A Unit-Linked Insurance Plan or ULIP is an insurance plan that combines market investment as well. The premium paid under the plan is divided into two categories. One part relatively smaller part goes towards your life coverage. The larger part goes towards market investments. ULIP allows policyholders to pay their premiums in a monthly or yearly order, and in both scenarios, the condition mentioned above is fulfilled.
As a ulip plan delves into capital market investments, these investments carry risk, and the policyholder has to bear this risk as a part of their investment portfolio. So, you should carefully plan your financial goals when investing in a ulip plan as your goals will define your risk-bearing mentality.
At any time during the term of your policy, you can change your investment from equity to debt and vice versa without any additional charges. In fact, ULIPs are very transparent, and the policy clearly states the allocation and fund management charges upfront. Let’s take a closer look at a ulip plan and learn more about their features and eligibility criteria.
What Are The Features Of A ULIP Plan?
At its core, a ulip plan focuses on three things primarily: tax benefits for the policyholder, financial security against future adversities, and wealth growth. These core principles make a ulip plan one of the most popular investment choices for investors of all skill levels.
As ULIPs combine the benefits of both investments and insurance. These policies are always better than individually going for any one of them. Let’s learn about some of the top features of a ulip plan to understand why they are better than going only for insurance or investment.
1. Soaring Returns
As a ulip plan deals with market investments, investors can expect as much as 12-15% returns on a mere 10-year investment. This is because ULIPs allow investors to change their investment from balanced funds to equity to debt funds. The ability to change your investments as per your risk appetite will enable investors to earn higher returns, but it usually comes at a higher risk as well.
2. Tax Benefits
Tax benefits are one of the critical features of a ulip plan. It not only combines the tax benefits of investments and insurances, but you also get ₹ 1.5 lakh (maximum) tax exemption benefits for investing in a ulip plan under section 80(C) of the Indian Income Tax Act.
The maturity benefits of ULIPs are also tax-exempt under the condition that the maturity amount is more than 10 times the value of the annual premium paid by the policyholder. These tax benefits are shared by all types of ulips available today.
3. Varying Investment Options
When it comes to investing in ULIPs, you get plenty of investment options that you can invest in however you want. In these situations, the critical thing to remember is to plan your investment in line with your financial goals.
If you don’t want to take risks, you can invest in debt funds that are low risk with guaranteed returns. If you have are okay with taking risks, you can invest in equity funds that can be very profitable but come at a higher risk.
You are not bound to invest your entire amount in either equity or debt; you can invest your premium in any ratio you please in both equity and debt to create a balance in your investment portfolio that promises maximum returns and adequate security.
4. Easy Liquidity post lock-in period
A ulip plan allows liquidity after the lock-in period of 5 years. Investors are allowed to liquidate or surrender their policy earlier if the plan is running at a loss. You can also opt for partial withdrawal/liquidity of your policy to meet unexpected expenses and emergencies.
What Is The Eligibility Criteria Of A ULIP Plan?
The eligibility requirements for a ulip plan vary among different insurance providers. You have to check out the eligibility criteria of the plan you are interested in to know the proper details. But, on average, here are the general eligibility criteria you have to meet for investing in ULIPs.
- You have to be older than 30 days minimum to be eligible for investing in a ulip plan.
- The maximum age at which you can invest in ULIPs is 69-70 years
- The minimum policy term has to be 5 years for ULIPs
- The maximum policy term can be up to 71 years
The minimum and maximum age requirements for a ulip plan vary among insurance providers. The absolute highest and lowest values are mentioned above. Make sure to check the eligibility requirements of the insurance provider of your choice to know their specific eligibility guidelines.
Bhupendra Singh Chundawat is a seasoned technology journalist with over 22 years of experience in the media industry. He specializes in covering the global technology landscape, with a deep focus on manufacturing trends and the geopolitical impact on tech companies. Currently serving as the Editor at Udaipur Kiran, his insights are shaped by decades of hands-on reporting and editorial leadership in the fast-evolving world of technology.