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ULIP: Insurance and investment in one

Life Insurance

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Life Insurance article in Advisorkhoj - ULIP: Insurance and investment in one
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ULIP or Unit Linked Insurance Plans provides you the benefit of market-linked returns along with a life insurance cover into one product. ULIPs are a wealth-creating tool that fulfils your financial goals in the medium to long-term period. ULIP plans offers flexibility to invest both in equity and debt fund portfolios depending upon your risk profile.

The unique feature of market linked returns clubbed with protection makes ULIP a sought after choice of the new generation. With growing popularity, ULIPs have contributed around 12.77% of the total Insurance Industry premium paid in India during the FY 2015-16.

What are the benefits of ULIP

There are 5 major benefits offered by ULIPs –

  • It offers flexibility

  • It offers transparency

  • Helps you save for your financial goals

  • Saves taxes

  • Easy to buy

Let us now discuss all the 5 benefits offered by a ULIP plan.

ULIP offer flexibility

  1. ULIPs offer the flexibility of choosing an investment option based on your risk profile. If you are young and want to take risk for high returns, equity fund could be suitable for you. But in case you do not want to take any risk, you may like to invest in debt fund.

  2. Again, it offers the flexibility to switch from one fund portfolio to the other suiting your changing risk profile or the market conditions.

  3. ULIP offer to you withdraw partially of fully any time from 6th policy year. Therefore, if you have any financial need you can draw from your accumulated corpus any time after 5 years

  4. If offers the flexibility to change your premium amount. ULIPs offer the facility of paying top up premiums whenever you have some investible surpluses

  5. There is a flexibility to change your life cover as well by paying additional premium. Please note that in ULIPs, the minimum life cover should be 10 times of your premium so that you can avail the income tax rebate under Section 80C.

  6. It offers the flexibility of adding a rider. Through riders you can choose to customize your ULIPs and get additional protection. One can add riders like accidental death benefit, disability benefit and critical illness and many others.

  7. ULIPs offer the flexibility of paying your premiums monthly. This helps you buy the units of your fund portfolio at different NAVs.

ULIP offers transparency

  1. Good thing about ULIP is that the charges are transparent and specified. The company reveals the charges in the product brochures which you should go through very carefully. Normally the charges applicable are policy administration, fund management and the mortality charges. You should select a ULIP plan with minimum charges.

  2. The charges so deducted are transparent as you know the percentage of each charge deducted from your premium. Moreover, the company sends you a detailed statement which shows how the charges have been deducted as well as the fund allocation and its performance. The same can be viewed online by login to the respective insurance company website.

  3. The fund performance is totally transparent as there are no hidden charges and it reflects in the net asset value of the fund (NAV) which is declared daily. Increase and decrease in the NAV indicates how the fund is performing

ULIP helps you save for your financial goals

  1. The unique benefit of market linked returns helps you plan your long term goals by investing in ULIPs. You can save for long term goals like, retirement, children higher education or buying a house by saving through ULIPs

  2. You can pay your premiums through monthly instalments and save small amounts for achieving a big corpus in future.

ULIP offers tax benefit

  1. Premiums paid upto Rs 150,000 in a Financial Year qualifies for tax deduction under Section 80C of the Income Tax Act 1961.

  2. ULIPs being insurance plans, the gains and maturity proceeds are also tax-free under Section 10(10d) of The Income Tax Act.

  3. The claim amount paid to your nominee in case of your sudden death is also tax free under Section 10(10d) of The Income Tax Act.

Easy to buy

  1. You can easily buy ULIPs by visiting the company website. All you have to do is fill up your personal details, communication and nominee details, answer the health questionnaire, upload the KYC documents and pay premiums using net-banking or debit card.

  2. ULILP bought online has lesser charges as no intermediation fee is paid to the insurance agent or the broker.

Insurance is the subject matter of the solicitation.

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Priyanka Chakrabarty

A literature enthusiast who loves to write. An ardent social worker who dreams of bringing about change and hopes to do so through her writing. A firm believer of the saying pen is mightier than the sword, Priyanka is an English Honours graduate. She also pursed Diploma in Wealth Management Practice from IIFP and is a certified social media expert.

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