Unit Linked Insurance Plan (ULIP)

Unit Linked Insurance Plan (ULIP) is a type of Insurance combining benefits of both, protection and saving in one plan. ULIP's major advantage is that besides having better wealth creation tools, it also has the benefit of a Life Cover. Thus, your funds grow along with your loved one’s future being protected from unexpected situations.

How ULIPs work?

ULIP is an insurance policy and an investment tool. The policy factor defines a death benefit, which is the amount the nominee will receive if the policyholder passes away during the ULIP term. If the policyholder survives the term of the ULIP, he/she will also get ULIP's maturity value, the amount generated by ULIP investments in equity and/or debt. The policyholder is usually given the chance of choosing ULIP funds and asset classes to generate its returns. This advantage is the key factor for the investment component in a ULIP. Moreover, even if ULIP investments value drops below the sum assured specified in the ULIP, the policyholder’s nominee(s) will receive the death benefit as specified.

Types of ULIP Plan 

When investing in a ULIP plan, it enables you to acquire wealth in the personalized way, where savings are maximized as per your financial disposition and risk appetite to support various life goals. The various types of ULIP plans are listed below:

ULIP Plans for Retirement: If you invest in ULIP plan for retirement, you'll pay premiums during the premium payment tenure. Upon maturity of the ULIP plan, you'll then receive the accumulated wealth to support the lifestyle requirements post-retirement.

ULIP Plans for Wealth Creation: Purchasing a ULIP plan for wealth creation enables to accumulate the desired amount of wealth within specific periods basis market returns. This type of plan is suitable for investors who desire to contribute a portion of their earnings towards ensuring long-term financial stability.

ULIP Plans for Children: Parents will always strive to provide the best possible upbringing and thriving future for their children. By investing in this essential ULIP plan, as a parent you'll have the assurance that your child's life goals will be secured financially, even if something happens to you, and/or you are not there with your family.

Benefits of ULIPs

• Regular Savings: Since ULIPs inculcate the practice of regular and disciplined savings, it's the vital key to successful long-term financial planning. By making regular premium payments, one can enjoy the benefits of wealth creation for their loved ones.
• Protection: ULIPs have the protective benefit of a Life Cover, which secures the individual's family in their absence. 
• Flexibility of Investment: The individual has the flexibility and control of its money through the following ways:

1. Fund Switch – This is an option in which money can be moved between equity, balanced and debt funds
2. Premium Redirection – This option allows to invest the future premium in a diverse fund as desired
3. Partial Withdrawal– One can withdraw a portion of its money
4. Top-up – This is an option where one can invest additional money to its existing savings

• Tax Benefits: Investments in ULIPs are eligible for deduction from taxable income under Section 80C of the Income Tax Act, 1961 up to Rs. 1.5 lakh per annum. Even the maturity of the ULIP is exempt from tax under Section 10(10D) of the Income Tax Act subject to terms and conditions. Moreover, if the ULIP investor expires during the term of the ULIP, it will be entitled to the death benefit specified in the policy, and the amount received on death is exempt from tax u/s 10(10D) of The Income Tax Act 1961. Even if you desire to switch between ULIP funds it won't attract any tax.
• Potential for Growth: One can earn higher returns from the power of equity and debt funds. 
• Greater Rewards for Staying Invested: Funds will grow further as the insurance company adds to the individual's savings through bonuses/additions and are available in ULIPs in different forms like Loyalty Additions and Wealth Boosters.

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