The COVID–19 pandemic has envisaged every individual to ensure two more necessities in life apart from home, food, and clothing, namely, insurance and investments. The importance of it is realized at every stage of post-pandemic life. ULIP plan is a comprehensive solution in this regard. Let us understand everything about ULIP going further.

What is a ULIP Plan?

Unit Linked Investment Plan is a type of life insurance plan offering dual benefits. One portion of the premium paid is used for life cover, and the other portion is invested in investment funds such as equities, debts or even a hybrid. It is one of the best guaranteed return insurance plans.

Why is a ULIP necessary?

In the wake of financial commitments, it is always important that you allocate a fund as a life cover to secure your family’s financial requirements. Uncertainties such as critical illness, disability, or even an accidental death can disrupt your family’s basic living. Further, children’s education, marriage and other financial responsibilities are affected. Thus, in your absence, financial protection becomes necessary. Investments are required to grow your wealth to meet your financial expenses later in the future, considering the effect of economic downturns and inflation.

Who should consider investing in the ULIP Plan?

1. People being the only earning member in the family managing various financial expenses.
2. People seeking opportunities to invest in long-term investment plans having many future financial commitments.
3. Salaried people who cannot afford to buy two separate plans for insurance and investments.
4. People seeking tax benefits on their investments

What are the basic features of ULIP?

• Flexibility:You can choose to invest in equities, debts or hybrid funds. The option to switch between the funds during the policy tenure is also available.
• Market linked returns – You will earn returns based on the market trend as the investment is made on fund instruments in the financial markets.
• Lock-in period – ULIPs have a lock-in period of five years. The plan holder cannot liquidate the amount accumulated during this period. Partial withdrawal is allowed after five years.

What are the advantages of ULIP?

• Dual Benefits:You get life cover for your family’s financial protection and investment benefit to grow your wealth.
• Tax Benefit: Investments made in ULIPs are eligible for tax deduction under Section 80C of the Income Tax Act, 1961 for up to ₹1 50 000.
• Customize – There are a variety of ULIPs available in the market. Also, you can customize a plan by opting for additional riders.

What are the major ULIP charges?

Depending on the plan and the provider chosen, there are various costs involved. Here are a few basic charges involved.

• Fund Management Charges:For managing the investment funds regularly.
• Premium allocation charges:Deducted from premium and gradually decreases during the tenure.
• Mortality charges:For providing life cover. It is based on the policy holder’s mortality rate.

Tips for choosing the best ULIP plans.

Take a balanced approach to choose a good option among the best ULIP Plans. Here are a few tips:

• Long Term Goals:Always focus on holistic, long-term goals that will give you higher returns when you stay invested. Ensure it is competitive and risk-tolerant at the same time.
• Understand your financial status: Before you take up a plan, ensure you can afford to pay for it throughout the policy tenure. For this, you have to analyze your income and expenses better.
• Modify: Keeping the basic features intact, you can modify the plan based on your requirements.

Final Words

Financial security is an ultimate requirement. The right approach to protect your family conservatively is through a ULIP policy. It will offer life cover to secure your loved ones, investment benefits to growing your wealth and tax benefits to save your income in the best possible way. Try your luck and let it favour you best!