Meaning of ULIP and Its Benefits

Have you been planning to make a worthy investment? Have you been considering your investment options for months now? If you wish to make a profitable choice, it is advisable to opt for ULIP.

What Does ULIP Mean?

Unit Linked Insurance Plan or ULIP is the ultimate combination of life insurance as well as investment. A life insurance policy investment type, ULIP requires the policyholders to make regular premium payments. It must be noted that a part of the premiums paid is used to provide life insurance coverage. The portion left is combined with other policyholders’ assets. Thereafter, it is invested in financial instruments such as equity and debt.

It must be noted that assets under ULIPs are managed by dedicated fund managers. The key objective of the fund managers is to attain specified investment objectives. When an individual buys a ULIP fund, you are required to commit an initial lump sum payment. Subsequently, they are required to make premium payments towards the plan, whether annually, semi-annual, or monthly. The premium payment obligation differs based on ULIP plans. One of the key things to note is that ULIPs come with the flexibility, i.e., the investors can choose their fund preferences based on their specific needs.

What Are the Benefits of ULIPs?

The prime benefits of ULIPs are:

• Market Linked Returns: ULIPs grant an opportunity to earn market-linked returns. This is done by allocating a portion of the premium invested into debt and equity instruments in varying proportions.

Must Read: Which ULIP Plan Is Best?

• Life Protection with Savings: Other than assigning a specific portion of the premium invested into market-linked instruments, ULIPs also help in protecting the policyholder and their loved ones against any emergencies in life. Overall, your ULIP takes care of your protection needs while you enjoy market returns.
• Flexibility: ULIPs give the policyholder a chance of fulfilling their financial objectives by offering the flexibility switch between investment funds on the basis of their changing requirements. Moreover, by allowing partial withdrawals after the lock-in period and making single premium additions to invest an additional sum when required.
• Even Distribution of Charges: As per the IRDAI, the charges levied on ULIP plans are evenly distributed during the lock-in period of 5 years. It is done in order to ensure that the insurance companies eliminate the high expenses.
• Level Paying Premiums: All premium payments whether limited-term or regular possess a level or uniform premium payment structure. Any additional premium payment is treated as a single premium in order to offer life insurance coverage.
• Tax Benefits: The premium paid for ULIPs qualifies for tax deduction under Section 80C, up to a maximum of Rs. 1.5 Lakh. Note that the maturity/death benefit received under a ULIP policy is also tax-exempt as per Section 10(10D) of the Income Tax Act 1961.

That said, go ahead and buy your ULIP today!

Also read: Who Regulates ULIP In India?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.