Ask Money Today: How much returns will I get in 15-year HDFC ULIP policy?

I had taken HDFC Life ULIP plan 12 years ago. The policy term is 15 years. The plan involves a premium payment of Rs 1,00,000 per year. How much return will I  get after the completion of 15 years?  What are main benefits of the policy? I am 47 years old.

-Mariam

By Balwant Jain, a tax and investment expert

HDFC life's  'HDFC click2invest', a ULIP policy, has many fund options ranging from blue-chip fund to bond fund. So the returns which you can expect from your ULIP plan would depend on the fund option exercised by you. The returns would also depend on the switching, if any, done by you from one fund option to another fund option during your policy period.  Since ULIPs are market linked products, where the risk is borne by the policy holder, the return which your ULIP plan will generate will depend on performance of the market during the policy period and is very difficult to tell in absence of the fund in which your investments are going.

The premiums for ULIP like any other life insurance policy are eligible for deduction under Section 80C up to Rs 1.50 lakh, every year along with other eligible items. Since all the ULIP products offer a minimum of ten times of life cover, the money received by you at the time of its maturity is tax free in your hands under Section 10(10d).

Since you have already completed 12 years under this plan, now you can expect to get better returns on your ULIP plans than average equity mutual fund schemes due to lower fund management charges as compared to fund management charges in ULIP. An insurance company can charge maximum 1.35 per cent annually as against 2.50 per cent expense ratio under equity mutual fund schemes.

I presume that you have opted for equity fund for your ULIP, I would advise you to switch your corpus at the end of 14th year of your policy, from equity to debt fund to avoid the volatility associated with equity market in case the money is invested for any specific goal or the market is in the midst of a bull run. However, you can continue to remain invested in the equity scheme till maturity if you are willing to take some risk and the ULIP investment is not mapped with any specific goal or in case the market is not doing well during the last year and is expected to do well in future. Let me add that it is very difficult to take any call about the performance of the market for one-year period and therefore would advise you to take your decision based on your risk profile and importance of the goal.

(Views expressed by the investment expert are his/her own. E-mail us your investment queries at askmoneytoday@intoday.com. We will get your queries answered by our panel of experts.)

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