ULIP buying tips

What is a ULIP?

A mix of investment and insurance, a Unit Linked Insurance Plan or ULIP offers policyholders a flexible way to create wealth with the additional security of a life cover.

Why invest in a ULIP?

Here are some of the ULIP benefits you will avail through our platform:

• Long-term wealth creation

ULIP plans are ideal for long-term financial planning as the premiums paid by the customer are invested in both, equity and debt for a minimum lock-in period of 5-years.

• Guaranteed Transparency

All the charges are detailed in the ULIP plan policy document. Hence, customers know what they pay for, how the funds are being used to create wealth, and therefore, can make planned financial decisions.

• Tax benefits

Under the Income Tax Act of 1961, ULIPs are tax-free investments. Customers do not have to pay any tax while investing, while their money grows during fund switches or even when during fund maturity.

• Protection for self and family

With ULIPs, you get the benefit of a life cover which ensures that your family is financially secure, even in your absence.

Four tips when investing in a ULIP plan:

1. Consider investment risks

The best ULIPs allow you to invest in equity funds, debt funds, or a mix of both. Equity offers higher returns over debt but the latter is more secure. It is important to find the right balance between the two when investing.

2. Tax benefits

Income and gains from ULIPs are tax-free, allowing you to save up to Rs. 1.5 Lakh per year, which is a considerable advantage over mutual funds.

3. Inquire about additional charges

Ask your insurance provider about charges like premium allocation charge, policy administration charge, mortality charge, and fund management charge.

4. Plan your financial goals

ULIPs have a lock-in period of 5 years, but allow you to shift your assets from the risky but more profitable equity funds to debt funds over time. These need to factor into your long-term financial goals if you choose to invest in a ULIP plan.

If you’d like to know more about how a ULIP plan can help you grow your wealth and achieve your financial goals, check out the ULIP plans available on Finserv MARKETS.