Unit Linked Insurance Plans

It's not risky to invest in ULIP if you chose a safer path. Risk factor in ULIPs depends on the investment option you choose. If you are not okay with sharp movements, then choosing a low risk investment is a better idea. For people with high risk appetite, it's good to choose equity funds while risk-averse investors can go for debt funds.

You can opt for settlement option if you want to take your fund value in periodic installments. With the settlement option, you can get your maturity amount in installment as per the frequency chosen by you over a maximum period of 5 years. You can choose complete withdrawal of fund value at any point of time. Although, you will not get any life cover during this period.

ULIPs are life insurance products that provide paths to invest. And just like other investment option, there's no guaranteed investment return in a ULIP. Although, if you like taking risks and want to earn more returns on your investment, then opt for equity funds.

At the time of maturity of ULIP policy, you will get the fund value on your prevailing NAV. Fund value is the number of units of policy multiplied by NAV (net asset value).

Value of the fund = Total units of policy x NAV (Net Asset Value)

Well, discontinuing your premium payment will disrupt your savings as well as financial goals. In such case, you can approach your insurance company and ask for the revival of discontinued policy within the stipulated timelines. Also, you will have to pay all the unpaid premiums.

ULIP plan is a combination of investment and insurance. Thus, one must hold this plan for a duration of at least 10 years so as to get investment benefits out of it. As an early exit will have its own consequences. ULIPs have a lock-in-period of 5 years. Thus, you may surrender your policy before the completion of 5 years, but you will be paid only after the end of 5 years.

Generally, minimum lock-in period for ULIP is 5 consecutive policy years. During this time period, if the policyholder discontinues or surrenders the policy, then he/she will not able to receive any payouts. Withdrawals are only allowed at the end of the lock-in period. In addition to this, if you surrender your policy before the lock-in period ends, then you will have to pay surrender charges as well. Also, it is advisable not to exit your plan after the completion of 5 years of lock-in period, because if you stay invested for a longer duration it will help you reap better benefits.

The amount that you pay towards the Unit Linked Insurance Policy is eligible for tax deduction as per Section 80C of the Income Tax Act, 1961. This means that the premium amount paid will be deducted under section 80C from your taxable income up to a maximum limit, which is currently ₹1.5 Lakhs. However, the aggregate amount of deductions under section 80C, section 80CCC and 80CCD (1) shall not, in any case, exceed ₹1.5 Lakhs. Also, upon the maturity of the policy, the payout amount you receive will be exempt from income tax, subject to the applicable provisions of Section 10(10D) of the Income Tax Act, 1961.

Here’re the following major benefits of buying ULIP

1. Tax Benefits – It helps you to reduce tax liabilities. This means you are liable to enjoy tax benefits on the premiums paid towards the policy as per Section 80C of the Income Tax Act.

2. Long-term growth– One of the major benefits of buying a ULIP plan is that it offers long-term benefits. ULIPs come with a lock-in period of 5 years which will keep you invested for a longer period.

3. Dual benefits – ULIPs not only offer life coverage but also come with a wide range of investment funds that will help you earn great returns. This includes balanced funds, debt funds or equity funds. You can invest in any of them depending on your need and risk appetite.

4. Flexibility – It gives you the flexibility to switch between funds basis your risk appetite. You could select multiple funds and different investment strategies.

5. Partial withdrawal option – It allows you to make partial withdrawal in case of any uncalled medical emergency or contingency after completion of lock-in period.

ULIP is a perfect investment option if you are looking for long term wealth creation. It could be buying your own house, a new car, going on a long vacation, or your child’s higher education or marriage, ULIP helps you to meet all your long-term financial goals. Moreover, it comes with a lock-in period of 5 years which keep you invested for a longer period and helps you earn better returns. The lock-in period is calculated from the date when the policy is issued.

The best time to invest was yesterday, the next best time is today. This statement fits aptly in the case of ULIPs as well. The earlier you can invest in ULIPs the more time you will give your investment to grow. This will help you achieve your goals.

Fund value in ULIP refers to the collective monetary value of all the units owned by you in the policy. For example, if you own 10,000 units of equity, each priced at 10 Rs then your fund value will be Rs 1 lakh (10,000x10).

A ULIP plan offers you a host of funds to choose from according to your risk appetite and preference.

ULIP not only allows you to invest and grow your wealth but also provides life coverage. Thus, it cares for you and your family from any uncertainty that can occur.

ULIP also provides you full transparency and control relating to your investments, helps you avail tax deductions, and inculcates saving habits.

All these factors make ULIP one of the best investments in the market.

Yes, you can cancel/surrender your ULIP plan. This cancellation will incur expenses in the form of discontinuance charges if done before the lock-in period is over. Also, this ceases your life cover benefit as well. This is why discontinuing your policy is not advisable.

You can withdraw free of any charge after the initial lock-in period. This lock-in period is generally 5 years. Some plans have a fixed number of withdrawals after that you are charged. While some plans give you unlimited free withdrawals as well.

If you want to withdraw before the lock-in period, you will have to incur the policy changes.

The main difference between SIP- a systematic investment plan and ULIP is that ULIP offers you insurance as well. In SIP, you are required to invest a certain sum of money at an interval chosen by you. This reduces the market risks and helps you grow your wealth over some time.

ULIP, on the other hand, provides you with an option to invest your funds systematically and earn a return and gives your life coverage as well. ULIP gives you chance to invest in your own chosen fund. So, you not only get market-linked returns but also insurance cover.