Unit Linked Insurance-ULIP Gives Investment Returns + Life Cover + Tax Benefits
ULIP Plans can be a great option for people who are looking for a life insurance product that also offers the potential for investment growth.
- One Plan Dual Benefit
- Enhanced Protection for Your Family
- Earn Market-Linked Returns
-
Loyalty Additions and Wealth
Boosters
Build Wealth & Save Tax
What is Unit Linked Insurance Plan
Unit linked insurance plans combine market-linked investments with life insurance coverage. ULIPs are life insurance policies with a unique structure. The premiums which are paid by the insured are invested in market-linked securities so that they can earn attractive returns that are in sync with the market performance. In the case of death, higher of the sum assured or the fund value is paid. When the policy, however, matures, you get the fund value as the maturity benefit.
ULIPs have different types of investment funds. Each fund has a diversified portfolio of market-linked securities and the portfolio is managed by expert fund managers. Based on your risk appetite and investment needs, you can choose from one or more funds to invest your premium.
ULIPs offer flexible policy features like partial withdrawals, top-up premium payments, switching, premium redirection, etc. As such, you can manage your ULIP investment as per your needs with the added protection of life insurance coverage.
There are some charges associated with ULIPs. These charges are deducted from the premium before getting invested in the chosen funds. Thereafter, as per the performance of the market, the fund performs. The invested premium and the returns earned on it are reflected in the fund value which is as per market conditions.
| Benefit | How it Works |
|---|---|
| Death Benefit | If you don't survive the policy term, your nominee will be entitled to a death benefit, which can either be -
Sum Assured + Fund Value The higher of either Sum Assured or Fund Value |
| Maturity Benefit | If you survive the policy term, you will be eligible to receive a maturity benefit. It is equal to the fund value of your investment on the date of maturity. |
Need and Importance of Unit Linked Insurance Plan
There are some things that an insured should keep in mind while choosing the best ULIP plan as it is essential to make the right choices .ULIP plans provide the advantages of investment and the comfort of life protection. Hence it's very important to invest in such a plan. Below are few other reasons one must consider Choose this plan If You wish to receive regular payouts at specific intervals to cover your financial goals or expenses, such as instalments for a new house, your child's education fees, your spouse's higher education fee, or post-retirement expenses, etc.
Dual Benefit of Investment with Life Insurance
ULIPs ensure life insurance coverage and market-based investments tailored to your risk profile, making it a cost-effective way to manage risk and grow wealth and makes a way to live a fulfilling lifestyle-It provides Choose this plan If You wish to receive regular payouts at specific intervals to cover your financial goals or expenses, such as instalments for a new house, your child's education fees, your spouse's higher education fee, or post-retirement expenses, etc.
Financial Security after Retirement
If you are planning to build a corpus for your retirement, ULIP can be a wise decision because of high returns that you get.
Create Corpus for Family’s Needs
The opportunity to earn market-type returns through ULIPs helps to create a huge corpus or fund for your future. Eventually, this amount can be used for your and your family’s betterment.
Long-Term Wealth Creation
If you want to meet your long-term financial goals, then switch to ULIP. ULIPs come with a lock-in period of 5 years that keeps you invested for a longer tenure. The accumulated money helps you meet your long-term financial goals such as buying a house or car, children’s education, marriage or other major financial objectives.
Financial Goal
ULIPs promote disciplined investing, aligning with financial objectives by getting return as high as 17% and preventing sacrifices of long-term goals for immediate needs.
Lack of Stress
Fund managers of the life insurance company handle ULIP investments, relieving policyholders of financial management hassles.
Eligibility Criteria to Buy a Unit Linked Insurance Plan
Eligibility Criteria for Buying a ULIP Plan To be eligible to buy a Unit Linked Insurance Plan (ULIP), the following criteria need to be fulfilled: Eligibility Criteria Specifications
| Eligibility Criteria | Specifications |
|---|---|
| Age at Entry | Min 0 days or 18 years /Max 60 or 65 years. It can vary and range from 45 to 70 years, depending on the product and premium payment term. |
| Age at Maturity | Min 25 years/Max 100yrs |
| Policy Term Range | 5 years to 40 years depending on the product |
| Lock In period | 5yrs |
| Premium Payment Frequency | Yearly/ Half-yearly/ Monthly/ One-time |
| Income | The policyholder should have a regular source of income to pay the premiums towards the ULIP plan |
Key Benefits of Unit Linked Insurance Plan
Unit Linked Insurance Plan (ULIP) helps you to save systematically and build wealth while also securing the future of your loved ones with a life cover. Investment plans offer numerous benefits as mentioned below;
Maturity Benefit
On maturity of the ULIP policy, you become eligible to avail of an amount equal to the accumulated fund value as a maturity/ survival benefit.
Life Cover
In case of your unfortunate demise during the policy term, your nominee/s will receive a lump sum amount. This can either be the higher of the sum assured or the fund value, or can be the sum assured plus the fund value.
Liquidity Benefit
ULIP plan gives the benefit of partial withdrawal of money after 5yrs’ to meet unpredictable events and emergencies.
Tax Benefits
ULIPs offer tax advantages with tax-free maturity as a life insurance product, subject to certain conditions based on the type of ULIP invested.
Low Charges
Annual charges for ULIPs are capped by IRDAI for the first ten years, making them comparable to mutual fund fees.
Riders Benefits
Enhance your policy by adding riders for specific events, including Accidental Death Benefit, Waiver of Premium Benefit, Accidental Permanent Total/Partial Disability Benefit, Family Income Benefit, and Critical Illness Benefit.
Fund Switching Option
It gives the benefit of free fund switching to manage the market risk.
Loyalty Additions
The best ULIPs also help you boost your accumulated wealth through loyalty additions, at the end of each policy year. A specific percentage of the fund value under the ULIP is added to your policy earnings through the creation of additional units.
Our Preferred Plan
The preferred Guaranteed return plan may vary based on individual preferences and financial goals. Factors to consider include the desired coverage amount, policy term, premium affordability, and any additional features like riders or bonuses.
Investment Plan
- Advantage with Max Life
- Claim settlement Ratio: 99.51%
- Rs 122857 Cr of assets under management as on FY 22-23
- Max Life’s presence in 296 offices
Coverage Benefits
- 28.7% Returns* Past 5 Year Returns of the Midcap Benchmark Fund
- High Growth Fund Returns: 19.09%*
- SIP* + Life Cover
- Unlimited Free Switches
Protect N Gain
- Advantage ICICI Prudential
- Claim settlement Ratio: 98.14%
- Crossed `2.5 trillion of assets under management as on FY 22-23
- 24X7 assistance with their Mobile App
Coverage Benefits
- Maturity booster3 at policy maturity to boost your fund value
- Life cover1 up to 125x of Annual Premium
- Return of Mortality and premium allocation charges
- Added protection with Accidental Death cover5 and Accidental Disability cover
Click 2 Invest
- Advantage with HDFC
- Claim settlement Ratio: 99.39 %
- Rs 238782 Cr of assets under management as on FY 22-23
- HDFC Life’s presence is in 498 branches across India
Coverage Benefits
- Choose from 11 Funds to maximize your investment
- Special Addition of 1% of Annualized Premium for first 5 years
- Unlimited free Switching option
- Option of systematic withdrawal from your funds
Goal Assure-II
- Advantage with Bajaj Allianz
- Claim settlement Ratio: 99.04 %
- Rs 1,04,493 Crore of assets under management as on FY 22-23
- Bajaj Life’s presence is in 510 branches across India
Coverage Benefits
- Choice of 4 investment portfolio strategies
- Return of life cover charges
- Maturity Benefit in instalments
- Get Tax free returns + Life cover
Kotak E-Invest
- Advantage with Kotak E term
- Claim settlement Ratio: 98.82%
- Covered 50 million lives nationwide as on 2023
- 24X7 assistance with their Mobile App
Coverage Benefits
- Multiple Plan options available
- Return of Mortality Charges
- Zero Premium Allocation Charges
- Enhanced Protection with Riders
Classification of Unit Linked Insurance Plan
ULIPS can be classified in various categories basis the need and requirement, one should know them to understand your goals which can help to invest in the right plan. Below is the classification;
ULIP for Wealth Collection
Targets gradual wealth accumulation, suitable for individuals in their twenties and thirties.
ULIP for Retirement
Provides support for post-retirement life, requiring premium payments throughout the policy term.
ULIP for Health Benefits
Offers financial aid during medical emergencies.
ULIP for Children's Education
Safeguards a child's future in unforeseen circumstances.
Types of Funds ULIPs Offer
The categorisation of ULIPS depends on the type of fund associated with the product. While different plans have a different variety of fund options, basically, there are four primary type of investment funds ;
Cash Funds
Invests in money market funds, cash, and low-risk instruments.
Equity Funds
Invests a portion of the premium in equity funds, offering higher risk and potential returns.
Debt Funds
Invests in debt securities with lower risks and potential returns.
Balanced Funds
Allocates funds among various assets for a balanced approach.
Types of Charges in ULIP
Insurance Companies will charge you some amount for maintaining the funds and making investments. There are mainly 5-6 charges associated with a ULIP;
1. Mortality Charges: Monthly charges for life insurance coverage based on age and sum assured.
2. Premium Allocation Charges: Deducted from the premium initially paid for the ULIP plan.
3. Partial Withdrawal Charge: Applied for withdrawals after the lock-in period.
4. Fund Management Charge: Assessed for managing ULIP funds, varying based on fund type
5. Switching Funds Charge: Applied when transferring money between different investment options.
6. Policy Administration Charges: Monthly charges deducted from premium.
ULIP Plans vs Traditional Plans
Below table will help you to understand the difference between ULIPS and traditional plans. All these plans offer something different;
| Criteria | ULIP's | Traditional Plans |
|---|---|---|
| Meaning | Combination of life insurance and wealth creation | Focus on guaranteed maturity payout with low-risk investments |
| Type of Plan | Investment + Insurance Plan | Insurance Plan |
| Liquidity | Lock-in period (5 years) | Locked till maturity |
| Risk Associated | Moderate Risk | Low-Risk |
| Loyalty | Earns loyalty benefits for long-term investments | Some traditional plans offer loyalty bonuses for the entire policy term |
| Investment | Invests in debt, equity, or hybrid funds based on investor preference | Funds invested in equities and debt securities as per insurer's decision |
| Income Tax Benefit | Tax benefits under Sections 80C and 10(10D) | Similar income tax benefits under Sections 80C and 10(10D) |
Inclusion and Exclusions in Unit Linked Insurance Plan
The inclusion under ULIP insurance plans may differ from one policy to another. The exclusions under all life insurance plans may differ from one policy to another. However, there are certain exclusions that almost all policies agree with. Below are some important inclusion and exclusions:
Different Time Periods You Should Know About in Insurance
1. Premium Payment Term (PPT): It is term for payment of premiums and it depends on the plan chosen.
2. Free Look Period: The free look period in life insurance is usually 15 to 30 days from the date of delivery of policy document, depending on the channel through which you have purchased the policy.
3. Grace Period: The insurance grace period is 15-30 days for policies basis the premium payment options like monthly, quarterly , yearly.
4. Revival Period: A revival period refers to the time band allowed by the insurance company to recover a lapsed policy starting from the due date of the first unpaid premium. Typically, this period ranges between 2-5 years and varies across insurers.
5. Lock In Period: Unit linked insurance plans have a lock-in period of 5 years.
FAQ's
As the need for insurance increases, doubts and queries also increase. Navigating insurance complexities can be overwhelming.To help you with this, We have tried to address common doubts for a seamless journey with Bimasure;
A Unit Linked Insurance Plan (ULIP) is a unique financial product that combines life insurance coverage with investment options. Policyholders can invest in a mix of equity and debt funds, providing both protection and wealth creation.
ULIPs work by allocating a portion of the premium towards life insurance coverage, and the remaining amount is invested in various funds such as equity, debt, or a combination of both. The policyholder has the flexibility to switch between funds based on market conditions.
ULIPs offer a dual benefit of life insurance coverage and investment growth. They provide flexibility, tax advantages, transparency, and goal-based savings. ULIPs can be tailored to meet specific financial objectives.
Yes, ULIPs offer flexibility in choosing the investment strategy. Policyholders can switch between funds, adjusting the allocation based on their risk appetite and financial goals.
ULIPs may have various charges, including premium allocation charges, mortality charges, fund management charges, switching charges, and policy administration charges. It’s essential to understand these charges before investing.
ULIPs offer tax benefits under Section 80C for premiums paid and Section 10(10D) for tax-free maturity proceeds. However, tax implications may vary based on the type of ULIP and prevailing tax regulations.
While it is possible to surrender a ULIP before the lock-in period ends, it is generally not recommended due to potential surrender charges. After the lock-in period, policyholders can make partial withdrawals without charges.
The lock-in period for ULIPs is typically five years. During this period, the policyholder cannot make withdrawals or surrender the policy without incurring charges.
ULIP performance can be tracked through the Net Asset Value (NAV), which indicates the fund’s value. Insurance companies often provide regular updates on NAV, and policyholders can access this information through online portals.
Yes, ULIPs offer additional coverage through riders. Common riders include Accidental Death Benefit, Waiver of Premium, Critical Illness Benefit, and more. Adding riders can enhance the policy’s coverage based on individual needs.
