Life is not a bed of roses once unfortunate events hover. We all are happy to sail through when there are laughs but cry in dire terms because of lack of something or the other necessity. Life insurance doesn’t guarantee mental happiness, but they help sail through the financial crunch one faces.
Life insurance holds diverse meanings in different people’s lives. It would provide a financial safety net for some after retirement, while for others, it would be a backup in the event of an unexpected death, illness, or other adverse events.
A life insurance policy is not only an essential instrument for protecting your family from life’s unforeseen occurrences, but it is also a long-term investment opportunity with unique benefits.
Purchasing life insurance does not entail blindly buying one without knowing the dynamics and ramifications. While insurance can help ensure cash flow in difficult times, it is evident that ill-advised plans can be rendered ineffective in a crisis. As a result, always list your criteria and investigate all insurance solutions accessible from the leading insurers.
There are different types of life insurance available in the market, and Unit Linked Insurance Plan (ULIP) is one of the insurance clusters. This blog will help in answering the following questions:
- What is ULIP?
- How does ULIP work?
- What are the benefits of ULIP?
- Best ULIP plans to consider in India
- How to compare ULIP plans?
What is a Unit Linked Insurance Plan (ULIP)?
A Unit Linked Insurance Plan (ULIP) is a significant financial choice as it is a beneficial amalgamation of insurance with investment. In this type of life insurance, a small portion of the premium you pay for a unit-linked insurance plan is used to provide you with the required insurance coverage, while the balance is invested in the financial markets. It’s a two-way train that paves a profitable path for you in the longer run.
As per the Income Tax Act of 1961, the premiums you pay are tax-deductible under Section 80C, and the returns are also tax-free under Section 10(10D). As a result, ULIPs provide monetary stability for your family, financial growth, and tax savings. Isn’t it a profitable deal?
However, the investments made in Unit Linked Insurance Plans are susceptible to the risks linked with the capital markets. The insured bears the investment risk, and it is why you should make your investment decision after examining your risk tolerance, budget, and needs.
But, when do you think is the right time to invest in a ULIP plan?
Well, it’s never too late to start investing in a ULIP plan, but ideally, the sooner you begin, the better it will be for you. The youth belonging to the earning class and are in their twenties are advised to buy life insurance. It is said so because you will have more time to increase your money and achieve your financial objectives.
You may also choose the funds you want to invest depending on age, financial risk tolerance, and other factors.
What are the different types of ULIP?
So far, we have understood that investing in a ULIP plan allows you to develop wealth in a personalized way, maximizing your savings depending on your financial status and risk tolerance to support various life goals.
Now, there are different types of ULIP plans available in the insurance world, and they are as follows:
ULIP for Wealth Creation: Planning and beginning wealth creation at a young earning age is a wise decision. When you invest in a ULIP plan for wealth development, you can earn the required amount of money over a certain period depending on the market returns. There are ULIP schemes for capital development that should be considered by individuals who desire to invest a part of their income for long-term financial stability.
ULIP for Post-Retirement: Who doesn’t wish for a secure sail in their post-retirement period? Everyone does, right!
Therefore, if you buy a ULIP for retirement, you must pay the premiums for the whole premium payment term. Later, when the ULIP plan matures, you get the accumulated money, which you can spend to satisfy your post-retirement living needs and requirements.
ULIP Plan to secure your child’s future: Once you have kids, there is no turning back from responsibilities, and your priority will be to provide them with the best of all. As a parent, you want to provide your child with the best education possible and everything possible for a bright future. It is why parents save for their children so that even in their absence, they want to make sure that they are financially secure and don’t hamper their child’s well-being in every possible manner. It is why investing in a ULIP child plan is necessary.
Single and Regular Premium ULIP: In the single premium ULIP plan, the policyholder only needs a one-time premium paid at the point of purchase. In comparison, regular premium ULIP allows the policyholder to pay premiums regularly throughout the plan’s term, right from purchase to maturity. Here, you can pay the premiums in monthly, quarterly, semi-annual, or yearly installments, depending on your pocket.
How does ULIP work?
After learning about ULIP and its types, let us understand how ULIP works. Under the unit link insurance plan, the insurance company collects money from all policyholders and invests it in their chosen funds. Once the funds are invested, the whole corpus is split into units having a fixed face amount.
Then, each investor is assigned units concerning the amount invested.
The equivalent number of units is sold when you withdraw from the corpus in part. Some policy charges are also deducted in the form of units.
Note: Net Asset Worth is the value of each unit at any given time (NAV). The NAV reflects the effect of changes in the value of the investment.
Best ULIP Plans to own in India 2022
Let us get down to the juicy part of the blog, bringing you some of the best handpicked unit-linked insurance plans that one can own in 2022 to have a beneficial monetary run in the longer term.
They are as follows:
Aditya Birla Sun Life Insurance Wealth Assure Plus Plan
This particular ULIP plan from ABSLI will shield you against death, disability, and illnesses. It assures to assist the policyholder in achieving your wealth accumulation objectives.
Here, the policyholder is responsible for the portfolio’s investment. Moreover, with this ULIP plan, you can invest in one of five investment approaches or one of sixteen funds. Dynamic, right?
It also empowers the insured with survivor benefit that pays out a lump amount to the policyholder at the end of the insurance period. The only condition is that all premiums be paid.
It comes with,
- Death Benefit
- Maturity Benefit
- Surrender Benefit
- Waiver of Premium on Critical Illness
If interested, click to read more about ABSLI Wealth Assure Plus Plan.
ICICI Pru Signature Life
This unit-linked insurance plan includes a variety of investment options. In a nutshell, it is a savings plan that simultaneously functions as a life insurance policy for beneficiaries. Here, the insured’s premium is invested in funds of their preference.
So you can choose between four portfolio strategies and a substantial number of funds. Under this ULIP plan, you receive whole-life insurance, unrestricted free exchanges, systematic withdrawals, and tax breaks.
Aditya Birla Sun Life Insurance Plan Fortune Elite Plan
This ULIP plan provides insurance coverage and the possibility for asset preservation and growth. It could be an ideal option. This plan comes with three types of investment options, and they are as follows:
Systematic Transfer Option: This feature aims at individuals who want to remove the necessity to time their market investments. It is only available if you have chosen the yearly mode.
Return Optimiser Option: This feature aims at individuals who want to maximize their involvement in the financial markets while protecting their returns from economic uncertainty.
Self-Managed Option: This benefit is for those who want to have complete control of their investment.
This ULIP plan also has,
- Maturity Benefit
- Surrender Benefit
- Death Benefit
Investing in an insurance policy is a wise decision, and when ULIP comes with two benefits under one roof it’s a seal the deal option. Suppose you are investing in a ULIP plan. In that case, It is advantageous to remain involved for an extended period because the effect of market volatility is compensated in the long run.
And, over time, increasing percentages of your premiums are invested, allowing you to attain all of your desired endeavors.