How Does a ULIP Works?

What is a ULIP?

The full form of ULIP is the Unit Linked Insurance Plan. It is an investment plan that provides you with the following triple benefits:

• Life Insurance Coverage

• Investment Options in Market-linked Funds

• Tax Benefits under the Income Tax Act, 1961

A ULIP is a type of life insurance policy that invests a portion of the premium paid in a variety of funds, such as equity, debt, hybrid, or index funds. You can choose the fund allocation based on your risk appetite and financial goals.

Latest ULIP NAVs

• SBI Life ULIP Funds
• HDFC Life ULIP Funds
• Axis Max Life ULIP Funds
• ICICI Prudential Life ULIP Funds
• Tata AIA Life ULIP Funds
• Bajaj Allianz Life ULIP Funds
• Aditya Birla Sun Life ULIP Funds
• Kotak Life ULIP Funds
• PNB MetLife ULIP Funds
• Canara HSBC Life ULIP Funds
• Pramerica Life ULIP Funds
• Bandhan Life ULIP Funds
• Aviva Life ULIP Funds
• Bharti AXA Life ULIP Funds
• Edelweiss Tokio Life ULIP Funds
• Future Generali India Life ULIP Funds
• Exide Life ULIP Funds
• Reliance Nippon Life ULIP Funds
• IndiaFirst Life ULIP Funds
• Ageas Federal Life ULIP Funds
• Star Union Dai-ichi Life ULIP Funds

Fund Name	NAV	AUM	5 Yr Returns	10 Yr Returns
SBI Life Balanced Fund	₹74.29	₹22084 Cr	8.62%	10.36%	View More
SBI Life Bond Fund	₹50.51	₹17457 Cr	5.59%	6.96%	View More
SBI Life Equity Fund	₹204.75	₹83975 Cr	11.41%	12.65%	View More
SBI Life Equity Optimiser Fund	₹55.89	₹2728 Cr	11.72%	12.25%	View More
SBI Life Growth Fund	₹95.93	₹3040 Cr	10.36%	11.93%	View More
SBI Life Money Market Fund	₹36.43	₹434 Cr	5.7%	6.04%	View More
SBI Life Top 300 Fund	₹58.01	₹2025 Cr	11.04%	12.96%	View More
SBI Life Pure Fund	₹26.78	₹1192 Cr	10.59%	-	View More
SBI Life Bond Optimiser Fund	₹22.52	₹3285 Cr	7.54%	-	View More
SBI Life Bluechip Fund	₹10.21	₹3014 Cr	-	-	View More
SBI Life Balanced Pension	₹74.55	₹807 Cr	9.22%	11.21%	View More
SBI Life Bond Pension	₹44.78	₹526 Cr	5.43%	7.2%	View More
SBI Life Equity Pension	₹76.68	₹11823 Cr	12.43%	13.45%	View More
SBI Life Growth Pension	₹74.7	₹634 Cr	10.86%	12.39%	View More
SBI Life Money Market Pension	₹33.66	₹138 Cr	5.65%	6.03%	View More
SBI Life Equity Optimiser Pension	₹59.84	₹989 Cr	11.64%	13.02%	View More
SBI Life Top 300 Pension	₹56.51	₹716 Cr	11.16%	13.07%	View More
SBI Life Midcap Fund	₹49.35	₹52995 Cr	19.89%	-	View More
SBI Life Corporate Bond Fund	₹16.39	₹1049 Cr	5.56%	-	View More
SBI Life Equity Elite II	₹52.84	₹12638 Cr	10.57%	12.06%	View More
SBI Life Index	₹49.53	₹112 Cr	12.1%	12.96%	View More
SBI Life Index Pension	₹51.67	₹30 Cr	12.21%	12.99%	View More
SBI Life Discontinued Policy Fund	₹25.3	₹9697 Cr	5.71%	6.09%	View More
SBI Life Equity Elite	₹90.17	₹13 Cr	13.58%	14.99%	View More
SBI Life P-E Managed	₹39.28	₹231 Cr	9.82%	10.62%	View More
SBI Life Guaranteed Pension GPF070211	₹26.48	₹3 Cr	5.27%	6.91%	View More
SBI Life Bond Pension II	₹23.43	₹29479 Cr	5.36%	6.59%	View More
SBI Life Equity Pension II	₹43.26	₹12763 Cr	11.65%	13.15%	View More
SBI Life Money Market Pension II	₹20.57	₹1549 Cr	5.41%	5.76%	View More
SBI Life Discontinue Pension Fund	₹21.35	₹6566 Cr	5.69%	-	View More
SBI Life Group Growth Plus Fund	₹57.95	₹3 Cr	8.99%	-	View More
SBI Life Group Debt Plus Fund	₹40.46	₹113 Cr	6.56%	-	View More
SBI Life Group Balance Plus Fund	₹48.77	₹11 Cr	7.68%	-	View More
SBI Life Group Balance Plus Fund II	₹26.68	₹809 Cr	7.61%	-	View More
SBI Life Group Debt Plus Fund II	₹26.16	₹232 Cr	6.57%	-	View More
SBI Life Group Growth Plus Fund II	₹27.11	₹240 Cr	9.1%	-	View More
SBI Life Group Short Term Plus Fund II	₹21.45	₹21 Cr	6.03%	-	View More
SBI Life Group Money Market Plus Fund	₹12.44	₹2 Cr	1.01%	-	View More

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How Does a ULIP Works?

You can understand the workings of a ULIP, or Unit Linked Insurance Plan, from the steps mentioned below:

• Premium Payment: You pay regular premiums to the insurance company.

• Premium Allocation: The insurer divides your premium into two parts - one for insurance coverage and the other for investment.

• Multiple Fund Choices: You choose from different funds for the investment portion, such as:

  • Equity funds

  • Debt funds

  • Hybrid funds

  • Index funds, and so on

• ULIP Fund NAV: The performance of your investment depends on the Net Asset Value (NAV) of the chosen fund.

• Insurance Cover: A portion of the premium provides life insurance coverage under which your beneficiary gets a death benefit in your absence.

• Flexibility of Investment: You can switch funds or make partial withdrawals based on your financial goals.

• Charges: ULIPs have various charges, such as fund management fees and mortality charges.

• Returns: The returns you receive depend on the market performance and the chosen fund's performance.

• Tax Benefits: ULIPs offer tax benefits on premiums under Section 80C and on maturity proceeds under Section 10(10D) of the IT Act, 1961.

In essence, ULIPs offer a mix of insurance and investment, giving you the potential for wealth creation while protecting your family's financial future.

What are the Features of a ULIP Plan?

The key features of a Unit Linked Insurance Plan (ULIP) are as follows:

1. Free Fund Switching: 

   ULIP plans offer you a wide range of best investment options, depending on your risk appetite and financial goals. Investors compare funds to find the best SIP investment that aligns with their strategy and objectives.

2. Taxation: 

   ULIPs offer tax benefits under Section 80C and Section 10(10D) of the Income Tax Act 1961. 

   • Premiums paid towards ULIPs are eligible for tax deductions up to Rs. 1.5 lakhs per annum

   • The maturity benefits are tax-free if the annual premium paid is below Rs. 2.5 lakhs.

   • The death benefits are also free of tax.

3. Partial Withdrawals: 

   ULIPs allow you to make partial withdrawals from your investment after a lock-in period of 5 years. This can be helpful in case of emergencies or unforeseen expenses.

4. Life Insurance Coverage: 

   ULIPs provide life insurance coverage to the policyholder. In the event of the policyholder's death, the nominee receives the death benefit, which is typically the sum assured plus the value of the units held in the policy.

5. Lock-in Period: 

   ULIPs have a mandatory lock-in period of 5 years. This aims to promote long-term financial planning.

6. Transparency: 

   A Unit Linked Insurance Plan provides transparency by disclosing the allocation of funds and charges. This helps you to get clarity on your investment.

7. Loyalty Additions: 

   Some of the best ULIP plans offer loyalty additions. This can enhance the value of your policy over time.

8. Maturity Benefit: 

   At the end of the policy term, you receive the fund value with your maturity returns. The maturity amount can be in lump sum or periodic payouts as per your choice.

9. Fund Management: 

   Skilled fund managers handle your investments within ULIPs. They aim to provide you with potential returns by making investment choices backed by analysis and research.

10. Top-ups

    ULIPs allow additional investments (top-ups) over and above regular premiums to enhance investment potential.

11. Rider Options

    You can add riders like the following to enhance the coverage for specific needs of your family:

    • Critical illness rider

    • Accidental death benefit rider

    • Disability benefit rider

    • Child benefit rider

    • Waiver of Premium (WOP) rider

12. ULIP charges

    A ULIP plan has charges like premium allocation, fund management, and policy administration, which impact your returns.

Wrapping It Up

ULIPs (Unit Linked Insurance Plans) are investment-cum-insurance plans that combine the benefits of wealth creation and financial protection. This makes them a versatile financial tool for individuals looking to meet their long-term financial goals. Understanding the underlying investment options and costs associated with ULIPs is crucial in making informed decisions and optimizing their benefits.