What is Unit Linked Insurance Plan (ULIP)
A unit linked insurance plan (ULIP) is a plan that offers the dual benefit of investments to fulfill your long-term goals and life insurance to protect your family in case of an unfortunate event. The premium paid towards a ULIP is divided into two parts, with one part invested in the fund of your choice and another half contributed as cover for you or someone else’s future. You can choose from equity funds, debt funds, or any combination thereof – depending on how much risk you are willing to take! This makes them ideal investment options for anyone who has their eye set on making long-range plans happen while also ensuring their loved ones are taken care off financially should anything happen unexpectedly.
There are 5 benefits to investing in Unit Linked Insurance Plan (ULIPs)
-Freedom to Choose Your Life Insurance
You can choose the amount of Life Cover that you want to buy. This is a significant difference from other insurance policies which generally offer no more than 10 times your annual premium. Like most ULIPs, most often your minimum Life Cover amounts are as high as 40 times or even higher in different plans depending on what company and policy you purchase with them.
-Freedom to choose your investment opportunities
Both equity and debt funds invest in companies, stocks or other financial instruments. Equity funds are investments that include buying shares of a company or investment firm, whereas the Debt Funds are investing with loans given to companies. Balanced Funds have equal proportions invested in both types of funds-that is, they mix up proportionally over 50% each for equity and debt fund investments.
ULIPs give you the power to invest in different funds, based on your investment goals and risk appetite. For example, if you want to grow wealth without taking too much risk or getting wild swings in returns (too much volatility), equity investments might be a good choice for you. Similarly, if long-term stability is what matters most to your investment portfolio and not short term gains with high ups and downs (which can cause damage over time), then perhaps debt investments are the way to go!
You can make the switch between equity and debt funds by using an option called a “switch.” Most insurance policies offer a fixed number of free switches in a year, with additional ones costing money.
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-Liquidity
Unit Linked Insurance Policies are flexible in that they allow you to take money out with ease. The option part, called partial withdrawal+, allows you to withdraw a portion of the money invested into your insurance policy. This option helps make it easier on you financially and not be as reliant on having access to this kind of “insurance” every time an emergency happens or when children need extra funds for their education-related expenses such as their 10th, 12th or graduation fees . Partial withdrawals are free from any cost.
-Goal-based planning with Unit Linked Insurance Plan (ULIPs):
ULIPs are structured to help you secure your key goals such as the potential for wealth creation, retirement planning or saving for your child’s education. They also give you the added benefit of knowing that your premium is working towards securing your future goals.
-Income Tax Benefit
Under the Income Tax Act, 1961, you can save tax on your hard earned money by investing in a ULIP. You might get tax advantage at different stages of your life insurance policy throughout its duration: Entry Advantage – when you buy; Exclusive Switching Advantage – when you sell; Exit Advantage- upon maturity or surrender period.
Stage 1: Entry advantage gives an instant tax break^ on premium payments under Sections 80C for new policies from November 15th 2016 to December 31st 2020 inclusive (inclusive of both entry and exit), subject to conditions as specified in Section 10(10D).
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Here are the top 5 ULIPs available in India
#1. ICICI Pru Signature ULIP Plan
This investment portfolio can help you increase your income, but also gives you financial protection for your family. The plan includes regular disbursements that allow the investor to reap the benefits of their insurance regularly. Premiums in this package are tax-deductible and will not incur additional allocation costs like those found in many other packages. Wealth boosters begin at 10 years with a maximum age of 99 years old if desired by purchaser, just one more added benefit for investing with us!
#2. Edelweiss Tokio Wealth Plus Plan
Edelweiss Tokio Wealth Plus is an investment program that helps you save for your future. It contributes more dollars to your investments, making it easier and cheaper to invest over time! If you continue investing with Edelweiss’s help, the company will have invested 1% in the first five years, 3% again in 6th-10th year plans and 5% thereafter. In 16-21st year plans this contribution grows from 7%.
#3. HDFC Life ProGrowth Plus Plan
The HDFC Life Click 2 Wealth Plan is indeed a household financial product with a business insurance scheme, but only in the sense that it is not an investment or venture. The client does not benefit from any bonuses, profits, or other benefits because this ULIP plan doesn’t function like most others do – where the assurer “participates” to receive these things as part of their share.
#4. Canara HSBC OBC Invest 4G
The unit-linked insurance option ‘Invest 4G’ was created by Canara HSBC Oriental Bank of Commerce Life Insurance (ULIP). This financial plan can be tailored to the individual’s needs, and is designed for long-term goals and objectives. It had a feature called Portfolio Management Options which allows you to select your degree of protection that best meets your needs without becoming overwhelmed.
#5. HDFC Life Click 2 Wealth
HDFC Life Click to Wealth is a non-participating unit-linked life insurance plan with business profits, low fees and vital economic security for you and your family. The Premium Waiver option might assist in protecting the future of your child/spouse. With the Golden Years benefit option, investors may properly prepare for their retirement or have market-linked returns as stated on our website. You’re also able to protect what you’ve built through this policy by finding out which 8 funds are best suited to meet your objectives – there’s no restrictions on how many switch ups can be used!
ULIP is a type of insurance that combines life insurance and investing. It offers a mixture of earning and coverage into one product, with various investment options available in liquid assets, fixed income instruments or stocks. If the policyholder dies while the ULIP is active, he or she can be paid for by their nominee who will receive coverage on behalf of their loved ones until they are able to take care of themself again. In addition to this point if the policyholder lives past his or her term (which usually ranges from 5-10 years), then he or she would also get a maturity benefit at that time which may pay more than 50% more than what was originally invested. The idea behind an ULIP is that it provides financial security for your loved ones when you’re gone.
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Frequently Asked Questions around Unit Linked Insurance Plan (ULIPs)
-Is Unit Linked Insurance Plan (ULIP)the right investment option?
There are many types of investments, such as stocks, bonds and mutual funds. One of the popularly known options is Unit Linked Insurance Plan (ULIPs), which offer both insurance and investment. ULIPs offer life cover with good returns; in fact, they have become one of the best investment options for you to invest your money today on your long-term goal.
-Is Unit Linked Insurance Plan (ULIP)better than a fixed deposit?
ULIPs give you the flexibility to change your allocation. For instance, when investing in a Fixed Deposit Account or Term Deposits, there is no death benefit offered and all funds will be lost upon account closure. The interest rate of ULIPs are more stable than fixed deposits due to the guarantee from Legal insurance which comes with it as part of a ULIP policy.
-Are Unit Linked Insurance Plan (ULIP) risky to invest?
Before investing in a Unit Linked Insurance Plan (ULIP), it is important to understand how these funds are based on stock market investments. The only risk faced by the investor is any change in overall market performance due to events outside of the investors control.
-What’s better: ULIP or ELSS?
An ELSS is better for those who are investing in the long run and like to have a market exposure of their capital. ULIPS, on the other hand, offer insurance plans that accompany investment products but not as an efficient way to invest money without tax benefits.
-What is the lock-in period for the ULIP?
ULIPs have a mandatory five-year lock in period.
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