Unit linked insurance plans are life insurance policies that come with an added advantage of market-linked returns. ULIPs are one of the best investment options for those who are looking for investment returns from their insurance policies.

 

Besides their return potential, ULIPs have various advantages which make them one of the best investment options. Given below are some reasons why investing in ULIPs makes sense –

• Added insurance protection

The first benefit that a ULIP plan offers is the added life insurance protection. Though designed as investment oriented plans ULIPs also guarantee financial assistance if the insured dies during the policy tenure. On death, higher of the fund value or the sum assured is paid to the family of the insured.

 

As such, with a unit linked insurance plan, you can not only plan a corpus for your financial goals, you can also enjoy financial security with the added advantage of insurance protection. A winning combination, isn’t it?

• Different types of ULIPs for different financial needs

There are goal-based ULIPs too which help in creating an earmarked fund for your financial goals. For example, a child ULIP plan is a unit linked insurance plan created especially to create a corpus for your child’s future. Under such plans, the parent is, usually, the life insured while the child is the beneficiary. There is an inbuilt premium waiver benefit under most child ULIPs which waives the premium if the parent dies during the policy tenure. The insurance company pays the premium on the parent’s behalf to ensure that the desired corpus is created for the child even when the parent is not around.

 

Another goal-based ULIP plan is the pension ULIP which is a deferred pension plan. With this ULIP policy, you can create a retirement corpus.

 

Then there are whole life ULIPs and savings oriented ULIPs too that can match different financial goals that you might have. As such, you can invest in ULIPs for the fulfillment of your financial goals.

• Flexibility of partial withdrawals and switching

ULIPs are flexible insurance plans. Unlike other life insurance policies, ULIPs provide various flexibility options. The partial withdrawal feature allows you to withdraw a part of your fund value when you face a financial obligation. The withdrawal does not disturb your ULIP policy while providing liquidity when you need.

 

Another flexible feature is the switching option. ULIPs offer different types of funds and every fund has a different investment objective. You not only have the choice of investing in one or more funds as per your investment preferences but also switch between them whenever needed. So, when the market trends change or if your investment preference changes, you can change the investment funds at your discretion. This allows complete autonomy in managing your investments.

• Professional fund management

The ULIP funds are managed by expert fund managers. They pick the most profitable instruments for the portfolio. Moreover, the fund managers actively manage the portfolio to minimise risks and maximise returns. The portfolio is also diversified which helps in mitigating risks.

 

As such, with ULIPs, your investments are handled by experts who have considerable knowledge of the financial market.

• Unmatched tax benefits

Lastly, the tax benefits offered by ULIPs are another primary reason for investing in them. Here’s a list of the tax benefits that ULIPs offer –

 

• The premium paid towards a unit linked insurance policy is allowed as a deduction. Section 80C of the Income Tax Act, 1961 allows this deduction and the limit of deduction is Rs.1.5 lakhs. So, if you invest Rs.1.5 lakhs in a unit linked plan, the premium would be deducted from your taxable income. As your taxable income is reduced, your tax liability is also reduced. In fact, if you are in the 30% tax bracket, you can save tax of up to Rs.45,000 (30% of Rs.1.5 lakhs) by investing in ULIPs.
• If you opt for partial withdrawals, the money withdrawn would be completely tax-free.
• If you switch between the ULIP funds, the amount switched would not attract any taxation. This is especially helpful in volatile markets when you might switch your investment from an equity fund to a debt fund till the market becomes stable. In such cases, the amount switched would be tax-free ensuring that your fund value is not taxed when your investment strategy changes.
• The death benefit paid by the ULIP policy is completely tax-free in the hands of the beneficiary.
• If your premium was up to 10% of the sum assured and the total premium paid on all ULIP plans was up to Rs.2.5 lakhs, the maturity benefit received from a unit linked insurance plan would also be fully tax-free. This tax benefit is allowed under Section 10(10D) of the Income Tax Act, 1961.

How many other investment avenues do you know of that provide you all the afore-mentioned benefits?

 

A ULIP plan is one of the best investment options that combines the aforementioned benefits to give you the best bang for your buck. It is a relevant saving scheme for your financial goals and the added life insurance coverage helps you plan for emergencies.

 

Aviva offers some of the best ULIP plans that can help you build up a diversified and quality portfolio. Explore the available solutions and then choose the best ULIP plans that match your financial needs.

 

AN Feb 38/22

 

 

 

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