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Unit Link Plan

Insurance is a financial product that has quite a few variants depending upon what exactly is being insured and what use will the premium amount be put to. Life insurance plans, health insurance plans, loan insurance plans are some of the most common insurance plans that we come across when we learn about insurance policies. Unit-linked insurance plan is a widely acclaimed investment cum insurance instrument across the globe. Unit-linked insurance plans or ULIPs as they are generally called is an integrated financial product that has features of both insurances as well as investment.

ULIP is a financial instrument that offers customers the best of both the insurance and the investment world.   ULIPs are provided by insurance companies to customers who want to avail insurance as well as grow their money while at it. 

ULIPs offer customers insurance cover as well as a choice to capitalize on various investment tools like stocks, bonds and mutual funds. The double benefit of protection combined with the freedom to choose your investment avenue makes ULIPs a truly popular financial instrument among customers. HOW DO ULIP WORK?


FEATURES OF LIFE INSURANCE POLICY

HOW DO ULIP WORK?

  • A ULIP or a Unit Linked Insurance Plan is a financial instrument that provides risk cover as well as investment options for the policyholder. ULIPs permit the policyholder to invest in stocks, bonds or mutual funds. The policyholder can choose the investment type based on his risk appetite as all option guarantee returns.

  • ULIPs do not assure returns and are primarily positioned as a long term wealth generation product.

  • When policyholders invest money in ULIPs, the insurer is given the option to choose investment option between Equity, Debt or mix of two.

  • The investments are managed by fund managers from the insurance company, taking away the need to track the investments.

  • ULIPs allow the policyholder to invest in multiple options, ranging from low-risk to high-risk as the case may be.

  • ULIPs also allow the policyholder to switch between their investments, allowing them to maximize their gains when market conditions are conducive. 

WHY YOU SHOULD BUY ULIP?

A ULIP provides investors with a number of advantages, which are listed below:


Flexible : ULIPs offer investors the option of switching between funds, resulting in better choices to the investor. Investors can choose to invest in either debt or equity funds depending on their risk appetite and market conditions.

Risk appetite : ULIPs offer investors to pick choose their investments based on their risk appetite. Low-risk appetite investors can choose to invest in debt funds and those who are willing to take a higher risk can opt for equity funds.

Tax benefits :  With ULIPs being life insurance products, they offer tax benefits in the form of tax-free maturity provided the sum assured is 10 times of the premium.

Low charges :  ULIPs do not have high charges associated with them. IRDA has capped the annual charge on ULIPs at 2-2.25% p.a. for the initial 10 years, with the charges on par with those of mutual funds.

Long term investment :  ULIPs are a long term investment option due to the increased lock-in period which also reaps bigger returns. 

FEATURES/BENEFITS OF ULIP

  • Flexibility

  • Transparency

  • Liquidity

  • Multiple Benefits out of a Single Scheme of

  • Risk Mitigation

  • Benefit of life insurance and market linked returns

  • ULIP are meant for long-term investment 

ULIP ELIGIBILITY CRITERIES

The eligibility criteria for ULIPs are mentioned below:

  • Should meet the criteria for entry age (depends on the insurer and policy type).

  • Should be below the maximum entry age (depends on the insurer and policy type).

  • Should be able to make the premium payments as per the policy selected. 

DEATH AND MATURITY BENEFITS

Following are the death and maturity benefits associated with ULIPs.

These benefits are central to any ULIP policy irrespective of the insurance provider the scheme is availed from. The benefits may, however, slightly differ from one insurance company to another.

Death Benefits:  Death benefits of ULIPs are offered in case of the unfortunate demise of the policyholder. Generally, the death benefit is equal to the sum assured plus fund value. However, depending upon the cause of death (accidental or natural) death benefits may vary.

Maturity Benefits: Maturity benefits are offered to policyholders when the policyholder survives beyond the maturity period. Maturity benefits are equal to the amount of fund value. However, certain insurance companies may offer additional benefits subject to policy terms and conditions. 

END OF FUND

  • For retirement planning, These ULIPs are offered for customers who want to plan their retirement earnings by paying premiums while they are employed.

  • For child education, These ULIPs offer benefits for your child’s education. These benefits include rolling out money at key education milestones of your children and also ensuring their education expenses are paid in case of some unforeseen circumstances take place.

  • For wealth creation, ULIPs meant for wealth creation help customers invest and save their money so that they have a good corpus at any particular point of time.

  • For medical benefits, ULIPs like these are aimed at providing financial assistance at times of medical emergencies. Special riders can be availed for protection against major illnesses or critical illnesses.