Universal Life Products in India Review

What Are Universal Life Products in India? – Review

Universal Life Insurance products are back in India with new guidelines by IRDA. However, many people don’t know that what basically these products are, how they work and which are the pros and cons of these insurance products? In this article, I will explain you everything about these new kind of products.

Let’s start from basics.

Well, there are basically 3 types of life insurance products which are freely marketed and sell in India.

01) Term Insurance Plans (The best in my opinion)

02) Endowment or Money Back Insurance Plans (Moderately investable)

03) ULIPs (Stay Away from them).

As all of you now know that ULIPs are the worst financial products because they are the combination of the insurance and investments while term insurance are the best insurance plans.

Now, Universal Life products (ULPs) also known as VIP – Variable Insurance Plans are basically the combination of Endowment plans and ULIPs along with one additional feature and that is – FLEXIBILITY.

Well, Yes. Flexibility. There are basically 3 types of flexibility in these products which are not available in any insurance plans till now and these are,

01) Premium Amount Flexibility

02) Tenure Flexibility

03) Flexibility of Sum Assured

Yes. This is true. You can anytime increase or reduce your premium amount, tenure of the policy and sum assured according to your needs without paying any penalties or additional fees.

Say for Example, if with the increasing age, your dependents become less and financially independent, you can choose to reduce your premium amount and sum assured without paying any penalties.

Previously, this feature was not available in any insurance product of India such as ULIPs or Endowment Policies but now it is available with ULPs.

These policies are so much flexible that,

Even if you stop paying the premiums, the policy would not get cancelled. The policy would be kept alive and in force, although with a reduced sum assured.

And on the top of this, there is NO FUND MANAGEMENT CHARGE at all. This is because you don’t know where your fund is going to be invested.

Disadvantages of ULPs

The only disadvantages of these products are,

- No control over the Investments

- Highly Opaque (Lack of Transparency)

This means that these are the kind of opaque mutual funds means you will never know that where exactly and in which proportion your money is going to be invested and how these policies will generate returns for you weather by investing in stocks, bonds or both?

Which Insurance Companies provide Universal Life Products (ULPs) in India?

At present in India, the following 4 companies provide these plans which are,

01) Max New York Life

02) Reliance Life

03) Bharti Axa Life

04) Aviva Life

But I am sure that after IRDA guidelines, more and more companies will start selling this insurance cum investment product.

My Opinion -

Well, in my opinion, there is no need to invest in such kind of investment cum insurance products. This is because still the Term Insurance + Equity Mutual Funds is the best combination.

Don’t try much fancy things when it comes to investing and yes, never mix insurance with investments. It is better to have a term life insurance plan to cover your life and equity diversified mutual funds having a past record of good performance to build the corpus for your retirement and various other long term financial goals (Child marriage, future and education).