A Unit Linked Insurance Plan is a variant of a life insurance policy that provides combined benefits of investment opportunity in bonds and equity along with adequate insurance coverage. It requires you to pay regular premiums, a part of which is used to generate insurance coverage for you and the rest is proportionally invested in multiple assets like equity, bonds, or even both, for a specified time. Whether you’re looking to generate wealth or attain financial security for your family, a Unit Linked Insurance Plan is certainly the perfect choice for you. Here’s a list of some amazing benefits offered by the various types of ULIPs available in the Indian financial market:
Combined Benefit of Insurance and Investment
With a Unit Linked Insurance Plan, you can enjoy the benefits of insurance for the financial safety of your loved ones in case you die during the policy tenure, along with returns on investment that allow you to accumulate wealth in case you survive till the end of the policy tenure.
A predetermined part of the premiums you’ve paid towards the benefits of your policy is used to make financial investments in assets like debt and equity. This allows you to generate a sufficient corpus to fulfill your dreams in life.
Tax Benefits at Every Step
As a policyholder of a Unit Linked Insurance Plan, you can enjoy various tax benefits as a part of the policy benefit at every stage of your investment, from returns to withdrawals. You can enjoy tax rebates through the amazing benefits of ULIPs.
The premiums you’ve paid towards the policy are also eligible for tax deductions. They aren’t like mutual funds that are associated with tax burdens. Instead, once you’ve completed the lock-in period of your ULIP, you can choose to withdraw the returns without any taxation.
Even the assured sum, often known as maturity amount, is exempted from taxes including the maturity proceeds.
Variety of Top-Ups
If you want to increase your investment amount, ULIPs provide you a top-up facility that allows you to invest extra money in your present policy. This allows you to make your investments higher when your chosen funds are performing well to maximize your returns on investment. With the top-up facility of ULIPs, you can accumulate wealth without any extravagant efforts.
Highly Customizable Investments
As you may already know that Unit Linked Insurance plans allow you to invest your capital in various assets like bonds, debt, and hybrid funds, it also makes your investments highly personalized by allowing you to switch between various fund options based on their risk profile and returns provided. Additionally, it also allows you to orient your investments as per your risk appetite. The best thing is that all these changes are completely free from any additional charges. If you have the habit of tracking the market and following trends, you can make good use of this feature of ULIPs and maximize your returns on investment. Moreover, as everything is available online, you can switch between multiple fund options from the comfort of your home.
Structured and Transparent Charges
When you purchase a ULIP policy, you have to pay five different charges namely premium allocation charges, policy administration charges, surrender charges, fund management charges, and mortality charges based on the decisions you make throughout your policy tenure:
- The administration charge is allocated for the maintenance of your policy
- In the starting years of your investment in ULIP, you may have to pay higher premium allocation charges because of underwriting and fund management costs
- The charges usually fall between 0.5-2%
- A surrender charge is levied when you surrender your policy before its maturity age
- The mortality charge varies as per the life cover chosen by you under your policy
During the initial years of your investment, you are charged slightly higher charges. However, as compared to other insurance plans, the charges involved in ULIPs are lesser and returns are usually more lucrative than other investment options.
As ULIPs are known to provide good returns in the long run, you never have to worry about these charges at all. According to the regulations of IRDAI, the charges for ULIPs are capped at 3%, which means you won’t have to pay any more than 3% of your policy value for the charges.
Higher Liquidity of Funds
Unit Linked Insurance Plans also consist of a lock-in period that consists of a minimum of three to five years. Once you’ve completed the lock-in period of your policy, you may choose to discontinue the investment and walk away with the benefits accumulated.
The accumulated financial corpus is transferred to a discontinuance fund in such cases. Moreover, it’s legally mandatory for the insurer to provide you the returns on your investment. However, you cannot enjoy the liquidity of funds during the lock-in period.
It shouldn’t be a problem as the lock-in period is usually less in ULIPs and it’s worthless to discontinue a policy in a short period. You can easily withdraw your money after finishing the lock-in period, which makes ULIPs highly liquidated.
More Features Than Any Other Policy
ULIPs are considered to be far more favorable investment options than any other traditional investment option. It not only allows you to invest your capital in different funds like debts and equity but also provides tax benefits that help you save even more money. Additionally, they are much more affordable and beneficial in the long run. Not to mention, you also receive adequate coverage that keeps your family protected in case of any mishap.
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There are numerous investment options available in India as per the ranging needs of consumers. Among the several different types of investment options available, the Unit Linked Insurance Plans offer the most promising returns along with great security coverage. If you want to build wealth and safeguard your family’s future at the same time, make sure you consider investing in a ULIP.