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Unit Linked Insurance Plans(ULIP)
There are several types of life insurance plans you can choose from based on your financial goals and convenience. Some plans offer only a life cover while some come with investment cum insurance components.
ULIP, short for a Unit Linked Insurance Plan is one such insurance cum investment plans. The plan allows you to invest for your long-term financial goals, while also providing the protection of a life cover. Read further to understand the various aspects of a ULIP policy
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Unit Linked Insurance Plan
A ULIP plan can offer a multitude of benefits. Here are some reasons why you may want to invest in a ULIP
ULIPs provide market-linked returns. The longer you stay invested, the probability of earning expected returns is high too, subject to market performance.
A ULIP investment portfolio offers a variety of fund options from aggressive equity to conservative debt or hybrid funds.
ULIPs offer the flexibility to switch between different funds based on changing goals and risk appetite, allowing better control over your portfolio.
ULIP premiums may be deductible under Section 80C, and the maturity or death benefit may be tax-free under Section 10(10D) of the Income Tax Act, 1961.
In case of emergencies, the partial withdrawal feature of ULIPs helps you access funds to meet your financial needs.
An investment in a ULIP may offer a broad range of market-linked investment funds...
Read More ↓The returns of a ULIP may be optimal for people with a long-term horizon...
Read More ↓ULIPs may be suitable for investors wanting to play an active role in their investments...
Read More ↓An investment in a ULIP may be customised to cater to people in different life stages...
Read More ↓Here's how it works in detail:
Follow these steps to acquire a ULIP online seamlessly:
You can also use a ULIP calculator to estimate your investment needs.
A ULIP may come with several distinct features that set them apart from other types of life insurance plans, such as:
A ULIP may offer a host of benefits that go beyond traditional insurance or investment plans. They may include:
Upon reaching the maturity of your ULIP plan, a rewarding benefit may await. You may become eligible to receive an amount equal to the accumulated fund value...
In the unfortunate event of an untimely demise, your family may receive the ULIP death benefit. This benefit is usually unaffected by market changes...
ULIPs allow allocation across different equity, debt, or hybrid funds. This helps align your investments with your risk appetite and goals...
ULIPs may offer better returns over the long term by linking your funds to market performance, though short-term volatility can exist...
ULIPs offer deductions under Section 80C and tax-free returns under Section 10(10D) of the Income Tax Act...
Premiums paid may be eligible for deduction from taxable income up to ₹1.5 lakhs under Section 80C...
Your returns grow tax-free as long as the funds remain invested. Tax is only applicable upon withdrawal or redemption...
Maturity/death benefits may be tax-exempt if premiums meet specified limits. Returns on equity funds above ₹1 lakh are taxed at 10%...
Familiarising yourself with the ULIP charges levied to cover expenses and risks may be crucial. It may give you a better understanding of when and why they are levied, enabling you to make an informed decision. Here is a list of major ULIP charges:
Charge Type | Description |
---|---|
Fund Management Charges | The money you invest in a ULIP is managed by expert fund managers. These professionals make investment decisions, monitor assets, and may aim to optimise returns. Hence, a fund management charge may be levied by the insurer to provide for this expertise. |
Policy Administration Charges | Managing ULIPs involves administrative tasks like paperwork and record keeping. To cover these expenses, insurance providers may deduct policy administration charges from your policy account. |
Mortality Charges | ULIPs include a life insurance component, providing a death benefit to the nominee in case of the insured person’s demise during the policy term. To account for this risk, insurers may levy mortality charges on ULIP. Some new-age ULIPs offer the Return of Mortality Charges (ROMC) benefit. If the policyholder survives the policy term, the initially levied mortality charges may be returned at maturity. |
Premium Allocation Charges | These charges may be deducted upfront as a percentage of the premium. They may account for initial expenses incurred by the insurer when issuing the ULIP, such as underwriting or distributor fees. |
Policy Discontinuance Charges | ULIPs typically have a lock-in period of five years. If you decide to surrender your ULIP before this period and discontinue payments, the insurance provider may levy discontinuance charges. |
Partial Withdrawal Charges | After the 5-year lock-in period, ULIPs may allow for partial withdrawals. Some plans may offer unlimited free withdrawals; others may have a limit. If you exceed the permitted number of free withdrawals, charges may apply. |
Fund Switching Charges | One unique feature of ULIPs is the ability to switch your investment between funds. Some insurers offer a few switches per year for free. Beyond that, charges may apply as per policy conditions. |
Miscellaneous Charges | Under this category, you may incur additional charges for changing your ULIP contract, such as adjusting the premium payment mode. These may vary based on the specific alteration. |
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‘ULIP’ stands for Unit Linked Insurance Plan. It can be considered a unique financial product combining the elements of life insurance and market-linked investments.
Before investing in a ULIP, you may want to keep in mind the fund options of the plan, the charges levied, the solvency ratio, and the claim settlement ratio of the life insurance provider.
Yes, ULIPs are safe. If you are a risk averse individual, you may invest in predominantly low-risk funds like debt funds. Also, you may use premium redirection and fund switching to change your fund allocation for ensuring fund safety.
The trial period or the free look period of a ULIP is typically 15 days from the date of receiving the policy document. In the case of electronic or online ULIPs, the free look period can be 30 days.
Choosing a ULIP that fits your needs and requirements perfectly may be crucial to be able to satisfy your goals. You may want to compare several plans and choose an option that has fewer charges and has the fund options of your choice.
Medical insurance provides financial protection against unexpected medical expenses, ensuring access to quality healthcare without depleting your savings.
You can add your spouse, children, parents, and other dependents as per the policy terms, ensuring comprehensive family coverage.
Online comparison helps you find the best plan that suits your needs and budget, offering a clear understanding of coverage and benefits.
Delaying premiums can result in policy lapse, losing coverage benefits and financial protection, and may lead to difficulties in renewing the policy.
Request a physical copy from the insurer or take a printout of the digital policy document received via email.
Claims should be made within the stipulated time as per the policy terms to avoid rejection and ensure timely processing.
Pre-existing conditions are medical conditions you had before buying your Individual Health Insurance plan. Coverage for these might require waiting periods or exclusions. Be transparent about your health history.
Insurers cover hospital bills through reimbursement (you pay upfront and get reimbursed later) or cashless hospitalisation (insurer settles bills directly with network hospitals).
Individual Health Insurance premiums often qualify for tax deductions under Section 80D of the Income Tax Act (India).
Personal medical insurance offers financial protection against unexpected medical expenses due to illness, accidents, or hospitalisation. It provides peace of mind and safeguards your savings.
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Yes, as per IRDAI regulations, insurance portability between providers is allowed. This also includes transfer of benefits like Cumulative Bonus and credits relating to waiting period for pre-existing diseases.