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Simplifying Top-Ups in ULIPs

By Finserv MARKETS - Feb 6,2019
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Simplifying Top-ups in ULIPs

Mr. Anurag Das is a highly successful MNC professional and an informed investor. He understands the concept and importance of wealth maximization and hence has a balanced portfolio of investments comprising of Equity and Debt instruments. One of the products in his portfolio includes Unit Linked Insurance Plans. For aspiring investors who don’t know what a ULIP is, it is a market-linked product that offers the dual benefit of a life insurance risk cover and an investment. It offers tax benefits under Section 80C and 10D of the Income Tax Act, 1961 as well as flexibility to invest in funds based on risk appetite and life stage goals.

Let’s understand Mr. Anurag Das’ profile: As stated earlier, Anurag is a young and highly successful MNC professional earning anywhere between INR 15-20 lakhs per annum. He invests INR 1,00,000 per annum into ULIPs along with investments in other instruments like PPF, Mutual Fund, NPS etc. With an INR 1,00,00 investments per annum in a Goal Assure plan, he gets the following benefits:

  • A Life Insurance Risk Cover of INR 10,00,000
  • ULIP Tax benefits under Section 80C of the Income Tax Act, 1961. Also, unit linked insurance plans do not fall under the purview of LTCG or Long-Term Capital Gains tax which is applicable on Mutual Fund or ELSS investments at 10% on profits exceeding INR 1,00,000
  • Tax exemption on Returns on Maturity (5-year lock-in) under Section 10D of the Income Tax Act, 1961
  • Other benefits include investment flexibility, full / partial withdrawal facility after maturity etc.

Anurag is now on top of the world. He has just received an appraisal and is quite happy with the outcome. He now has additional disposable income that he can invest across different market instruments. What should he do? He has the following options:

  1. He can keep it in a bank and earn interest
  2. He can either invest in PPF, Mutual Funds, NPS etc. OR
  3. He can go in for a “Top-Up Plan” on his existing ULIP investment

What are Top-Ups in ULPs?

A Top-Up is a facility through which you can increase the amount of investment that you have already made under ULIPs. You can avail the Top-Up facility anytime during the tenure of the policy and the amount depends on the terms and conditions specified by your policy provider.

Why Top-Ups in ULIPs are better than other market instruments?

Some of the key reasons as to why Top-Ups can be a better option for you to invest your additional income are:

  1. Both your Top-Up and Base investment earn interest (compounding each year) – This means that you can be assured of higher returns as compared to keeping the money in your bank.
  2. There is absolutely no difference between a regular premium and a top-up premium when comes to tax benefits. Both are available for deduction under Section 80C and 10D of the Income Tax Act, 1961. This means that they offer more benefits as compared to a Mutual Fund investment which is taxable under LTCG.
  3. ULIP Plans come with a lock-in period of 5 years but that is still less as compared to other market instruments like a PPF

So why wait? Invest in a unit linked insurance plan with Finserv MARKETS, today!

To know more on ULIP investments in depth, you can check out these blogs:

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Bajaj Finserv Direct Limited ("BFDL") is primarily engaged in distribution of financial products and services through its digital platform (“Bajaj Finserv MARKETS”) and inter alia renders services of customer acquisition, providing preliminary credit support activities, fulfilment services and post-acquisition customer services to Banks, NBFCs, HFCs. BFDL is also a registered Corporate Agent (Composite) under valid IRDAI registration number: CA0551 valid till 10-Apr-2024 for solicitation and servicing of Insurance Products. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522