SBI Life, HDFC Life, Aegon Life, Bajaj Allianz, ICICI Prudential and Aviva Life Insurance are some of the companies who offer online Ulips.
Investors are increasingly becoming conscious of the costs involved in investment products. After all, costs eat into the returns and the damage is more pronounced in the long term.
One of the market-linked tax-saving investments that many taxpayers are seriously considering is the unit-linked insurance plan (Ulip), precisely for its low cost in online version. Most life insurance companies offer online Ulips and to invest in them, one needs to go directly to the respective company’s website. SBI Life, HDFC Life, Aegon Life, Bajaj Allianz, ICICI Prudential and Aviva life Insurance are some of those who offer online Ulips.
What are the charges in an online Ulip?
Unlike in the past when the costs were neither capped and the online Ulips were not around, presently, the costs in Ulips are not only capped but the online Ulips carry far less costs than their older versions.
“The 4th generation new age Ulips which are designed for the long-term customer who buys the product online have a lower cost. Barring, FMC of 1 percent to 1.35 percent plus the mortality charges, there are no charges,” says Vineet Arora, MD & CEO of Aegon Life Insurance company. Most online Ulips do not carry any Premium Allocation Charge and even the Policy Administration charge is considerably low. Remember, the mortality charges will, however, exist, till the fund value is below the sum assured in Ulip. Thereafter even mortality charges are not applied in Ulips where the death benefit is higher of fund value and sum assured.
Why online Ulips are low on costs
One main reason for low cost in online Ulips is that there is no intermediary like an insurance agent or a corporate agent in between and this cuts down the cost considerably. “Investing in a Ulip where any sort of distributors are associated may not be the best form of investments from customer perspective, due to high expenses, huge commissions and structures and policies which may not address to the investor’s interest,” says Arora.
Are Ulips most tax-friendly?
Other than the costs, investing in Ulips also comes with its tax advantages. “Ulips provide long-term capital gains tax (LTCG) advantage on investments as against direct equities and equity mutual funds. Also, Ulip investors can redeem the entire amount at the end of five years, though it is advisable to stay invested longer, even if the premium has been paid in instalments. While in ELSS or Tax saving FDs, only units or deposits that have completed the lock-in can be redeemed,” informs Arora.
Online Ulip’s buying process
Before one initiates the online buying process, it’s better to understand the entire process of buying Ulips online — from filling the personal, medical and income details to disclosing of the material information, to uploading of documents to making the payment and finally receiving the policy document. Importantly, understand from the insurer by calling them up, when will you receive the proof for deduction under Section 80C for the premium paid towards Ulip. “Most of the companies including ours have a seamless on-boarding process. Documents can be scanned and attached during purchase or sent later. Medical test, if any, are easily coordinated by home visits at the convenience of the customer,” informs Arora.
What to do?
Online Ulips provide tax and cost advantage over other competitive investments. Before choosing, consider the fund performance of the insurer and then decide. For better results, link it to one of your long-term goals and continue the Ulip till its maturity. Being an online investor, making an informed buying decision helps in not being mis-sold something you don’t want to buy.