ULIP is a single investment plan that offers multiple benefits. You can have an insurance cover and generate returns, all in just one ULIP plan. It is so because some portion of the premium you pay is invested in an insurance policy, whereas the remaining portion is invested in equity or debt instruments which will help you generate returns.
ULIP is a unique investment plan that seamlessly combines insurance policies’ benefits with market-linked investment. A ULIP is a wealth-creating tool that helps you focus on your financial goals and fulfil them while keeping in mind a medium to long-term horizon. Under ULIPs, you are issued units by an insurance company while the NAV (net asset value) is declared on a day-to-day basis. However, it must be noted that the investment risks in a ULIP will have to be borne by the policyholder, not by the insurance company.
Benefits and features of ULIP
Flexibility- As a policyholder, you will be offered a high level of flexibility when choosing your preferred fund option, selecting the perfect rider plans, and change in life cover. You will be given the freedom to decide where you would want to invest your hard-earned money. It makes it easier for you as a policyholder to switch from one investment plan to another if you change your mind. You can even change the investment variant between debts, balanced fund options and equity.
Free-look period- Almost every life insurance plan comes with a free-look period, which goes to ULIPs. Free-look period is when you are offered a few day periods and, in some cases, a few months’ time to decide whether or not you are satisfied with the policy. If you are not happy with the plan, then you get the liberty to cancel your policy.
ULIPs usually have a 15-day window, and you can cancel your policy if you are not happy with it. The entire premium will be paid back to you after the provider deducts the applicable charges that are listed in the policy.
Liquidity- One of the best features of a ULIP is that you can partially withdraw money once you have completed the 5-year lock-in period. In case of emergencies and other unforeseen future events, you will be allowed to withdraw a certain percentage from the policy. This helps you stay financially prepared if something happens and you need the money urgently. You can withdraw the amount whenever you want at multiple intervals as per your requirements and needs.
Keep in mind your long-term financial goal-To achieve your long-term financial goals, such as buying a house, a child’s education and more, it is recommended that you do not withdraw any amount from your ULIP unless it’s an emergency.
Tax benefits- With the multiple benefits and features of a Unit-linked insurance plan, another added advantage of this plan is the tax benefits. Under section 80C of the Income Tax Act, 1961, premiums paid up to Rupees 1,50,000 for ULIPs are exempt.