Unit Linked Insurance Plan or ULIP is a multifaceted insurance product. It is basically a combination of investment and life insurance. Under this plan, the policyholder pays a regular premium, part of which is used to provide life cover. And the rest is invested in financial instruments similar to mutual funds.
By investing in a ULIP plan, you can stay financially secure while building an adequate corpus. This plan is best suited for people with long-term financial planning. A ULIP plan also allows investors to switch between investments such as debt and equity. In this article, let’s understand everything about a ULIP plan, including its benefits and features.
Unit Linked Insurance Plan Benefits
A unit-linked insurance plan gives the opportunity to invest in market-linked financial instruments while providing life coverage. Apart from this, here are some of the major benefits provided under an ULIP plan:-
In addition to investing a portion of your premiums in market-linked instruments, a ULIP plan helps protect you and your family by providing life insurance coverage. With the need for protection against uncertain events out of the way, you can develop saving habits and build wealth over time with a ULIP plan.
A unit-linked insurance plan provides flexibility in several ways. You can switch between your investment funds, make partial withdrawals after 5 years, make single premium additions to invest more money.
A ULIP plan provides death benefits in the unfortunate event of the insured’s death. The death benefit provided under a unit-linked insurance plan may vary depending on the cause of death of the insured.
Uniform load distribution
In accordance with IRDAI guidelines, fees charged on a ULIP plan are spread evenly over the 5-year lock-up period. It helps investors eliminate high upfront expenses.
All premiums paid under a unit-linked insurance plan have a uniform payment structure. Additional payments are treated as a single premium to provide life cover.
The premium paid for a unit-linked insurance plan is eligible for tax deductions under Section 80C of the Income Tax Act 1961. In addition, the maturity benefit paid in the under a ULIP plan is exempt from tax under Section 10 (10D) of the IT Act.
Things to remember when buying a ULIP plan
Make sure you evaluate and fully understand the ULIP plan before investing in it. Here are some of the key things you should consider before purchasing the ULIP plan:-
- Credibility of the insurer
As an investor, you should check the credibility of the insurance company before purchasing a unit-linked insurance plan. Since this is a long-term investment, you need to be sure that the insurer will be able to provide the benefits of the policy when the time comes. Check customer reviews on past cases or browse articles about the insurer.
The unit-linked insurance plan may levy various fees, including top-up fees, administration fees, fund management fees, etc. Make sure you are aware of all fees involved in the ULIP plan.
Under a ULIP plan, part of your premium is invested in funds linked to the market of your choice. This plan also offers you the possibility to choose between investment funds. Therefore, choose your fund options wisely based on your risk profile.
The sum insured under a unit-linked insurance plan is paid to the applicant in the event of the death of the policyholder. It can help your family support themselves financially when you’re not around to earn a salary. It is therefore essential to opt for a sufficient amount of insurance to ensure the financial security of your family.
A ULIP plan usually has a lock-in period of 5 years. Indeed, investments need a minimum period to generate returns. You can only make partial withdrawals after the blocking period has ended. It is essential that you are aware of the lock-in period of the policy.
If you are looking to save taxes, you can find out how to save taxes with ULIP. There are many options for buying a ULIP plan on the market today, and finding the right one can be difficult. Purchasing an ULIP plan from Max Life Insurance can be beneficial. It is a reputable brand that offers this plan at an affordable price and with many benefits.