Benefits of ULIPs

Top 5 Benefits of ULIP Plans

Unit Linked Insurance Plans (ULIPs) offer the dual benefit of life insurance and investment, allowing you to build wealth along with life cover to protect your family. Besides a life cover or impressive returns, ULIPs give you the flexibility to make investment choices as per your risk tolerance.

They also help you achieve various future goals, whether for early retirement planning, health, child education and marriage, or general investment purposes. These plans come with several benefits, including the combination of insurance-cum-investment tools, tax benefits, choice of funds to invest in, flexibility, potential for higher returns, and a fund-switching facility.

Before looking into the benefits of ULIPs, let’s understand what a ULIP is and how it works.

What is a ULIP?

A ULIP plan is an insurance-cum-investment tool that helps you build a corpus to achieve long-term goals and protect your family financially with a life cover. This plan comes with a lock-in period of five years, during which you cannot surrender or partially withdraw funds.

The premiums you pay towards a ULIP are divided into two parts: the first is invested in the fund of your choice, and the remaining is paid towards your life cover. As per your future objectives and risk appetite, you can invest in debt, equity, or both.

The plan provides a set of market-linked funds in which you can choose to invest. You also have the flexibility to easily switch or redirect units from one fund to another. Professional fund managers handle unit-linked plans and decide how to invest the necessary amount of your premium appropriately.

Top 5 Benefits of ULIPs

1. ULIPs Offer Flexibility

   • Choice of Fund Options

     ULIPs come with a range of equity, debt, and balanced fund options. As per your future objectives and risk appetite, you can invest in debt, equity, or both. You can even switch or redirect your units from one fund to another in order to earn maximum returns.

   • Flexibility to Increase Life Cover

     While buying a ULIP, you choose your sum assured. However, some plans allow you to enhance your sum assured at a later stage of life (e.g., marriage, childbirth) to get adequate cover.

   • Top-up Premiums

     With ULIPs, you can invest your lump sum money as a top-up premium above the base premium to maximize the returns on your investment.

   • Rider Protection

     You can easily customize your ULIPs and get additional protection against death, disability, or disease with add-on riders. In exchange for extra premiums, you can enhance your base cover and get protection for specified conditions.

2. ULIPs Offer Transparency

   A Unit Linked Insurance Plan is a highly transparent investment tool. You can easily check the additional charges in the brochure. It also provides regular updates on fund performance, allowing policyholders to track their investments and make informed decisions.

   • Benefit Illustration

     While buying ULIP plans, you can freely ask your insurer for a sales benefit illustration. It gives you detailed information about charges, fees, and premium usage upfront. It also has details about the possible returns based on the chosen sum assured and premium.

   • Product Brochures

     With the help of a ULIP’s product brochure, you can easily understand all the features and benefits offered by the plan. It gives you the upper hand, and you can easily customize the plan as per your needs.

   • Free-Look and Lock-in Period

     A Unit Linked Insurance Plan comes with a lock-in period of five years, during which you cannot surrender or partially withdraw funds. Some ULIP plans come with a free-look period, which is basically a 15-day window during which you can surrender your policy if you are not satisfied with it.

   • Net Asset Value (NAV)

     Once you’ve bought ULIPs, you must check your fund performance regularly. You can easily monitor the performance through the insurer’s NAV update report. NAV is the price at which the units of a fund are purchased. A slight change in your NAV gives you a sign of the performance of your funds.

3. ULIPs Provide Liquidity

   With ULIPs, you can easily make a partial withdrawal after the lock-in period of 5 years. This helps you withdraw a certain amount of money from your policy in case of emergencies. With this feature, you can rest assured that if something goes wrong, you’re financially ready. You can even take an amount whenever you want to achieve your short-term goals. However, if you want to save for long-term goals, it’s best to keep your money in your ULIP.

4. Potential for Higher Returns

   A Unit Linked Insurance Plan can provide higher returns than a traditional life insurance plan, but it also comes with a risk. A portion of your premium is invested in market-linked funds like debt and equity, increasing the opportunity to fetch higher returns.

   Fund managers allocate your premiums into market-linked funds to get higher returns than other sub-optimal investment options such as bank FDs or PPFs. As a policyholder, you can increase your chances of higher returns by starting to invest early, switching funds in a timely manner, being consistent with investment, and reviewing your fund performance regularly.

5. ULIPs Tax Benefits

   Similar to other life insurance and investment options, ULIPs also offer income tax benefits. They provide seamless tax benefits during all stages of the policy:

   • Entry Advantage

     You can get up to Rs. 1.5 lakhs tax exemption on the premium paid towards the plan under Section 80C and Section 80D.

   • Return Advantage

     The returns on your investment are tax-free.

   • Exit Advantage

     At maturity, you’ll receive a maturity benefit, which shall be tax-free under Section 10 (10D).

Conclusion

Nowadays, ULIPs are considered a flexible financial tool because they combine investment and insurance elements. To get higher returns, you must regularly monitor your plans to ensure they fit your risk tolerance. For further assistance, you can easily talk to our financial experts and make the right choice for your better tomorrow. You can easily contact us through the website Policyx.com or call us at 1800-4200-269.