Some Frequently Asked Questions About ULIPs

ULIPs are well-known among investors as a great investment instrument for creating investing habits and providing investors with flexibility. As a consequence, investors are unconcerned about these plans because they are flexible enough to meet your investing objectives. We've answered the most commonly asked questions about ULIP plans in this post.

Frequently Asked Questions About ULIPS

The following are the most typical questions that all investors have while considering a ULIP investment:

Is There A High Level Of Risk In ULIP Plans?

The premium paid in unit-linked life insurance policies is subject to capital market investment risks, and the Unit Price of the units may grow or fall based on the fund's performance and other variables impacting the capital market and the insured/policy. This is why these programs guarantee a greater rate of return.

Is it Possible to Make a Partial Withdrawal from a ULIP Plan?

ULIPs allow investors to withdraw funds from their accounts to cover unforeseen expenses, thereby creating an emergency fund. The money can be taken out in one single payment or in installments. In other cases, however, the policy stipulates that the life guaranteed must be at least 18 years old to make withdrawals.

Is it Possible for an Investor to Switch Funds under a ULIP Plan?

You can move units between your investment funds based on your risk tolerance and investing preferences. ULIPs are basically combined investment and insurance products with a wide range of investment terms and conditions. This aspect of fund switching helps to safeguard your returns by insulating them from market fluctuations and the subsequent expected reduction in fund performance.

What Are the Tax Advantages of ULIPs?

Under sections 80C and 10 of the Income Tax Act, you may be entitled for tax advantages on the premiums you pay for ULIP plans (10D). Investors can benefit from higher profits based on current market circumstances with these strategies.

What Are the ULIP Plans' Exclusions?

If the policyholder dies by suicide within 12 months of the policy's start date, the nominee or beneficiary is entitled to the single premium fund value and top-up premium fund value, as available on the date of intimation of death.

What Does ULIP Plans' Top Up Feature Mean?

Additional contributions can be made in addition to the normal premiums, if the possibility is indicated in the Policy. In ULIP plans, this is referred to as the Top Up Feature.

What is the Length of the Lock-in Period for these Plans?

The policyholder cannot receive the funds of the policy until the policyholder dies or the policy's covered events occur, which is a 5-year term commencing on the policy's commencement date. During this time, the benefit of partial withdrawal is not available.

Are ULIPs a Good Long-Term Investment Option?

Investors like ULIPs as a long-term investment choice. These plans' net returns are nonetheless high when compared to their peers. These plans operate well under the correct circumstances and produce strong long-term returns.

What Kind of Flexibility do ULIPs Provide?

The following is a list of the types of flexibility offered by ULIP plans:

1. Switching: You can move your collected funds from one fund to another at any moment.

2. Premium Redirection: Depending on your needs, you can direct your future premium payments to alternative funds. In any insurance year, the first four premium redirections are free. Premium redirections that have not been utilized are not transferable.

Take Away

The volume of information available on the internet makes it simple to be influenced. As a consequence, understanding the precise components of your insurance plan before making a selection is crucial. The information in the preceding article will assist you in this endeavour.

Also read: Are ULIPs Ideal For Stable Fund Creation?

How Capital Gains On ULIPs Will Be Calculated?

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.