Features Of Unit-Linked Insurance Plans (ULIPs)
Table of Contents
A market-linked investment and an insurance policy are seamlessly combined in ULIPs, a novel investment vehicle. In essence, they are a wealth-creating instrument that may assist you in reaching your financial objectives while keeping a medium- to long-term vision in mind. The premium for a ULIP is split into two parts.
One-half is used for life insurance, while the remaining amount is used for investments in securities like bonds and stocks. As a result, ULIPs are renowned for offering you security, regular savings, and the freedom to invest in either equity- or debt-based fund portfolio depending on your risk tolerance. To know more about the features of ULIPs, read on.
What About ULIPs?
The dangers related to the financial markets are present in the investments undertaken. The policyholder is responsible for bearing this investment risk in the investment portfolio. As a result, you should choose your investments after taking your needs and level of risk into account.
Your potential financial needs in the future are another aspect you should think about. ULIPs provide you with a range of options to meet your objectives, whether they are related to investing, retirement planning, health, your child's schooling, or their future marriage.
What Is The Structure Of ULIPs?
After allocation fees, expenses related to funding management, policy administration, and providing insurance coverage are subtracted from the funds by eliminating some shares, and the premiums you contribute are deposited in the funds you choose. Divide the total worth of the investments in the funds by the entire number of units to get the worth of each unit of the funds.
What Are The Features Under A ULIP Plan?
Following are the features under a ULIP Plan -
- Flexibility - Whenever it comes to selecting fund alternatives, changing the amount of life insurance, and selecting riders, ULIPs provide a great degree of freedom. ULIPs provide you with the opportunity to choose where you want to invest your money, and they make it simple for policyholders to swap between equities, debt, and balanced fund alternatives as the market demands. You may even expand your investment portfolio via top-ups to take full advantage of any market changes that may present investing possibilities. You may actively monitor your assets in this manner and increase your profits.
- Savings - ULIPs are made to help you achieve important long-term financial objectives like purchasing a home, paying for your child's school, purchasing a new automobile, etc. Since they assist you in creating a sizable corpus in a methodical way. Compounding's strength allows ULIPs to provide substantially larger rates of return. Long-term investing also makes it easier to withstand market risks and see quicker growth of your money over a longer period of time.
- Liquidity - ULIPs provide you the option to partially withdraw funds from your unit-linked account in the event of crises or unanticipated future occurrences, but only after five years have passed since the policy's launch. The fact that these withdrawals offer tax advantages is their biggest feature. Additionally, if you need a loan against security, you can utilise ULIPs to get a loan for a certain portion of the fund's worth, usually not more than 50%.
- Single Premium - In contrast to a regular premium ULIP, which requires premium payments at regular periods, a single premium ULIP only requires payment when the policy is purchased. You receive the benefits of the policy for the duration of the policy period after paying the payment. The insurance is perpetual.
- Tax Exemptions - In addition to offering high profits and life insurance, ULIPs also provide you two tax breaks. ULIPs are free from paying taxes on premiums up to Rs. 1,50,000 according to section 80C of the Income Tax Act of 1961. Additionally, Section 10(10D) of the Income Tax Act of 1961 exempts any payments made at maturity.
Endnotes
You can now choose this investment option more wisely if you have a good understanding of how ULIPs operate. Staying involved for a longer period of time is advantageous. In the long run, market volatility's effects are neutralised.
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