Indexed Linked Insurance Products in ULIP

What is Index Linked Insurance Plan (ILIP)?

Index linked Insurance products in the context of ULIPs (Unit Linked Insurance Plans) are investment options where the returns are directly linked to the performance of a specific market index, such as the Nifty 50 or Sensex. These products are a type of fund option within a ULIP, allowing policyholders to participate in the growth of the stock market through a diversified portfolio that mirrors a chosen index.

To know the available Index fund please go to Nifty Indices

How do Index-Linked Funds in ULIPs work?

• Structure:
  Within a ULIP, you can choose among several fund options : equity, debt, balanced, and sometimes index funds.
  An index fund option invests your money in the same proportion as the underlying index (e.g., Nifty 50), aiming to replicate its returns.
• Returns:
  The performance of your investment in an index-linked fund depends on the performance of the chosen index. If the index rises, your fund value increases, and vice versa.
• Transparency:
  Since these funds simply track an index, they are transparent and generally have lower management charges compared to actively managed equity funds within ULIPs.

Key Features

• Market-Linked: Returns are not guaranteed but depend on index performance.
• Diversification: By tracking an index, your investment is spread across multiple companies, reducing company-specific risk.
• Lower Charges: Index funds usually have lower fund management charges than actively managed funds.
• Simplicity: The fund simply mirrors the index (No fund manager discretion).

Example

Suppose you buy a ULIP and choose the “Nifty 50 Index Fund” option. The insurance company will invest your money in Nifty 50 companies that make up the Nifty 50, in the same proportion as the index. If the Nifty 50 rises by 10% in a year, your fund value will also rise by approximately 10% (little less than 10% because of the charges).

Is Index Linked Insurance Policy different from ULIP?

So far, there are no Investment plans exclusively offering Index funds. Within the existing ULIP funds you can find both Active funds and Index funds. You may choose to allocate your funds in only Index funds or mix of Index and Active funds. We have listed few low charges ULIPs offering Index Funds below.

Why choose Index-Linked Funds in ULIPs?

• If you want to participate in broad market growth without betting on a particular sector or fund manager’s skill.
• If you prefer lower fund management charges.
• If you want transparency in how your money is invested.
• More than 60% of active funds underperforming over the last four years in India, which makes Active more riskier than Index Funds.

Important Note

• ULIP as a product :
  ULIPs combine life insurance with investment. The investment part can be allocated to various funds, including index-linked funds. Please note that index funds can be found in the ULIP itself under the fund options.
• ULIP Charges :
  ULIPs have multiple charges (premium allocation, fund management, mortality, etc.) which can impact net returns. Please choose a right fund to maximise the returns or contact us, we will advise you on the Top ULIPs having low charges which will maximise your returns.

Few Index Funds offered by Top ULIPs in India for 2025:

1. Max Life Online Savings plan

• Nifty Momentum Quality 50 Fund 
• Nifty Smallcap Quality Index Fund
• Nifty Alpha 50 Fund
• Midcap Momentum Index Fund
• Nifty 500 Momentum 50 Fund
• Midcap Momentum Index Fund

2. HDFC Life Click 2 Wealth

• Nifty Alpha 30 Fund

3. Canara HSBC Promise 4 Wealth

• Midcap Growth Momentum Index Fund 

4. Aditya Birla Capital - Wealth Smart Plus

• Nifty Midcap 150 Momentum 50 Index Fund
• Nifty Alpha 50 Index Fund
• Capped Nifty Index Fund
  

Summary

Index Linked Insurance Product (Index Life Insurance Policy) in ULIPs are fund options that invest in a market index like Nifty or Sensex, aiming to replicate its performance. They offer a transparent, diversified, and cost-effective way to participate in stock market growth within the ULIP structure.

Regards,

Honvest Team.