Until recently, the life insurance market had been dominated by straightforward term and endowment plans. Today, it’s increasingly opening up to other opportunities that make it more appealing to clients. Among these new advancements are Unit Linked Insurance Policies. These policies have caught on so rapidly that if you ask anyone that has signed up for a life insurance plan in the past few years, they will likely tell you their cover is a ULIP.
ULIPs are more than just life insurance policies in that they give you the chance to invest in money markets while at the same time covering your life. The premium you pay is divided into two, and one part covers risk to life while the other goes towards investments.
ULIPS presents some inherent benefits over other investment options. Below are five convincing advantages of investing with a ULIP.
ULIPs provide life insurance and savings from market-linked returns, but the best part is that the amount you choose to invest is entirely up to you. With a good life insurance provider, you can invest even 100 percent of your premium, and later allocate an additional amount to your policy to suit your protection needs, such as marriage or the advent of kids. Moreover, you can choose the investment strategy that works for you, be it letting your provider manage your asset allocation or managing it yourself, based on your profile and risk appetite.
- Multiple Investment Options
Compared to traditional investment plans, ULIPs offer a lot more variety. Depending on how much you’re willing to stake, you can opt for debt funds (low risk), balanced funds (moderate risk) or equity funds (high-risk). A ULIP will also give you the option of investing in balanced funds that can range between debt and equity funds, and you will be able to switch funds depending on your market outlook.
- Long-Term Investment
If you have a long-term goal like buying a house or a new car, paying for a child’s college education, or perhaps starting a business, you can count on ULIP to save and raise you the funds you need. Thanks to compounding, ULIPs offer a better return over an extended period than conventional savings accounts or bank fixed deposits. If you decide to opt out of a plan after five years, you will receive a lot more than you would if you were saving without investing.
- Tax Benefits
ULIPs are among the handful of investment options that provide tax benefits. For the premiums you pay, you get tax rebates as per section 80C, and the payouts you receive are exempt under section 10D of the Income Tax Act. You can also make tax-free fund switches.
Although term insurance premiums are also tax deductible, they don’t offer any returns. Tax benefits on ULIP returns can be very instrumental for your long-term goals.
The working of ULIP charges is transparent enough to give you the confidence that you’re making informed decisions. A proper provider will offer a sales benefit illustration that will help you to understand how your premiums are used and the charges deducted during the term. Other useful documents like product brochures and feature reports will give you all the information you need to become a smart investor. And, because life insurance plans, including ULIPs, typically come with a free-look period, you can try the policy and return it, and the provider with return your premium in full after deducting the applicable charges.
Unit Linked Insurance Policies combine life insurance and mutual funds in one appealing resource that offers diverse investment options and tax benefits. If you’re looking for a plan that will fulfill both your investment and protection needs, ULIP is the way to go.
About AEGON Life
Launched in July 2008 with pan-India operations, AEGON Life Insurance Company Limited has a vision to be the most recommended new age life insurance company. As a joint venture between AEGON – world’s leading financial services and Bennett, Coleman & Company – India’s leading media house, AEGON Life Insurance adopts the power of global expertise to facilitate a direct to customer approach, leveraging digital platforms to bring transparent solutions, and to prioritize customer’s needs. Our product portfolio includes term life insurance plan, pension plans, unit-linked insurance plans (ULIPs), health insurance plans, child education plans, and more.