The full form of ULIP is Unit Linked Insurance Plan. ULIPs are best suited for individuals with a long term financial plan of wealth creation and insurance. Whether it is for retirement, children's education or for other financial goals, a ULIP continued till maturity works as an advantage. It gives you the dual benefit of savings and protection, all in a single plan.
- Offer flexibility
- Offer transparency
- Encourage goal-based savings
- Offer tax benefits
- Offer Liquidity
5 reasons you should invest in ULIPs:
1. ULIPs Offer Flexibility
- Flexibility to choose your fund option: Most ULIPs come with a range of equity, debt and balanced fund options to choose from. As a result, you can invest your money as per your risk appetite and return expectations. ULIPs also give you the opportunity to move your money between different funds in order to help you earn maximum returns.
- Flexibility to change your Life Cover: With ULIPs you have the flexibility to choose your Sum Assured* at the beginning of your policy. Some ULIPs also allow you to increase your Sum Assured over the term of the plan to suit your protection needs at different stages in your life (E.g. marriage, childbirth, etc.). *Sum Assured is the fixed minimum amount that your nominee receives in your absence.
- Flexibility to change your premium investment amount: ULIPs also allow you to pay a top-up amount, over and above your existing premium. You can use this option to maximize the returns from your investment.
- Flexibility to opt for a rider: Riders are optional features you can choose to customize your ULIPs and get additional protection. One of the most common riders is the Unit Linked accident and disability benefit rider. It increases the Life Cover amount that the family receives in the event of an accidental death. It also ensures that your Life Cover continues in case of disability caused by an accident.
^Life Assured is the person for whom the life/health insurance policy has been issued.
2. ULIPs Offer Transparency
The working of charges in ULIPs is transparent and enables you to make informed decisions with the help of the following features:
- Benefit illustration: As a customer, it is your right to ask for a sales benefit illustration. A benefit illustration helps you understand your premium usage and policy charges. It also highlights important information about the possible returns on the basis of the chosen Sum Assured* and premium.
*Sum Assured is the fixed minimum amount your nominee receives in your absence.
- Product Brochures and key feature documents: While benefit illustrations play a significant role in explaining the measurable aspects of ULIPs, it is important for you to understand other features and benefits offered by ULIPs.
You can go through the product brochure to understand your policy benefits in detail. Once your policy is issued, you will get a key feature document summarizing the key features of the plan. This, along with the product brochure ensures a complete understanding of the plan that you have purchased.
- Free-look period: Most life insurance plans including ULIPs come with a free-look period. This is typically a 15-day window, during which you can cancel your policy if you are not satisfied with it. You will be paid back the entire premium after deducting applicable charges as listed in the policy.
- Net Asset Value (NAV): It is important to monitor the performance of your policy on a regular basis. To help you do this the company publishes daily NAV updates. NAV is the price at which the units of a fund are purchased. A change in the NAV value (increase or decrease) gives you an indication of the performance of your funds.
3. ULIPs Encourage Goal-Based Savings
In order to fulfil your important life goals like buying a home, providing for your children’s higher education or ensuring a comfortable retirement, you need to save. ULIPs, begin long-term systematic investment options, are one of the most practical ways to do so.
Designed to address key financial goals, ULIPs help you invest your money in a disciplined manner. In the absence of such an approach, there is a risk of your long-term goals being compromised to fulfil short-term needs.
4. ULIPs Offer Tax Benefits
ULIPs are efficient tax saving instruments which offer unmatched tax benefits during all stages of your policy:
- Stage 1: Entry Advantage – You receive tax benefits* on your premium payments, under Section 80C and Section 80D
- Stage 2: Earnings Advantage – The returns on your investment are not taxable.
- Stage 3: Exclusive Switching Advantage – You can make completely tax-free* debt-equity Switches.
- Stage 4 Exit Advantage – You also receive a Maturity Benefit which shall be tax-free under Section 10 (10D).
5. ULIPs offer Liquidity
One of the features of a ULIP is that it offers partial withdrawal of money after the 5-year lock-in period. This feature allows you to withdraw a certain percentage of money from your policy in times of your need.
This ensures that you stay financially prepared in case of an emergency. You can also withdraw the amount at various intervals as per your need.
However, in order to help you achieve your long-term financial goals, such as your child’s education, buying a house, and more, it is advisable not to withdraw from your ULIP unless in case of an emergency.
Unlike traditional products, Unit Linked Insurance Plans are subject to market risk. It is important to note that market volatility affects the plan's NAV. The customer shall be responsible for his/her decision. The Insurance company, Product names, or fund options do not indicate their quality or future guidance on returns. Funds do not offer guaranteed or assured returns.