HDFC Life launches online unit-linked plan

Given the rise in online sales, HDFC Life has recently launched an online unit linked plan called Click2Invest.  

Being sold online, the plan does not charge you for premium allocation and policy administration charges. It only deducts fund management (1.35%) and mortality charges from the policy.

The low cost has given the policy an edge over both direct and other mutual fund schemes. Direct plans of mutual funds allow you to invest directly without any intermediary either by submitting it to the fund houses or their registrars or doing it directly through the website.

Consider this: For a 35-year-old male, who invests Rs 50,000 for the risk cover of Rs 5 lakh in an all-equity fund for the period of 15 years the fund value comes to Rs12.67 lakh at an assumed rate of 8%.

The net yield comes to around 6.30%. If the same person invests the same amount in the direct plan of mutual fund with an assumed expense ratio of 1.9% the amount comes to around Rs12.28 lakh, a net yield of 5.95%.

Not only higher returns HDFC Life's plan also gives you 10 times life insurance coverage for the entire term. This calculation is only for illustrative purpose. Returns on Ulips and mutual funds are market-linked. Also, mortality charges will wary according to the age of the insured.

Under the plan the sum assured is fixed at 10 times for people below 55 years, and 7 times for people above 55 years. Minimum annual premium is Rs12,000 with no upper limit on maximum premium.

According to a report by Boston Consulting Group and Google India it is estimated that three in every four insurance policies sold by 2020 would be influenced by digital channels. The report also states that insurance sales from online channels will grow 20 times by 2020, and overall Internet influenced sales would be Rs 300,000-400,000 crore.

It is the first online unit linked plan after new unit-linked rules got implemented in 2010. The Insurance Regulatory and Development Authority (IRDA) imposed a cap on charges in September 2010, after a tussle between IRDA and Securities Exchange Board of India over unit linked plans. Under new rules the difference between gross yield and net yield cannot be more than 3 per cent where tenure is not more than 10 years and 2.25 for more than 10 years.