What is ULIP?
ULIP – Unit Linked Insurance Plans. It’s a kind of life insurance product with a combination of insurance and investment or we can say this is a market linked insurance plan. ULIP provides risk cover for the policy holder along with investment options to invest in stocks, bonds or mutual funds. Here policyholder can pay a premium monthly, Quarterly, Annually or can also take plan by paying one time/single premium. A small amount of the premium goes to secure life insurance and rest of the money is invested just like a mutual fund does. Policyholder goes on investing through the term of the policy – 5 to 20 years and accumulates the units. ULIP offers Policy holder options that invest in equity and debt. An aggressive investor can pick equity oriented fund option whereas a conservative one can go with debt option as per options available in plan. If you have a long term view you may go for equity oriented fund option for better growth as per the experts. There is a choice of funds available to all types of investor. Here Policy holder have option to choose funds/portfolio for investment as per his risk appetite and needs. ULIP can offer you double digit returns if you are invested in equity funds, Where as traditional insurance plans offer 4% to 6% returns.
Unit linked insurance plans allow policy holder to closely monitor their portfolios. They also offer the flexibility to switch your capital between funds with varying risk-return profiles. There is flexibility to switch between funds available under a unit linked plan.
You may switch units between equity and debt funds, in times when there is market volatility or interest rate fluctuations.
A fee is charged for administration, fund management & switching of units from your policy. These charges are deducted by cancelling units.
You can make a Partial or full withdrawal of your policy before its maturity date. However, surrender charges will be applicable in this case.
Premium paid towards a ULIP is eligible for a deduction under Section 80C. Additionally, the returns out of the policy on maturity are exempt from income tax under Section 10(10D) of the Income-tax Act.
ULIP can be a best for wealth creation along with risk cover and for the goals like retirement planning, children’s education or another important events you may wish to save for.
