HDFC Click2Invest new ULIP-Should you invest?
Few days back, HDFC life has floated a new Unit Link Insurance Plan (ULIP) which indicates zero policy allocation charges and zero policy administration charges. Apart from this, HDFC Click2Invest plan can be discontinued without any charges. Investors lost interest in ULIP plans as they have been charging high allocation charges and premiums are invested after deducting them. Should you invest in HDFC Life Click2Invest ULIP plan? Is this different from other ULIP Plans? What are the positive and negative factors about HDFC Life Click2Invest Plan?
Features of HDFC Life Click2Invest ULIP Plan
- This is an online ULIP plan.
- Zero policy allocation charges
- Zero policy administration charges
- There are 8 fund options to choose in equity and debt segment.
- Premiums paid would be reinvested in the funds you would be choosing
- Single, limited and regular premium options available
- Maximum tenure is 20 years
- Premiums can be payable monthly or per annum
Other features of HDFC Life Click2Invest Plan
What are the various fund options available to invest?
What are the benefits?
1) Death Benefit: In case of unfortunate death of insured, highest of the following would be paid
- Sum assured
- Fund value
- 105% of premiums paid
2) Maturity Benefit: An investor who is alive till the end of the policy period would get the fund value as maturity amount.
4) Income tax benefits: Life Insurance premiums paid up to Rs. 1,00,000 are allowed as a deduction from the taxable income each year under section 80C of income tax act and the maturity amounts are tax free under section 10 (10) D subject to fulfillment of terms and conditions.
Positive factors of HDFC Click2Invest ULIP plan
1) No allocation and administrative charges: Unlike other ULIP plans, this plan comes with zero premium allocation charges and zero policy administration charges. There are fund management fees charged by this insurance policy which is 1.35% of the fund value.
2) Free Switches between funds: When you invest in a fund, you may think of switching to other funds due to market conditions. This plan offers 4 free switches in a year. Beyond this, any further switch would have separate charges
3) Zero discontinuance charges: One more negative point for many ULIP schemes is they charge high penalty for discontinuance of ULIP Plan. However, this plan comes offer zero charges in case you want to discontinue this ULIP.
4) Partial withdrawals: There are partial withdrawals allowed under policy after 5 years of the policy.
Negative points of HDFC Click2-Invest Plan
1) Surrendering policy before 5 years: Like any other ULIP plan, even this policy can be surrendered only after 5 years of taking the policy. However, if you want to surrender this policy before 5 years, you can do that and fund value would be transferred to the discontinued fund portfolio and 4% annual returns would be paid till the completion of 5 years.
2) Fund Management charges: This ULIP plan charges 1.35% fund management charges. Comparing to mutual fund schemes which charge 1% to 2.5% as fund management charges is comparable. However, one should think that mutual fund schemes need more professionals to manage funds as they are intended to provide good returns. ULIP’s can provide returns of 4% to 6% returns, hence paying such fees could be still higher.
3) ULIP Still complex and not simple: Though the charges are reduced, still ULIP plan is still complicated and not simple to understand. Even an educated person need to spend a lot of time to understand how it works.
4) Don’t consider for risk cover: If you want to buy this plan for risk coverage, then you need to pay hefty premiums. E.g. for Rs 20L risk coverage, one can buy term insurance plan where premiums come at Rs 4,000 (approx) per annum. However, for this ULIP plan, you need to pay Rs 2 Lakhs (per annum) as this is risk cover + investment product.
5) No tax benefit for 55 years and above: This plan provides tax benefits for specific fund options. Any individual who wants to buy this ULIP plan after 55 years, would not get tax benefit as you can opt in specific fund options and not in all options.
Should you invest in HDFC Life Click2Invest ULIP?
There are several positive factors like zero premium allocation charges, zero administration charges, investing online etc. However, I still feel that you should look Risk cover and wealth creation as separate aspect. Consider a term insurance plan for risk coverage. If you are a low risk investor, invest the balance amount in bank FD schemes or RD schemes. If you can take some risk, invest in equity mutual funds or hybrid/balanced mutual funds which can create good wealth in long run of 10 to 20 years. Personally, I would not like to invest in such ULIP schemes.
HDFC Click2Invest Plan brochure can be downloaded here
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HDFC Click2Invest ULIP