combine mutual funds benefits with life insurance benefits

Things To Look For In A Unit-Linked Plan

August 22, 2022

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A Unit Linked Insurance Plan refers to a scheme which is a mix of insurance and investment. This plan provides benefits of protection against risks to the policyholder through the security of life insurance. Moreover, the policyholder also gets the flexibility to manage their investments. ULIP helps in wealth creation and provides life cover. A portion of your premium is invested towards life insurance, while the remaining is deposited in funds as per your choice and requirements. So, you can say that Unit Linked Insurance Plans are insurance plans that combine mutual funds benefits with life insurance benefits.

ULIP Benefits

ULIP is a modern insurance product where you are incentivized for Keep scrolling through to know the advantages of ULIP:

Dual Benefits

With ULIPs, you can enjoy the benefits of both life cover coupled with investment. This plan offers security to the investor’s family in case of unfortunate events like the untimely death of the investor. It is a type of insurance plan that protects and offers you great returns as well.

Systematic Investment Plan

Apart from offering insurance coverage to the investor, it is a good tool for systematic investment planning. This plan allows you to choose your investment to get good benefits in return depending on current market scenarios.

Long-Term Finance Goals

If you want to meet a long-term goal like buying a house, a new car, etc., then ULIPs are a good investment option. The money grows per the market, provided the policy monies are left to grow over time.

Flexibility to Switch

ULIPs are designed to offer you the benefit of switching your portfolio between debt and equity based on your risk-bearing ability and your knowledge of how the market may perform. You have the freedom to choose your investment options as per your risk profile.

Tax Benefits

The advantage of taxability of ULIP on maturity is eligible under Section 80C of the Income Tax Act in India. Therefore, the short-term gains that the policyholder makes by switching funds are also tax-free. In addition, the returns out of the policy on maturity are also exempt from income tax under Section 10 (10D) of the Income Tax Act.

Here are the Following Things You Must Consider Before Investing In ULIP

Opt for Optimum Sum Assured

The sum assured refers to the lump-sum amount promised to the policyholder’s nominee in case of death. Therefore, it’s advisable to opt for a sufficient sum assured, which can take care of the policyholder’s family in case of an unfortunate event.

Extra Charges Involved

There are some charges associated with ULIP, which include:

Policy administration charges
Premium allocation charges
Fund management charges
Top-up charges
Mortality charges
Switching charges
Rider charges
Premium discontinuance charges etc.

You must ensure that you have a clear idea about the different charges involved before approaching an insurance provider. In addition, the policyholder must understand the total charges involved and their impact on the policy’s return.

Insurer’s Credibility and Solvency

ULIPs are long-term investment plans; thus, the policyholder needs to check the credibility and pedigree of the insurance provider before making a purchase decision. In addition, the insurance companies are highly regulated; thus, the regulator needs to ensure that all companies meet the solvency guidelines. The solvency ratio measures the ability of the enterprise to meet its long-term debt obligations and indicates the insurer’s financial stability

Compare Different Plans and Choose Products Wisely

Before making a purchase decision, you must make sure that you compare features and products available offered by different investors. While analysing, do keep in mind that past performance does not indicate the future performance of the funds. Insurance products offered by trustworthy insurance providers like Kotak Life Insurance prove to be a reliable solution.