About Unit Linked Insurance Plan
ULIP is a life insurance product, which offers risk cover for the insured along with investments options to any of the qualified investments such as stocks, bonds or mutual funds. As a single integrated plan, it combines the best of investment and insurance. It is a plan which is linked to capital market and provides flexibility to invest in equity or debt funds as per risk taking capabilities. ULIPs can be utilised for numerous advantage pay-outs including education, retirement, life insurance and more. It provides many varying provisions to the insured as benefits.
Advantages of ULIPs
Life Protection, Investment and SavingsFlexibilityTax benefits
ULIPs offer double benefits of life insurance and savings at capital market-linked returns. Thus, the insured have the chance to invest their money for higher returns, while protecting their needs. Investing in ULIPs is vital in building capital over the long term and helps to instil a regular habit of saving and investing.
ULIPs offers a wide range of flexible options such as:
- To switch between investments funds to match the changing needs
- Facility to partially withdraw from the fund, subject to changes and conditions
- Single premium additions to enable the insured to invest additional amounts of money as and when desired, subject to conditions.
- To invest premium in a different fund of choice.
For the premiums paid up to Rs. 1.5 lakhs under Section 80C of Income-tax Act, 1961, employees can also enjoy tax benefits. The earnings from the policy and equity-debt switches are tax free. Additionally, the pay-outs received at time of maturity are also tax-free.
Types of ULIPs
Classification by Purpose:These are best classified on the basis of purpose they serve.
- ULIPs for Children Education:There are several ULIPs that offer small amounts in the crucial events of the children’s life and ensure that no unexpected event hinders their life in any manner.
- ULIPs for Retirement:In this plan, the insured needs to invest during tenure with the employer. Invested amount is automatically collected in a corpus amount and is paid in terms of annuities to the insured after their retirement.
- ULIPs for Health Benefits:ULIPs efficiently provide financial assistance to meet medical emergencies in addition to some common benefits.
- ULIPs for Wealth Collection:By investing in this plan, the insured gets the flexibility to fund their future financial goal. This plan primarily accumulates the insured’s wealth over a period of time and provide the benefits.
Classification by Death Benefit:These are categorized into two broad categories depending on death benefit.
- Type 1 ULIPs:In case of death of the insured, the nominee receives death benefit which is equal to higher of the sum assured or fund value by the insurance company.
- Type 2 ULIPs:In this type 2 plan, nominee of the policyholder gets the benefit which is equal to the sum assured plus fund value. The premiums for type 2 plans are higher than those for type 1 plans.