Unit Linked Insurance Plan or ULIP is a multi-faceted 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 remaining 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 individuals with long-term financial planning. A ULIP plan also allows the investors to switch between investments such as debts and equity. In this article, let us understand everything about a ULIP plan, including its benefits and features.
Benefits of Unit Linked Insurance Plan
A Unit Linked Insurance Plan gives an opportunity to invest in market-linked financial instruments while providing a life cover. Other than that, here are some of the key benefits provided under a ULIP plan: -
-
Life Cover with Savings
Apart from investing a part of your premiums into 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.
-
Flexibility
A Unit Linked Insurance Plan offers flexibility in multiple ways. You can switch between your investment funds, make partial withdrawals after 5 years, make single premium additions to invest more sums of money.
-
Death Benefit
A ULIP plan offers death benefits in the unfortunate event of the policyholder's death. The death benefit provided under a Unit Linked Insurance Plan may vary with the insured's cause of death.
-
Even Distribution of Charges
As per the IRDAI guidelines, the charges put on a ULIP plan is evenly distributed during the 5-year lock-in period. It helps the investors to eliminate the high front-end expenses.
-
Level Paying Premiums
All the premium paid under a Unit Linked Insurance Plan has a uniform payment structure. The additional payments are treated as a single premium to provide life cover.
-
Tax Benefits
The premium paid toward a Unit Linked Insurance Plan is eligible for tax deductions under section 80C of the Income Tax Act, 1961. Also, the maturity benefit paid under a ULIP plan is tax-exempt under section 10(10D) of the IT Act.
Things to Remember When Buying ULIP Plan
Make sure to evaluate and understand the ULIP plan well before investing in it. Here are some of the key things that you should consider before buying the ULIP plan: -
- Credibility of the Insurer
As an investor, you must check the insurance company's credibility before buying a Unit Linked Insurance Plan. Since it is a long-term investment, you must be sure if the insurer will be able to provide the policy benefits when the time comes. Check the customer reviews past records, or go through the articles about the insurer.
- Charges Involved
The Unit Linked Insurance Plan may levy various charges, including top-up charges, administration charges, fund management charges, etc. Make sure that you are aware of all the charges involved in the ULIP plan.
-
Risk Appetite
Under a ULIP plan, a part of your premium is invested into market-linked funds of your choice. This plan also offers you the flexibility to choose between investment funds. Therefore, choose your fund options wisely as per your risk profile.
-
Sum Insured
The sum insured under a Unit Linked Insurance Plan is paid to the nominee in case the policyholder passes away. It can help your family take care of their financial needs when you are not around to earn a paycheck. Therefore, it is essential to opt for a sufficient sum insured to keep your family financially secure.
-
Lock-in Period
A ULIP plan usually has a lock-in period of 5 years. This is because the investments need a minimum period to yield returns. You can make partial withdrawals only after the completion of the lock-in period. It is vital that you are aware of the policy lock-in period.
If you are looking to save taxes, you can check out how to save tax with ULIP. There are many options to buy a ULIP plan in the market today, and finding the right one can be difficult. Buying a ULIP plan from Max Life Insurance can be beneficial. They are a reputed brand that offers this plan at an affordable rate and with extensive benefits.
