The ultimate ULIP guide: All you need to know
ULIPs have been hot-selling life insurance plans for the investment benefits that they provide. However, like other insurance plans, ULIPs have their fair share of technical aspects that many investors tend to overlook, which is a mistake.
When you invest your savings in ULIPs, you need to be fully aware of what the plans involve and their terms and conditions. So, here’s an extensive lowdown on ULIPs for a detailed understanding –
What is a ULIP?
Short for Unit Linked Insurance Plans, ULIPs are life insurance policies that combine investment returns with insurance protection. The premium that you pay towards the plan is invested in market-linked funds in hopes of attractive returns. As a result, you enjoy insurance coverage during the tenure and also get a chance to create wealth through market-linked returns.
How do ULIPs work?
In a ULIP, the choice of the premium amount, policy tenure, premium paying term, and frequency depends on you, the policyholder. Based on the premium that you pay, the sum assured is determined.
The premium is allocated towards one or more investment funds. ULIPs offer equity, debt, and balanced funds, and you can choose the funds based on your risk appetite.
After that, depending on market movements, your investments grow over the policy tenure. In the case of premature death, the higher the sum assured or fund value is paid, while on maturity/surrender, the fund value is paid at the time of maturity.
Features and benefits of ULIPs
Here are some standard features and benefits of unit-linked life insurance plans –
- Returns are not guaranteed. They depend on the market performance
- The sum assured is calculated as a multiple of the premium
- There is a lock-in period of 5 years during which you cannot surrender or make partial withdrawals
- You can switch between the chosen funds through switching or premium redirection facility
- You can pay additional premiums through the top-up facility available under many plans
Different ways ULIPs can help achieve your financial goal ULIPs can serve as a lucrative tool to fulfil various financial goals
Investment oriented goals
ULIPs aim to create a corpus for your financial goals. In addition, some ULIPs offer readymade investment strategies that help you manage your investments in the best possible manner.
Child oriented goals
Some ULIPs have features that help you build a corpus for your child’s education while also securing the child’s future even when the parent is not around.
Pension oriented goals
Investing in ULIPs for a long time can give your fund the power of compounding that can help you create a considerable retirement corpus that can be used to withdraw regular income post-retirement.
Pros and cons of ULIPs
Just like other investment avenues, ULIPs have their pros and cons. Here’s a look –
- Investment + insurance in a single plan
- Flexibility through partial withdrawals, switching, top-ups, and premium redirections
- Market-linked, competitive returns
- ULIPs can help you fulfill your financial goals
- Different funds offerings to suit the risk-taking preference of every investor
- Tax benefits on investment (Section 80C), partial withdrawals, switching, and also on the maturity proceeds (under Section 10 (10D) if the premium is below Rs. 2.5 lakhs)
* Tax benefits are available as per current tax laws
- Different Charges are applicable on ULIPs.
- The Lock-in period hampers liquidity in the initial five years of the policy
Why can ULIPs be a good investment solution for you?
The pros far outweigh the cons of investing in ULIPs. ULIPs ensure that your financial goals are fulfilled even when you are not around due to the insurance cover offered. In addition, the choice of funds helps you diversify your portfolio and reduce risks without compromising on returns. So, choose a ULIP plan like Aviva Fortune Plus. In addition, you can reduce the cons further with the Return of Charges feature that returns all the charges (except Fund Management Charge) and lets you enjoy the pros of ULIP.
Why Aviva Fortune Plus is a winner?
Aviva Fortune Plus is a unique ULIP which not only provides you all the benefits of investing in ULIPs, it goes a step ahead and offers something extra. With Aviva Fortune Plus Plan, you can enjoy the following additional benefits –
Option to pay the premium in monthly instalments
Systematic withdrawal and transfer facility
Partial withdrawal options
Accidental Death Benefit and Waiver of Premium Add-on benefits
Choice of 7 fund options
So, understand the nitty-gritty of ULIPs and then invest in the best plan for maximum benefits.
Aviva Fortune Plus (UIN: 122L137V01) is A Unit Linked Non Participating Individual Life Insurance Plan
AN May 43/21