Investment Plans in ULIP - Features, Benefits and Claim Process

Unit-linked investment plans (or ULIPs) serve as comprehensive investment options which provide investors with the benefits of market returns as well as an insurance cover. Not only does this investment tool allow you to multiply and enhance your invested amount but it also allows you to avail of insurance coverage for yourself.

By investing in a Unit-Linked Investment Plan, the insurance company directs a segment of your money towards market linked financial products which may range from equity shares to bonds. The remainder of your money is directed towards a life insurance policy. Serving as long term investment plans, ULIP plans have a five year lock-in period tethered to them. These plans provide policyholders with tax benefits outlined in Section 80 C and Section 10 D of the Income Tax Act. Profits drawn from these holdings are, to the benefit of investors, exempt from taxes imposed under long-term capital gains tax.

In order to invest in an ULIP plan, you must meet the age criteria outlined in the plan under consideration. Investing in such a plan is a possibility when your age falls within the specified range at the time of the plan’s maturity mentioned in such a policy’s terms and conditions.

Listed below are some of the many reasons that make unit linked investment plans worth purchasing.

 

1. Tax-Free Savings –

For starters, such investment plans provide policyholders with the benefits that investing brings with it without being burdened by having to pay taxes that are ordinarily levied on investments. As per the income tax act of 1961, savings are possible as per section 80( C) at the time of contribution as well as during withdrawal as per section (10D)

2. Self-Sufficient –

One of the primary reasons you ought to consider purchasing a ULIP is because it allows you to be financially independent even once you have stopped working. While it is important to focus on fulfilling financial and aspirational goals that your family might have, it is equally important to carve out funds that will help you once you retire. With a Unit-Linked Investment Plan it is possible to save money for your future.

3. Wealth Multiplication –

Rather than letting your money sit idle it is worth investing it in the form of a viable Unit-Linked Investment Plan that is aligned with your life goals and threshold for risk. Such a plan provides you with the dual benefits of investment and insurance which help multiply your money. With such a plan, not only are you actively investing for your future but you are also insuring your life with an insurance plan. By having your money sit around in your bank account, you are losing out on an opportunity to grow your wealth in a tax-free manner.

Some of the best ULIP plans have the following features.

1. Premium Payments Applicable –

There are a number of premium payment avenues applicable to ULIPs which are as follows.

• ULIP premiums can be paid on an annual, bi-annual or monthly basis

• Policyholders are also entitled to make a single premium payment which is comparatively heftier and paid at the time the plan is purchased

• Ordinarily, premiums applicable to ULIPs are paid for the policy term opted for at the time of purchase however certain insurers permit policyholders to determine the number of premium payment years they’d like to opt for

2. Lock-In Period –

Lock-in periods applicable to ULIPs amount to 5 years owing to which you cannot access the money you have invested during this time. Funds may only be withdrawn from a ULIP once this period comes to a close. That being said, it is recommended you hold off on liquidating a ULIP for as long as you can as the longer you stay invested in such a plan, the greater are your chances of accruing viable returns.

ULIP benefits are plentiful as is evident from the merits mentioned below which pertain to ULIPs available at Bajaj Markets.

1. Take Advantage of Top-Rated Investments –

ULIP investment funds available on the platform have been known to enjoy good ratings that feature returns that are high and approximately amount to 25% over a five year investment time frame.

2. Top Tier Investment –

Be confident in the knowledge that ULIP investments made via Bajaj Markets are viable as they have under their helm close to 2,00,000 crores worth of assets under management.

3. Minimal Cost Structure –

As charges aren’t applicable at the time of allocating funds and return of mortality charges aren’t applicable, ULIPs are cost friendly.

4. Flexibility –

There exist four ULIP investment strategies that each aim to provide investors with greater returns and allow for flexibility.

5. Tax Benefits –

As per the Income Tax Act of 1961, ULIPs are classified as tax-free investments owing to which investors needn’t pay taxes while investments are active. This means that you can enjoy watching your money grow without paying taxes which aren’t required when you switch funds or at the time of maturity either. Since there exist an array of tax benefits applicable to ULIPs, they have been summarised below.

 

• ULIP Premium –

Premiums paid on ULIPs can be claimed under deductions as per Section 80C of the Income Tax Act with a maximum bar amounting to INR 1.5 Lakh.

 

• ULIP Maturity –

Provided you pay all your ULIP premiums on time, taxes aren’t applicable once your ULIP acquires maturity provided it was issued prior to February 1, 2021. In case of ULIPs bought after this date and in case the aggregate premium exceeds INR 2.5 Lakh, the maturity benefit will be viewed as a taxable capital asset.

 

• Partial Withdrawal –

Partial withdrawals following the five-year lock in period are tax-free as per Section 10 (10D) of the Income Tax Act.

 

• Payouts in Case of Death –

In case you die, your family (or nominee) will receive the total fund value or else the entire sum assured, whichever is higher. This pay-out is exempt from taxation.

 

• Top-Ups –

You can increase the amount you choose to invest in your ULIP plan at any point in time and this additional top up is eligible for a tax deduction as per Section 80C.

 

• Long-Term Capital Gains -

If you have invested in an equity-oriented fund via your ULIP holding, you can avail of the long term capital gains tax benefit.

Understand the varied factors included under a given Unit-Linked Investment Plan as outlined below.

• Life Coverage –

Tethered to all ULIPs is the inclusion of life coverage.

• Investment –

By purchasing a ULIP plan, a portion of your invested money is directed towards a market linked security which is anticipated to generate returns.

• Nominee –

In case you purchase a plan in your name and happen to die, the nominee you select will be the recipient of the fund value or sum assured – whichever happens to be greater.

Listed below are the varied factors excluded under a given ULIP plan.

• In Case of Death by Suicide -

If the policyholder of a ULIP dies by suicide and this unfortunate event transpires within the first year of the policy commencing or reviving, the nominee will only receive the regular premium fund’s value along with the top premium fund value if it is applicable.

• Deductions –

in case any amount is deducted once you die, it is repaid to your beneficiaries in addition to the amount that is classified as the death benefit.

Filing claims on your Unit-Linked Investment Plan has never been more straightforward as it is today. Simply follow the steps mentioned in order to file ULIP claims.

Step 1. Register -

Begin by registering your claim online on the appropriate website.

Step 2. Upload Documents -

Part of your online claim application will require you to upload appropriate documentation.

Step 3. Claim Assessment –

Once you submit your claim application, it will be assessed by your insurance provider. The time frame needed for this assessment to transpire will be outlined in the terms and conditions of your plan.

Step 4. Claim Decision –

After your claim has been assessed, an agent will reach out to you on the status of your claim and whether or not it has been approved.

Unit Linked Investment Plans have, over the years, shown themselves to be viable investments capable of making a positive impact on one’s portfolio. These investments allow you to potentially fulfil your financial goals owing to which they are recommended. As they provide you with the opportunity to not only invest but also provide life insurance, they are worth investing in. A great resource via which you can learn more about ULIP returns, plans and benefits is the Bajaj Markets website.