Things to keep in mind to get the best of your ULIP
1. Understand the key features of your ULIPs
ULIPs offer you the benefit of a Life Cover and also give you the opportunity to grow your wealth. To get the best out of your ULIPs, understand the following benefits available in ULIPs:
1. Fund Switch – An option to move your money between equity and debt funds.
2. Premium Redirection – An option to invest your future premiums in a different fund of your choice other than your base fund.
3. Partial Withdrawals – An option that allows you to withdraw a part of your money.
4. Top-ups – This option allows you to invest your surplus money, either once or multiple times in your existing policy.
To understand all benefits offered under your policy, it is advisable that you read the product brochure carefully. This will help you make the right decision.
2. Choosing ULIP Plans fund options depending on your goals
3. Take the right amount of Life Cover
ULIPs are designed to help you meet your financial goals like funding your child’s education or planning for your retirement. In addition to securing your goals, ULIPs also secure your family. They provide a lump sum amount called the Life Cover so that your loved ones can achieve their dreams even in your absence. You can opt for a minimum Life Cover of 10 times your annual premium. To increase your family's financial security, you can also increase the Life Cover offered under your policy.
Let us understand this with an example. For an annual premium of `1,00,000 you can get a minimum Life Cover of `10,00,000. As a result, you can increase your family's level of protection by increasing your Life Cover.
4. Stay invested with ULIPs for a long term
5. Get tax benefits
Under the Income Tax Act, 1961, you can save taxes on your hard earned money with Unit Linked Insurance Plans. You can get tax advantages at different stages of your life insurance policy.
Stage 1: Entry Advantage
You receive tax benefits* on your premium payments under the Sections 80C, 80CCC and 80D
Stage 2: Earnings Advantage
The growth of your money is not taxable*
Stage 3: Exclusive Switching Advantage
You can make completely tax-free* debt-equity Switches**
Stage 4 Exit Advantage
You also receive a tax-free* Maturity Benefit#
*Tax benefits are subject to conditions u/s 80C, 80CCC, 80D, 10(10A) and 10(10D) of the Income Tax Act, 1961. Tax laws are subject to amendments from time to time.
**Switch is an option to move your allocated money between equity and debt funds
#Maturity Benefit is the amount you receive when your policy ends
6. Know the charges in your ULIP
ULIPs help you meet two of your most important financial needs - Protection and Savings. Both these benefits have some charges attached to them and it is important to understand the following charges before purchasing the ULIP:
Premium Allocation charge
Policy Administration charge
Fund Management charge
In ULIPs, the overall charges reduce in the long term resulting in wealth creation.
Please note that your life insurer reserves the right to revise the charges over time.
Click here to know more about the charge structure of ULIPs.
1. What is a ULIP policy?
A ULIP or Unit Linked Insurance Plan is a life insurance policy which helps you grow wealth by investing your money in the financial markets, while also providing you the protection of life insurance cover.
2. Is it good to invest in ULIP plans?
ULIP plans are a combination of investment and life cover. Investments help you achieve your long term financial goals, whereas life cover makes sure your family doesn’t have to bear financial burden in case of your untimely demise. ULIP premiums can also help you claim deduction under section 80C of Income Tax Act 1961, and ULIP payouts are tax-free* subject to conditions under section 10(10D) of the Act. Hence, investment in ULIP can be considered as a good idea.
3. What is the best way to choose ULIP?
To choose the best ULIP for yourself, you should compare plans and select the one that charges you the minimal amount in Premium Allocation, Policy Administration, Mortality, and Fund Management Charges.
4. Which is better ULIP or term insurance?
ULIP and term insurance are different categories of life insurance. If you are looking to invest your money to achieve a financial goal with the umbrella of life cover, then buy a Unit Linked Insurance Plan. If you wish to get a pure protection plan, then buy a Term insurance plan.