation towards investment. The premium allocation charges on the online plan are either zero or much lower than the ones applicable to offline purchases of ULIPs. Other charges relating to policy administration, fund management, mortality charge and miscellaneous charges are the same for both online and offline policies.
- Quicker- The online application process is quite simple and involves filling the form, scanning your KYC and other relevant documents, and uploading or mailing them. In contrast, the offline process involves going to the agent’s office (during working hours only) and submitting all the necessary documents, making it a lengthier process.
- Convenient– Investors can buy online ULIP plans at any time of the day from anywhere. They can study, analyse and compare different plans from the comfort of their home. They can also take time to study the features of different plans, the investment options available, and the charges and benefits available, before taking a final decision.
- Informed Decision-Making and Use of Online Tools– Since an investor can compare different plans and their features, the decision is well-thought-of and based on adequate research and better understanding. Online tools like a ULIP calculator can be used to arrive at the amount to be invested and the duration of the policy.
- Quick Resolution of Queries– Online options allow investors to resolve their queries immediately by talking to the insurance company’s advisor immediately. This saves a lot of time and effort that is usually required when visiting the agent’s office.
While online ULIPs are convenient, they should be chosen only when the net yield is higher than the offline option. The net yield is calculated by subtracting all costs associated with the policy from the gross yield. The gross yield will be the same whether an investor buys a ULIP offline or online, but the net yield is decided by the charges associated with the policy.
Some other factors to look at while buying a ULIP online are:
- the insurance provider’s claim settlement record or ratio
- the additional riders being offered
- the number of switches being allowed and the charges for them
- The loyalty bonuses and their terms.
- Types of investment options available
- The investment strategies being offered.
- Exit and partial withdrawal rules.
To conclude, an online ULIP saves a lot of money and effort for the policyholder. Investors should, however, ensure that the policy being offered online is the same as the one available in the offline mode.
