Unit Linked Insurance Plan (ULIP) is a mix of insurance along with investment. ULIP Returns in 10 years are increased.The main motive of this plan is to provide wealth creation along with life cover. In this plan, the insurance company invests a portion in life insurance and remaining portion into a fund that is based on debt or equity and matches with your long term goals. These goals could be children’s education, retirement planning or another important event you may wish to save for.
The insurance company invests a portion of the premium in bonds/shares etc. and the remaining amount is utilized in providing an insurance cover. Fund managers manage investment in insurance companies. ULIPS allow you to switch your knowledge of the market’s performance as well as your portfolio between equity and debt based on your risk appetite. This is a huge factor in the popularity that investor can switch easily.
Lock in the period increased from 3 years to 5 years by the Development Authority of India (IRDAI) and the Insurance Regulatory in the year 2010 as regards ULIPs. Insurance is a long term product so the policy can range from 10 to 15 years.
Must Read: ULIP VS MUTUAL FUNDS – PROS & CONS
Income Tax Benefits: ULIP is eligible for a tax deduction under Section 80C. Apart from this, the returns in this policy on maturity are excluded from income tax under Section 10(10D) of the Income-tax Act. Therefore this is a double benefit that you can claim with this policy.
Life Cover: ULIP gives you a life cover with investment. It offers security to the family of the taxpayer in case of emergencies like the death of taxpayer etc.
Finance Long Term Goals: If you have long term goals like buying a new car, a house, marriage etc. then it is a good investment option for you. Money gets compound effect in this plan. So the returns are better. In ULIP plan the policy always goes for a longer time to reap the best out of it.
The Flexibility Of A Portfolio Switch: ULIPS allow you to switch your knowledge of the market’s performance as well as your portfolio between equity and debt based on your risk appetite. Apart from this insurance companies offer very few numbers of switches free of cost.
|Nature||Investment cum insurance product||Pure Investment product|
|Withdrawal||Only after 5years lock-in-period||Can be withdrawn anytime|
|Switching||Here, Switching between funds is permitted and not subject to taxation.||Switching between schemes of the same fund house is permitted. However, it’s treated as redemption and the resulting capital gains are taxable.|
|Charges||Premium allocation charge, mortality charges, fund management charge and administration charges||No entry load, the annual fund management charges apply and an exit load, if applicable.|
|ULIP Plans||Entry Age||Minimum Premium||Premium Allocation Charges||Policy Admin Charge||No. Of Free Switches In A Year|
|Bajaj Allianz Future Gain||1 to 60 years||Rs 25,000||0% to 1.5%||Rs 33.33 per month||Unlimited|
|PNB Metlife Smart Platinum||7 to 70 years||Rs 30,000 to Rs 60,000||1.25% p.a|
|Max Life Fast Track Growth Fund||18 to 50 years||Rs 25,000 to Rs 1 lakh||2%(in Single Premium) to 4% (for Annual premium)|
|Sbi Life Wealth Assure||8 to 65 years||Rs 50,000||3% of Single Premium||Rs 45 per month||2|
|Hdfc Life Pro Growth Plus||14 to 65 years||Rs 2,500 to Rs 10,000||2.5% of the Annual premium||Rs 500 per month||unlimited|
These are divided on the following parameters
Balanced funds: Where the premium is paid balanced between the equity and debt to low the risk for investors.
Equity funds: Premium is invested in the equity market.
Debt funds: Premium is invested in debt instruments that carry lower risk and also offer a lower return.
Must Read: INSURANCE TYPES – DIFFERENCES YOU MUST KNOW
Type I ULIP: This pays the fund value to the nominee or higher of the assured sum value in case of death of the policyholder.
Type II ULIP: This pays the fund value and the assured sum value to the nominee in case of the death of the policyholder.
It is deducted as a fixed percentage from the premium in the starting years of the policy. It includes the renewal and initial expenses and intermediary commission expenses.
It is the fee charged the insurance company for the management of the various funds in the ULIP. The charge on non-equity funds is much lower and insurers levy the maximum amount allowed in equity funds.
It is for the insurance coverage under the plan. Mortality charges depend on a number of factors like the sum assured, age etc and are deducted on a monthly basis.
It is deducted on a monthly basis and charged for the administration of the policy. ULIP Returns in 10 years are increased and it is a good choice because it offers benefits of insurance with investment.
The moving of investments between options is called switching. There are certain limits per year in which you have options to switch your funds. Some changes may charge of Rs. 100 – Rs. 250 per switch.
ULIPs offer an advantage in terms of being customizable and flexible. ULIPs provide the option to move your money between debt and equity funds, the flexibility of premium payment, and allow you to withdraw a part of your money whenever you need it. ULIP returns in 10 years can be obtained on your risk appetite you can also choose where to invest. ULIPs are investment instruments that combine the benefits of both investments and life insurance in money markets.
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