ULIP – UNIT LINKED INSURANCE PLANS

What is ULIP (Unit Linked Insurance Plan)?

The complete form of ULIP is the Unit Linked Insurance Plan. ULIP is an insurance + investment combination. Some of the money invested will keep your life safe and the rest will be invested in the market. Policyholders can pay monthly / annual premiums.

Introduction

Investments made in Unit Linked Insurance Plans (ULIPs) are subject to capital market losses. This investment risk in the investment portfolio is borne by the policyholder. Therefore, you should choose to invest keeping in view your risk appetite and needs.

Another factor you need to consider is your future funding needs. HDFC Standard Life offers a wide variety of unit-linked insurance products tailored to your goals – for your retirement plan, your health, your children’s education and marriage or investment purposes.

How ULIP Is Structured?

In Unit Linked Insurance Plans (ULIPs), the premiums you pay are invested in the fund of your choice, which includes the allocation fees and charges for providing fund management, policy administration and insurance cover, some units are canceled and deducted from the fund.

Advantages Of ULIP?

• Unit linked insurance plans give you opportunities to earn with market-linked returns as part of the premiums which are invested in market linked funds which fund in different market instruments including debt instruments and equity in varying proportions.
• Unit Linked Insurance plans offer the twin benefits of savings on life insurance and market linked returns. Therefore, you have the opportunity to invest your money to earn higher returns while taking care of your security needs. Investing in a unit linked insurance plan helps to develop a general habit of saving and investing, which is essential for building wealth in the long run.
• HDFC Life  is offering a variety of Unit Linked Insurance Plans that are right for different types of users and help them reach their specific financial goals and also options to switch between investment funds to meet your changing needs.
• Partial withdrawal facility from your funds subject to fees and conditions.
• The single premium is in addition so that the policyholder can invest an additional amount (more than the regular premium) subject to additional conditions.

Features of ULIP

• At the beginning of the policy term the policyholder must pay the entire premium in a lump sum.
• As the policyholder chooses for the premium payment period, the predetermined amount of premium must be paid from time to time, i.e. annually, half yearly or monthly.
• It depends on the policy term you choose. In most cases, the policy term and the number of years the premium is paid (in the case of a normal premium) are the same. However, some policies give the insured the opportunity to choose the number of years the premium will be paid.
• The following charges will be deducted from your policy on the benefits provided by HDFC Standard Life Insurance and the cost of administration services:
• There is a monthly fee for managing your policy. Administration fees are deducted by canceling units in proportion from each fund you select.
• These charges cover the costs associated with fund management. It is charged as a percentage of the value of the fund and is deducted before the net asset value of the fund.
• You can switch between available funds to suit your changing needs and goals. During the policy year, a certain number of such switches are available for free. After that, there is a fixed charge for each switch. These fees are deducted by canceling units in proportion from each fund you select.
• All withdrawals from the Fund are allowed after three years of the policy term and subject to the conditions specified earlier. However, as noted in the relevant policy brochures, such withdrawals attract fees.

Benefits of ULIP

Make a habit of saving

When you invest money in ULIPs every month, you become accustomed to disciplined savings. As we all know, keeping savings away is one of the key elements in every successful long term financial plan. When you pay regular premiums on time, you can enjoy creating wealth for yourself while securing the financial future of your loved ones.

Provides security

One of the important benefits of ULIP is that it offers life insurance along with investment options. So, apart from creating wealth for yourself, these plans ensure that your family is financially supported in case any untoward incidents happen to you.

Flexible investment

With ULIPs, you have complete control over your economy. You can choose to move your funds at any time. This means you can transfer your money from equity funds to balanced and debt funds or vice versa. Additionally, you can choose to divert future premiums to a different fund of your choice. If you want to invest more money later, you can top up your ULIP. Most importantly, in some cases, you may have the opportunity to partially withdraw some funds from investments for financial emergencies.

Tax benefits

The premium you pay for the insurance products and the return you receive are tax deductible under Section 80C and 10D of the Income Tax Act, 1961, respectively. Also, if you choose to transfer your money from one fund to another, you do not have to pay any additional tax.

Tax benefits under the Income Tax Act, 1961 are subject to change in the Tax Act.

Growth potential

The benefits of ULIPs are innumerable. But, one reason it remains an investment option is its growth potential. These plans allow you to invest in market instruments such as debt and equity funds to increase your money. The returns you get will help you achieve your long-term financial goals.

More rewards over time

The longer you invest in your ULIP, the more time you can enjoy bonuses such as loyalty additions or wealth growth. Once you have invested, you have to stick to it for a long time.

Income tax benefits of ULIPs

You buy a ULIP with two goals in mind. First, you want to invest your money and increase your wealth. Second, you want to get life insurance to protect your family financial benefits. But, you can also enjoy some ULIP tax benefits. According to the Income Tax Act, 1961, premiums you pay are eligible for ULIP tax deduction up to INR 1,50,000 per annum. If this requirement is not met, the Maturity Benefit will not be exempt from income tax and your premium tax benefits will be within 10% of your total sum insured.