Here’s Your Complete Guide to ULIPs

Are you looking for a suitable investment option? Then you are at the right place because ULIPs offer you more than just an investment opportunity. Along with the aim of wealth creation, you can secure a risk cover against the uncertainties in life. Thus, you don’t need to purchase an insurance policy separately as ULIPs satisfy that aspect for you. So, here, find out everything about ULIPs right from the features and benefits to types of ULIP plans.

What Is Unit-Linked Insurance Plan?

A Unit-Linked Insurance Plan or ULIP is a unique policy that offers dual advantage of life cover with an investment component. So, a policyholder can secure a financial backup for their family while creating wealth for the long term. There are fund options available under ULIPs that you can pick to earn returns from your investment. Based on your risk appetite, you can choose from equity or debt funds. Since September 2010, the mandatory lock-in period has been changed to 5 years where you cannot make any withdrawals until its completion. So, let’s understand the features of the ULIP policy:

Features of Unit-Linked Insurance Plan

Here are the key benefits offered by ULIP policies that make it the best investment option for most individuals:

Enables fund switch

As you are already aware of the investment fund option, you must know that each carries a risk factor. Let’s assume you pick an equity fund that is highly volatile to earn lucrative returns. But as months go by, you aren’t able to afford such high-risk exposure. But as it is a ULIP policy, you can switch to debt funds for more stable returns. Therefore, such a switch feature enables you to secure your returns without much trouble.

Allows partial withdrawal

Though you cannot make any withdrawals during the lock-in period, ULIPs allow you to make partial withdrawals after completing 5-years. It could be a financial urgency or some other obligation that requires immediate funds. Thus, you can continue the insurance policy and make a partial withdrawal to secure any monetary need.

Offers risk cover

The best part of ULIP is that you can financially safeguard your loved ones in case of an unfortunate mishap. While you are aiming for wealth creation with the investment component, your loved ones are secured no matter what. Therefore, you can rest assured by selecting the right coverage amount as a backup for your family. Estimate the right coverage amount for you with a ULIP calculator now!

Presents top-up options

What if you need more coverage as you grow older? Or, better, want to earn more ULIP returns in 10 years? Then, you can make use of the top-up premium facility available under the policy. So, by dedicating a surplus amount over and above the premium, you can get an additional sum assured to secure your current requirements. However, if you only want the extra sum to go towards the funds, the top-up premium facility also allows that.

Provides tax perks

By purchasing a ULIP policy, you can claim the premium, death and maturity payout as a deduction. The premium can be claimed under Section 80C up to the limit of INR 1.5 Lakh per year. The maturity and death benefit can be claimed under Section 10(10D) as tax-free. But the annual premium shouldn’t be more than INR 2.5 Lakh for new plans.

Types of ULIP Plans

  • Equity fund – By choosing this fund type, you can invest in the equity market to earn higher returns. However, you need to have an increased risk appetite because the market is highly volatile.
  • Debt fund – You can park your money in debt instruments, which offer stable returns by opting for debt funds. In case you want low-risk exposure, this is the fund option for you.

Now, you must have learnt the features and types of ULIP funds available to help you make the right choice. Hurry up and purchase a Unit-Linked Insurance Plan today to gain lucrative returns in the future. Check out the ULIP calculator to understand more about ULIP investment!

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