Advantages of a Unit Linked Plan?

Market linked returns: Unit linked plans give you an opportunity to earn market-linked returns as part of the premiums are invested in market linked funds which invest in different market instruments including debt instruments and equity in varying proportions.
Life protection, Investment and Savings: Unit linked plans offer the twin benefits of life insurance and savings at market-linked returns. Thus, you have the opportunity to invest your money to earn higher returns, while taking care of your protection needs. Investing in unit linked plans helps to inculcate a regular habit of saving and investing, which is important for building wealth over the long term.

Flexibility: Unit Linked Plans offer you a wide range of flexible options such as

a. The option to switch between investment funds to match your changing needs.
b. The facility to partially withdraw from your fund, subject to charges and conditions.
c. Single premium additions to enable the policy holder to invest additional sums of money (over and above the regular premium) as and when desired, subject to conditions.

Switching Between Funds

HDFC Standard Life Insurance offers you the flexibility to switch between funds available under a unit linked plan. You may wish to switch between equity and debt funds, in times when there is market volatility or interest rate fluctuations. At times, changes in your financial standing, liabilities or risk profile may also require that you change your investments accordingly.

Making Withdrawals
You may also make partial withdrawals from your funds after a certain specified period, subject to a partial withdrawal charge. The withdrawal amount should be at least the minimum prescribed withdrawal amount and the fund must not fall below the minimum fund value after the withdrawal.
You can make a full withdrawal of your policy before its maturity date. However, surrender charges will be applicable in this case.

Source: HDFCLIFEINSURANCE

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All About Unit Linked Insurance Plans

In Unit Linked Plans, the investments made are subject to risks associated with the capital markets. This investment risk in investment portfolio is borne by the policy holder. Thus, you should make your investment choice after considering your risk appetite and needs.

Another factor that you need to consider is your future need for funds. HDFC Standard Life offers you a variety of unit-linked insurance products to suit your goals – be it for your retirement planning, for your health, for your child’s education and marriage or for investment purposes.

In a Unit Linked Plan, the premiums you pay are invested in the funds chosen by you after deducting allocation charges and charges including those for managing funds, policy administration and for providing insurance cover are deducted from the funds by cancelling certain units. The value of each unit of a fund is determined by dividing the total value of the fund’s investments by the total number of units.

Which Investor Class Are They Most Suited For?

· Those who wish to closely track their investments: Unit linked plans allow policy takers to closely monitor their portfolios. They also offer the flexibility to switch your capital between funds with varying risk-return profiles.

· Individuals with a medium to long term investment horizon: Unit linked plans are ideal for individuals who are ready to stay invested for relatively long periods of time.

· Those with varying risk profiles: Across the seven funds offered, the equity component varies from zero to a maximum of 100 per cent. Thus there is a choice of funds available to all types of investors - from risk-averse investor to those investors who have strong risk appetite.

· Investors across all life stages: This plan category offers a variety of plans which can be opted for depending upon the life stage you are in and your needs and financial liabilities at that point in time.

Cont

Riders

A rider is a provision that can be added to a life insurance policy to provide extra coverage for benefits that would otherwise not be covered on the primary policy. A long-term care rider would pay for some or all of your extended care expenses. In effect, your policy would provide you with "living benefits" that you can employ while you are still alive.. These can be purchased at a marginally additional premium.

Types of Riders:

a) Waiver Of Premium
What is: Waiver of premium is a benefit under which payment of premiums is waived off when the insured person suffers total disability. In such a case, further payment of premiums is exempted but the policy continues.

Need: This optional benefit ensures that the policy continues to invest the regular premium as planned and that the objective for taking the insurance policy is not compromised.
b) Critical Illness Cover


What is: If the insured is diagnosed as having any critical illness covered by the insurance company, the sum assured is paid out to the insured person as a lump sum amount. However, the policy continues even as the critical illness cover ceases to exist.

Need: The need for critical illness cover arises because of exorbitant medical costs, which can be covered, at least partially, at a nominal expense through critical illness cover.
c) Accidental Death Benefit


What is: Under the accidental death benefit rider, an additional amount covered under this benefit is payable in the case of the accidental death of the insured person during the term of the rider.

Need: The need for this rider arises because the accidental death of the insured person could cause additional financial inconveniences to the family/dependents due to the event.
d) Accelerated Sum Assured

What is: When Accelerated Sum Assured benefit rider is chosen, the insured person is paid the sum assured on being diagnosed as suffering from any of the critical illness. After the settlement of claim the basic policy is terminated.

Need: The accelerated sum assured is useful when one wants critical illnesses to be covered but desires the same at a marginal cost as compared to Critical illness cover.

Conventional Plans

Conventional Plans

1. Pension Plans
   

Retirement is a natural progression and only if you are financially secure during these years can you hope to live a comfortable retired life. Pension plans are designed to accumulate your savings during your earning years and thereafter provide you with a regular income after retirement so that you don't have to depend on your children or society.

Further, the premium payment in the case of pension plans can be made as recurring payments for a fixed period of time (regular premium) or once as a lump sum (single premium). Either way, the amount and returns thereon are cumulated and paid out to the policy holder at the retirement date as a lump sum. Part of this lump sum is then used to purchase an annuity which provides post retirement income

Benefits:

• These plans are flexible as they allow you to choose your investment period, the premium amount and the premium frequency.
  
• Reversionary bonuses are usually declared by the insurance company annually and once declared are guaranteed.
  
• There are tax benefits under various sections of the Income Tax Act, 1961. A deduction is available from the total income up to Rs 1 lakh under section 80 CCC and 80 C.
  

2. Money Back Plans

When you plan for your future, ideally you should set out with specific goals and these should have costs and deadlines attached to them. Once this is done, money back plans provide an excellent vehicle to take you to the fulfillment of these goals.

Money-back plans are insurance products which pay out pre-defined benefits at periodic times during the entire term of the policy. For instance, in a money-back plan with a 20 year term, 25 per cent of the sum assured could be paid out after every five years (i.e., at the end of the 5th, 10th and 15th year) and the remaining 25 per cent of the sum assured along with the bonus, if any, would be paid out at the end of the 20th year. However, in the case of the unfortunate death of the insured person, the total sum assured (100%) and bonuses will be paid.

Benefits:

• Since a part of the sum assured is received periodically, this plan combines short term financial goals with long term savings and insurance.
  
• Tax benefits under Section 80C are applicable on the premium paid.
  
• The periodic lump sums as well as maturity amount is tax free.
  

3. Children's Plans

Your children are your pride and joy and you would like them to have the best that money can buy. And with a sound financial plan, you can make sure that the materializing of their dreams is not hindered for want of funds. Children's insurance policies and products are designed with this specific aim in mind.

These plans set out to secure you financially against the back drop of constraints such as inflation and the rising cost of education. They help you to fund various aspirations like an overseas education, extra curricular activities, sports training, supplementary vocational education, marriage celebrations, etc. by providing a lump sum amount at a specified future date.

An additional feature offered by children's plans is that they continue to offer financial protection even in the event of the loss of the premium paying parent. This ensures that the amount envisaged is actually delivered even in the event of unforeseen eventualities.

Benefits:

• Children's insurance plans enable the parents to save money for child's future without any disturbance to the family budget. This is because the premiums can be chosen to suit the parent's convenience.
  
• There are a number of options and customized products to choose from for the child's future.
  
• Reversionary bonuses are usually declared by the insurance company annually and once declared are guaranteed.
  
• Tax benefits under Section 80C are applicable on the premium paid.
  
• Certain plan options also allow the plan to continue after demise of insured parent and the insurance company continues paying the premium.
  

4. Endowment Plans

Life is full of risks – both financial and non financial. While it is difficult to eliminate the non- financial risks, insurance helps you to minimize the financial ones. Endowment plans are one such product. They ensure that you receive an assured amount at the end of the policy term plus bonuses, if any. If, due to unfortunate circumstances, the insured person expires during the term of the policy, the sum assured and bonuses go to the nominee. Endowment plans can be taken in the name of minors too.

Benefits:

• This plan helps one plan for the future of their loved ones and rest assured that finances will not be an obstacle, even in case of the insured persons demise.
  
• Reversionary bonuses are usually declared by the insurance company annually and once declared are guaranteed.
  
• Tax benefits under Section 80C are applicable on the premium paid.
  

5. Term Plans

As the breadwinner of the family, even the best financial plan that you create can go out of gear if you are not around to meet the financial commitments it entails. With term plans, you can be sure that in the event of your unfortunate demise your family will be compensated for the financial loss to the extent that you see fit.

Term Assurance Plans are those plans where the sum assured is paid out only if the insured person dies. There is no maturity benefit under these plans. Due to this feature, the premium amount is relatively low.

The premium can be paid regularly or even in a lump sum, according to the design of the plan. Such policies can be taken either on a single basis or on joint basis.

Benefits:

• These plans are ideal for individuals who have dependents to be taken care of. In the unfortunate event of the insured person's death, the dependents are left financially secure.
  
• The premium for such plans is very low, especially if the insured in young.
  
• The plan can be topped up with add additional features (known as riders), such as accident death cover or critical illness cover.
  
• There are tax benefits for the insured person.
  

6. Whole Life Plans

Insurance has become a necessity, particularly in India where most families are dependent on a single earning individual. Further, since there is no social security available in India, the financial interests of the family have to be protected through other sources. Whole life insurance policies are designed to provide lump sum payments to a family in the event of the death of the insured person.

Unlike term insurance, a whole life insurance policy covers you for your entire life and not just for a specific period of time.

Benefits:

• The policy stays in force as long as the insured individual continues to live and benefits remain constant during the entire coverage period of the policy.
  
• There is no need to undergo future medical examination once the policy is in force.
  
• There is also an element of tax-saving in these policies.
  

Comparison Unit Linked Plans And Mutual Funds

Tax Benefits and slab

* Calculations are based on highest tax benefits.

Note: These tax calculations are based on present tax legislations, which are
subject to change The aggregate deductions from income under Sections 80C, 80CCC and 80CCD (applicable in case of central government employees only) should not exceed Rs 1 lakh.

*Note:

A further surcharge of 10 per cent is applicable if the taxable income exceeds Rs 10 lakh. An education cess of 2 per cent is applicable on the taxable income (including surcharge if any). A further tax of 1 per cent is charged as higher education cess payable on taxable income (including surcharge if any).

HDFC Taxsaver Fund

Maximize your returns & Earn attractive Dividends
Returns
7 years – 23.82%
10 years – 28.35%
12 years - 31.80%

Invest Rs. 100,000
Save Taxes upto Rs. 33,990
Earn Tax Free Dividend of Rs. 14,780
Total Savings Rs. 48,770