ULIP Investment Plan FAQs Answered

What is ULIP?

A unit-linked insurance plan provides insurance with investment in market-linked funds. ULIP plans provide protection along with wealth creation. A professional fund manager handles the investment corpus, and investors are provided various ULIP fund options to choose from, ranging from debt to equity funds.

You can choose a fund option depending on your long-term financial goal. If the target is wealth creation over the long run, you may choose an equity fund. You can switch your investments between different types of ULIP funds based on your risk appetite and market conditions during the tenure of the policy. Truly, ULIPs are one of the most innovative insurance-investment products ever designed.

Using an ULIP investment plan to achieve your financial goals

Most people familiar with ULIPs know that it is a very effective long-term investment tool. Whether your financial goal is retirement, a child’s higher education, buying a home or going on a world tour, ULIPs can be customised according to your life goals, time horizon and risk appetite. Apart from being an insurance, investment and tax-saving tool, a ULIP investment plan can also be used as an effective risk management tool.

You can also maximise the portion of premium investment by buying online ULIPs, as these plans come with very low ULIP charges because the insurer is able to apportion the commission towards investment which otherwise would have been paid to the agent. Here are some reasons why you should invest in ULIPs -

• Flexibility in investment

  ULIPs are very flexible investment plans, as you can make as many as 12 free fund switches (applicable on plans from select insurers; in some products, there is no capping on the number of switches) during the policy tenure to reallocate funds according to market conditions, time left to maturity and evolving financial needs.
  
  Most ULIP plans allow you the freedom to choose from multiple investment strategies and multiple funds. This gives you ample freedom and bandwidth to maximise returns and protect your investments during market volatility and corrections.

  It also allows you to increase your exposure in equity funds to maximise ULIP returns as you start in your investing journey and gradually reduce the exposure to equity as you draw closer to the maturity date.

  
  

• ULIP Tax benefits

  Many investors do not realise that tax can eat into their returns more than ULIP charges. ULIP plans are free from LTCG tax and eligible for tax deductions under section 80C while the maturity benefit or death benefit is tax-free under section 10(10 D) of the Income Tax Act, 1961, up to a specified amount, subject to the provisions stated therein.
  
  Apart from these, life insurance protection, critical illness riders, top-ups and other additional coverage are a few of the other options available that make ULIP one of the preferred investment tools for someone who dreams big and invests in a disciplined manner to reach their financial goals in life.