Tax savings, Investments and Insurance are some of the most important aspects of financial planning. Unit Linked Insurance Plans help you plan for all the three aspects of your financial goals through a single integrated plan.
What is ULIP?
Unit Linked Insurance Plan as the name suggests, is an insurance plan that offers double advantages. Here, along with a sound life insurance coverage, you also get to invest in funds of your choice.
Thus, you get to benefit from insurance as well as investing – all under a single policy. The funds that you choose to invest in can either be equity-oriented funds, debt funds, or a combination of the two.
Investors with a high-risk appetite tend to invest in equity-oriented funds; whereas people with a low-risk appetite invest in debt funds. It is noteworthy that you can switch between equity and debt funds any time you want, depending on the market movements. You can read more about what is ULIP in our Insurance section, to get a clearer picture.
Why Invest in ULIPs?
By investing in a unit linked insurance plan, you can plan for your long-term goals and ensure that they are met, “with you or without you”. Moreover, with amazing tax-saving ULIP benefits under Section 80C and Section 10(10D) of the Income Tax Act, 1961, they are one of the best tax-saving financial product available in the market today.
However, it is surprising that while planning their life-goals, people often miss out on such a lucrative investment tool. If you invest wisely, unit linked insurance plans can be the perfect solution for all your needs and help you protect your financial future.
Still confused about ULIPs and how it is the most comprehensive investment and tax-saving tool?
Here are six lucrative ULIP benefits that will help you make the right investment decision:
Generally, ULIP plans have a lock-in period of 5 years to ensure liquidity. Liquidity is essentially the extent to which an investment can be cashed out without influencing the return. At Finserv MARKETS, with high returns on mortality charges, the policyholder can withdraw the full amount after the completion of the lock-in period.
Transparency is one of the most attractive ULIP features. All charges such as policy administration, fund management, allocation etc. are mentioned up front along with their deduction methodology. With ULIPs, you need not worry about any hidden fee or charges.
Unit linked insurance plans are highly flexible, i.e. they allow you to switch funds according to your financial goals, needs and changing risk appetite. Additionally, ULIPs offer you the freedom to opt for additional protection through riders. Hence, you have the freedom to control and manage your investment as well as your life insurance risk cover based on your requirements.
Along with investment growth and insurance coverage, you can enjoy ULIPs tax benefits under section 80C and 10(10D) of the Income Tax Act, 1961. This means that your premiums, as well as returns on investment, are both exempt from tax!
Mitigation of Risk
Thanks to professional fund management and long term life goal-based investment, the money you invest in ULIP becomes relatively safer against various market-related risks. This indeed is a good option for investors who wish to expand their finances but want to avoid managing the associated risks. Although, in case any, the risk is borne by the policyholder.
Potentially Higher Returns
You get the opportunity to earn potentially higher returns over the long term at a relatively low-risk profile. As an example, our policyholders have enjoyed as much as 29.7% returns in the past five years! Calculating returns is easy with the ULIP calculator online.
When planning to invest in unit linked insurance plans, it is essential that you are well-versed with the charges involved in it. Here’s a list of ULIP charges that you need to know about:-
- Premium allocation charges
- Administration charges
- Surrender charges
- Mortality charges
- Fund management charges
- Fund switching charges
- Discontinuing charges
- Partial withdrawal charges
How is ULIP Different from Mutual Funds and Fixed Deposits?
Even though you have made investments in mutual funds and fixed deposits, we still want you to consider investing in Unit Liked Insurance Plan. The following table summarizes the difference between ULIPs, Mutual Funds, and Fixed Deposits.
|ULIPs||Mutual Funds||Fixed Deposits|
|What Does it Mean?||Combination of life insurance and investment facility.||An investment option only.||A fixed investment option.|
|Coverage||Provides life cover that is a minimum ten times the premium amount.||It does not offer a life cover.||It does not offer a life cover.|
|Tenure of Investment||Long-term||Either be short, medium, or long-term||Short-term|
|Tax Benefits||The premiums paid up to INR 1.5 lakh are exempted from tax under Section 80C of the Income Tax Act, 1961.
The maturity amount is tax-free under Section 10(10)D.
|Only the Equity Linked Savings Schemes (ELSS) investments are exempted from tax under Section 80C of the Income Tax Act, 1961.||The invested amount of up to INR 1.5 lakh is tax exempted under Section 80C of the Income Tax Act, 1961.
The maturity interest amount is taxable.
|Flexibility||Flexibility of choice when switching between funds.||No such flexibility offered.||No such flexibility offered.|
|Returns||ULIP returns depend on the type of funds you choose to invest, depending on the market performance.||Mutual fund returns depend on fund allocation in conjunction with the market performance||Fixed returns|
Fully understand the difference between ULIP vs Mutual Funds to get more clarity about where to invest your funds.
The Bottom Line
Without a doubt, a unit linked insurance plan is an ideal investment instrument for someone who wants to avail tax benefits and at the same time, aims to secure the financial future of his/her family. And, all of the above-mentioned ULIP benefits and features have proved the just fulfilment of the same.
Invest in a unit linked insurance plan to build a financially secure future for yourself and your family.
By investing in Bajaj Allianz ULIP plans with Finserv MARKETS, you can enjoy many other lucrative features as compared to regular plans. Some of the key benefits and features include – security, convenience, zero fund switching charges, option to alter premium payment frequency, enhanced maturity benefit, simple claim process and much more!
Finserv MARKETS, a subsidiary of Bajaj Finserv, is a one-stop digital marketplace that has been created for consumers on the go. It offers 500+ financial and lifestyle products, all at one place. At Finserv MARKETS, we understand that every individual is different. And that’s why we have invested in creating a proposition – Offers You Value. A value proposition that ensures you get offers which are tailor-made for you. We also offer an amazing product range and unique set of online offers across Loans, Insurance, Investment, Payments and an exclusive EMI store. Be it in helping you achieve your financial life goals or offering you the latest gadgets, we strive to offer what you are looking for. From simple and fast loan application processes to seamless and hassle-free claim-settlements, from no cost EMIs to 4 hours product delivery, we works towards fulfilling all your personal and financial needs. What’s more! Now enjoy the same benefits in just one click with our Finserv MARKETS App.