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Types of Unit Linked Insurance Plans

By Finserv MARKETS - Jan 21,2019
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In order to lead a financially secure life, it is important that you plan your investments well ahead in time. While working hard can help you accumulate a substantial amount of wealth, it is also essential to grow and protect your hard earned money. A ULIP plan not only helps you grow your wealth but also helps protect it. Moreover, ULIP plans are flexible enough to adapt to your dynamic financial needs as you progress through different stages of life.

Understanding the Concept of ULIP

Quite often, people get confused when it comes to this kind of investment product. In fact, most investors do not know what a Unit Linked Insurance Plan entails, the benefits it brings to the table and why one should go for it.

A ULIP or Unit Linked Insurance Plan is a market-linked investment plan that provides dual benefits in the form of a life insurance cover, and investment growth. This is primarily the reason as to why ULIPs have become a popular investment product in India.

Moreover, ULIPs are tax exempted under Section 80C and Section 10 (10D) of the Income Tax Act, 1961. This means that your investment (premiums), as well as returns on maturity, are non-taxable.

A Glance at Various Types of ULIPs

Being an investor, you should carefully understand the various types of unit linked insurance plans you can invest in depending on your needs and financial goals. Let’s take a look at the various kinds of ULIPs:

  • ULIPs based on Investment Objectives

ULIPs for Retirement Planning – Retirement might put an end to your regular income but not your financial worries. ULIPs work as an investment during your earning days. You later receive a fixed and regular payout for the rest of your life. In fact, you are also allowed to withdraw a lump sum amount after the maturity of your policy.

ULIPs for Child Education – Dealing with the educational expenses of your child is a difficult task at different stages of life. This ULIP aims to provide financial support to cover the expenses related to your child’s education. You can rely on this investment product to help your child realize his / her dream. Moreover, ULIPs are a “With You or Without You” investment i.e. your child’s education will continue even if you are not around to support them.

ULIPs for Wealth Creation – Wealth creation is a universal financial goal. If you are someone, who dreams of living a life free from financial worries, investing in this plan is definitely the right choice. In fact, you are free to choose any kind of ULIP for wealth creation and get returns on your investments. Also, an LTCG tax has been levied on financial instruments like equity and mutual funds. But ULIPs are exempted from this tax and thus enjoy an LTCG benefit.

  • ULIPs for Building a Corpus

ULIPs for Health Solutions – We all know life does not always go as planned.There may be surprises anytime that can adversely affect your finances. The surprises can be anything ranging from medical emergencies, accidents to legal fees, debt settlements etc. You need to be prepared for such surprises in order to protect yourself as well as your family. Investing in a ULIP can help you achieve the same by supporting you in building a corpus along with a life insurance cover.

  • ULIPs with Risk – Reward Tradeoff

ULIPs can cater to a variety of investors with varying risk appetite. For example:

  • An investor looking for high-risk appetite can use ULIPs to invest in high-risk equities and stocks. These are definitely risky investments but also offer high rewards.
  • Similarly, an investor with low to medium risk appetite can invest in either government securities, corporate bonds, fixed-income securities etc. through ULIP route.

Now that you are well-informed about the different types of ULIPs available in the market, it is highly advisable that you define your financial needs and goals first, before deciding on which ULIP you wish to invest in.

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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522