Top 5 Benefits of ULIP Plans

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

It even helps you achieve various future goals, whether for early retirement planning, health, child education and marriage, or 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 return, and fund switching facility.

Before looking into the benefits of ULIP, let’s look at what ULIP is and how it works.

What is ULIP?

ULIP plan is an insurance cum investment tool that helps you to 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, wherein you cannot surrender or partially withdraw funds during this period.

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

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

Top 5 Benefits of ULIP

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 & 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 have to choose your sum assured. But some plans allow you to enhance your sum assured at a later stage of life (E.g. marriage, childbirth, etc.) 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 on the brochure. It also provides regular updates on fund performance, allowing policyholders to track their investments and make informed decisions.

   • Benefit Illustration

     While buying a Best 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 on the basis of the chosen sum assured and premium.

   • Product Brochures

     With the help of 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, wherein you cannot surrender or partially withdraw funds during this period.
     Some of ULIP’s plans come with a free-look period. It 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 the ULIPs, you must check your fund performance on a regular basis. You can easily monitor the performance of 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. It helps you withdraw a certain amount of money from your policy in case of emergencies. With this feature, you can rest assured if something goes wrong, you’re financially ready. You can even take an amount whenever you want to achieve your short-term goals. But 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. Some of your premium portion 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

   Same as other life insurance and investment options, ULIPs also offer income tax benefits. It provides seamless tax benefits during all stages of policy:

   • Entry Advantage

     You can get up to Rs. 1.5 lakhs tax exemption on the premium paid towards the plan under 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.