ULIP Plans
Unit Linked Insurance Plan
Unit Linked Insurance Plan which you might know as ULIP is among the best market-linked investment plans. Its dual benefits of life insurance cover, as well as a long-term investment, serve the purpose of the investors like you who wish to accumulate corpus to achieve your life goals as well as secure your family's future in your absence. ULIP policy does both these jobs in a single plan.
What is the ULIP plan?
ULIP plan is a market-linked insurance cum investment plan that offers dual benefits. When you invest in a ULIP policy a part of your premium goes towards a life insurance cover while the remaining part is invested in different funds of your choice to accumulate a large corpus over the long term.
In simple words, if you invest in the best ULIP plans you can save some money for your future goals while the life cover from this plan helps secure your family's financial future in case something unfortunate happens to you.
How ULIP Works
How does one plan - Unit linked insurance policy serve the dual benefits? How does the plan work? Let's understand.
ULIP insurance serves as both life insurance and long-term investment. Specific to the death benefit upon the unfortunate demise of the life insured during the policy tenure the assured sum is paid to the nominee.
In case the life insured survives the policy tenure they receive the maturity amount of their ULIP policy.
When you consider making a ULIP investment you can decide the assured amount based on your financial goals, the type of lifestyle you want to provide to your loved ones, your risk as well investment appetite.
Based on these factors you can also choose to invest a part of your ULIP investment either in equity, debt, or balanced funds to generate desired returns to fulfill your financial goals.
Benefits of Investing in ULIPs
Along with the dual benefits of investment and insurance ULIP plan offers other key benefits. Here are some of the benefits of ULIP.
- Flexible investment
One of the major benefits ULIP plans offer is the flexibility of investment. You can manage and control your investment through:
● Premium redirection
To get more out of your investment you can choose to redirect your future premiums to different funds of your choice.
● Top-up
Through this option, you can invest any windfall gains into your existing plan to receive more financial benefits.
● Fund-switch
As per your investment and risk appetite, you can switch between the various funds offered in your ULIP Policy which could equity oriented, debt oriented ,or balanced funds. - Financial protection
ULIPs offer life cover to the nominee as a death benefit, which helps financially protect your family in your absence. - Tax benefits*
ULIP offers tax benefits under section 80C of the Income Tax Act 1961. Premiums of up to Rs. 1.5 lakhs paid towards a ULIP policy are allowed to be exempt from your taxable income. Moreover, as ULIPs are insurance products, they also come with tax benefits* *Tax benefits are as per existing tax laws which are subject to change. - Growth potential
Staying invested in equity and debt funds through ULIP long-term will certainly help you achieve your financial goals of buying your dream car, house, supporting your child's higher education, your early retirement, and more.
Features of ULIP Plans
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Flexibility: One of the primary features of ULIPs is the flexibility they offer. They allow you to switch between different investment funds according to your financial goals, market conditions, and risk appetite. This flexibility helps you increase your returns by adapting to changing circumstances. Furthermore, ULIP schemes provide you the option of partial and systematic partial withdrawals after a lock-in period. This means you can withdraw a portion of your invested amount for unexpected needs, offering financial stability in emergencies.
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Dual Benefits: Unit linked insurance plans combine the benefits of life insurance with the potential for high returns through market-linked investments. This dual approach provides financial protection and wealth creation under one plan. Expert fund managers manage the funds, reducing exposure to market volatility. Moreover, you can choose investment options that align with your risk tolerance.
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Financial Security: ULIPs are ideal for long-term investment horizons, as equities tend to perform well over extended periods. You can start early with aggressive equity-based plans and gradually shift towards safer debt funds as you approach retirement. The accumulated funds can provide a stable income source after retirement, ensuring financial security in your later years.
ULIP Plans from Aviva India
It’s not just a ULIP insurance plan – it’s a safety net you cast around your loved ones
How to Choose the Best ULIP Plan
When considering a Unit Linked Insurance Plan choosing the best one is essential to get the most out of your savings. While the best ULIP plan will vary from person to person as it is based on various factors such as plan features, financial goals etc.
Performance of ULIP funds
Before investing in ULIP funds make sure you check their long-term performance. ULIP funds can be equity, debt, as well as balanced funds. Thus, you should invest in the type of funds that suit your financial goals considering how much amount you can invest, and how much investment risk you can bear. When checking the performance of ULIP funds consider their long-term benchmarks, for example, Nifty 50, BSE 200, NSE 500, or Crisil Composite Bond Index. DISCLAIMER : PAST PERFORMANCE IS NO GUARANTEED FOR FUTURE RESULTS
Charges
The various policy charges in ULIPs are transparent and are deducted from the premium you pay. such as premium allocation charges, policy administration, and fund management charges, fund switching, discontinued premium, and mortality charge. Understand all these charges and how they work and consider a ULIP plan with affordable charges.
Investment strategies
Some of the best ULIP plans offer various investment strategies such as SIP and lifecycle-based investment. Choose the plan that offers the investment strategies suitable to your financial goals.
Documents & Eligibility Criteria for ULIP Plans
You should be at least 18 years old
You should have a steady income to pay ULIP premiums
No pre-existing medical conditions that could impact life expectancy. Be transparent about your health history during the application process
Valid Know Your Customer (KYC) documents like Aadhaar and PAN cards are required
Have a clear financial objective while investing in ULIP
Understand your risk appetite and choose a fund accordingly
Select a term aligning with your financial goals and risk tolerance. Don't hesitate to seek guidance if needed
Frequently Asked Questions
ULIP offers the benefits of both investment and insurance. The regular payouts that the ULIP plan offers can help you achieve your financial goals of buying a car, property, your child's higher education, and so on.
On the other hand, the life cover secures your loved ones financially in case something unfortunate happens to you.
ULIP also induces the habit of regular savings which over the long term becomes a key to your successful financial planning. Moreover, it also provides tax benefits on both premium as well as maturity amounts. So ULIP is a good investment option for those who want to generate a future corpus, secure their family's financial future, and save taxes.
There is no right or wrong time to invest in ULIP.. However, the earlier you start investing more time you get to generate desired returns without taking unnecessary risks.
As you start early when you have fewer responsibilities and more risk-taking abilities you can use this time to generate more corpus gradually decreasing your investment risks as your responsibilities grow.
The best ULIP plan depends on various factors such as the financial goals you want to achieve, policy tenure, risk as well as investment appetite. When considering the best ULIP plan also consider the factors we have mentioned above in the "how to choose the best ULIP plan" section.
Before you make the final decision, compare different ULIP plans online and consider the reviews from the former or current ULIP investors. This will help you invest your hard-earned money in the right place.
ULIPs are non guaranteed and the minimum guarantee in a ULIP is the Sum Assured that is paid on the death of the life insured.
ULIP plan offers dual benefits of insurance policy and long-term investment. It provides life cover upon the death of the life insured . If the life insured survives the policy tenure, they receive the maturity amount of the ULIP plan.
As for the investment part of the ULIP policy, it helps in wealth creation for you and your family.
ULIP also offers attractive tax benefits which is why most investors consider ULIP investment to save taxes while enjoying other benefits.
There are various charges allocated to the ULIP plan. Some of these are -
● Premium allocation charges
● Policy administration charge
● Fund management charge
● Fund switching charge
● Policy discontinuation charge
● Mortality charge
Before investing in a ULIP plan, understand all the charges associated with it and consider the plan that offers charges that are affordable to you.
You can calculate your ULIP fund value by doing a simple calculation. For that, you have to multiply the units of each fund with the Net Asset Value(NAV) of a fund on that day.
You can check the updated NAVs on the respective company's website or through share market news.
Another easy way to track your ULIP fund value is by logging in to your secured account on AVIVA's website.
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AN: Feb 110/22