Unit Linked Insurance Plans (ULIPs) offer a unique combination of insurance and investment, making them a popular choice for individuals looking to secure their financial future. These versatile financial products not only provide life insurance coverage but also offer the potential for significant wealth creation through market-linked investments. Understanding the benefits of ULIPs can help investors make informed decisions about their financial planning. From tax advantages to investment flexibility, ULIPs present a range of benefits that cater to diverse financial goals and risk appetites, ensuring a balanced approach to saving and investing.
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†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
Unit Linked Insurance Plans (ULIPs) are financial products that combine investment and insurance in a single plan. Offered by insurance companies, ULIPs allocate a portion of the premium paid towards life insurance coverage, while the remaining amount is invested in a variety of assets, such as market-linked funds. The performance of these investments determines the returns on the ULIP, which can vary based on market conditions. ULIPs offer policyholders the flexibility to switch between different funds, allowing them to adjust their investment strategy according to their risk appetite and financial goals. They usually come with a lock-in period of five years, ensuring a disciplined approach to long-term savings. Furthermore, ULIPs provide tax benefits under Sections 80C and 10(10D) of the Income Tax Act, making them an attractive option for individuals seeking both protection and growth for their investments.
Below are the ULIP Plan benefits:
Flexibility: ULIPs offer a variety of investment options to suit your risk tolerance and financial goals. You can choose how to invest your premium among equity, debt, or balanced funds. You can also switch between funds to maximize returns. Additionally, some ULIPs allow you to increase your life insurance coverage over time.
Transparency: ULIPs provide clear information about charges and benefits. You can get a benefit illustration that shows how your premium is used and potential returns based on your chosen options. Product brochures and key feature documents explain the plan in detail. There's also a free-look period to review the policy and get a full refund if you're not satisfied. Finally, daily updates on the Net Asset Value (NAV) help you monitor your investment performance.
Goal-based Savings: ULIPs encourage regular savings to achieve your long-term goals, like retirement or your child's education. By setting up a ULIP, you commit to disciplined investing and avoid using the money for short-term needs.
Death Benefit: In the unfortunate event of your passing, ULIPs provide a death benefit to your designated beneficiary. This financial cushion can help your loved ones maintain their financial well-being during a difficult time. The payout is usually the higher of the sum assured or the fund value at the time of death, or whichever is higher, thus offering a layer of security for your dependents.
ULIP Tax Benefits: ULIPs offer tax advantages throughout the investment. You can get tax deductions for premiums paid under Section 80C. The returns on your investment and any switches between debt and equity funds within the ULIP are not taxed. Maturity benefits are also tax-free under Section 10(10D)*.
Liquidity: ULIPs offer some flexibility after a 5-year lock-in period. You can make partial withdrawals to address emergencies. However, it's recommended to avoid withdrawals unless absolutely necessary to achieve your long-term goals.
*The information on this website does not constitute tax advice. Tax benefits mentioned are subject to qualifications under Sections 80C, 10(10D), 115BAC, and other relevant provisions of the Income Tax Act, 1961. Goods and Services Tax (GST) and any applicable cess will be charged additionally at prevailing rates. Tax laws are subject to change. Please consult a qualified tax advisor for specific guidance on your situation.
It depends on your individual financial situation and goals. If you are looking for an investment option that offers life insurance coverage, the potential for higher returns, and some flexibility, ULIPs could be a good fit. However, it's important to be aware of the risks involved and the associated charges. Before investing, carefully consider your risk tolerance, investment horizon, and financial goals. It's also wise to compare ULIPs with other investment options like mutual funds or ETFs to see which one aligns with your needs.
Market Risk: ULIPs are linked to the market, so your returns are not guaranteed. The value of your investment can fluctuate, and there is a possibility of loss.
Investment Charges: ULIPs typically have higher charges compared to traditional insurance plans. These charges can include premium allocation charges, policy administration charges, and fund management charges. Understanding these fees is crucial.
Lock-in Period: ULIPs typically have a lock-in period of 5-6 years. During this period, you cannot withdraw your money without facing surrender charges. This reduces liquidity compared to other options.
Understand the Investment Options: Research the different fund options offered by the ULIP and their risk profiles.
Compare Costs and Charges: Be aware of the premium allocation charges, policy administration charges, and fund management charges associated with the ULIP.
Lock-in Period: Understand the lock-in period and any surrender charges that may apply if you withdraw your money before the term ends.
Investment Horizon: ULIPs are suitable for long-term investments. Consider your investment horizon and if it aligns with the lock-in period.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
*All savings are provided by the insurer as per the IRDAI approved insurance
plan.
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
+Returns Since Inception of LIC Growth Fund
¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.
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