New Age ULIPs: How good are these as an investment option?

• Reduce taxable income by up to Rs. 1,50,000 deduction under section 80C**
• Convenient payment options - annual, half-yearly, quarterly or monthly premium payments
• Do more with plans that offer pure protection, retirement planning and investment options

ULIPs or unit-linked insurance plans provide policy buyers not only a risk cover against death, but also the option to invest in funds. Thus, these plans help policyholders earn market-linked returns in addition to providing them a comprehensive life cover. Despite this, many policy buyers shy away from investing in ULIPs due to the charges that are levied by the insurance companies that offer these plans.

However, the ULIPs that are currently offered by insurance providers, which are called New-Age ULIPs, provide a host of attractive benefits to policy buyers and are also offered at competitive rates. Thus, these ULIPs have become an attractive choice for policy buyers.

Benefits of New-Age ULIPs

1. Financial Security: Since unit-linked insurance plans are a type of life insurance product, they provide financial security to the policyholder’s dependents for the duration of the policy tenure. Thus, in the case of ULIPs, If the life assured passes away during the policy term, a death benefit will be paid to the nominee.
2. Reduced Charges: When you purchase a ULIP, your insurance provider will levy certain charges, such as the premium allocation charge, policy administration charge, fund management charge, etc. While the charges levied for ULIPs were quite high when they were first launched in the country, insurers, over time, have made these charges more affordable.
3. Return of Mortality Charge: The mortality charge, which is the fee charged by an insurer to provide you the life cover, is usually included in the premium that you pay. Several ULIPs that are currently offered, however, return the mortality charge to the policyholder if the concerned individual survives till the completion of the policy term.
4. Choice of Funds: Insurance firms that offer ULIPs usually offer a range of investment funds with varied risk profiles. Thus, as per your appetite for risk, you can choose to invest in an equity fund, debt fund, or a balanced fund.
5. Tax Saving Benefit: ULIPs offer tax benefits to policyholders. As a policyholder, you can claim tax benefits for the premiums that you pay and the payouts that you may receive through the plan under Section 80C and Section 10(10D) of the Income Tax Act, 1961, respectively. Also, unlike mutual funds, no LTCG (Long-Term Capital Gains) Tax is levied on ULIPs.
6. Option to Switch Funds and Re-Direct Premiums: Since the returns that you receive through a ULIP are market-linked, you can choose to switch funds at any time during the policy term. Further, you also have the option to redirect your premium to more than one fund. Thus, ULIPs offer a high degree of flexibility to policyholders.
7. Bonuses and Guaranteed Additions: Several insurers also offer bonuses and loyalty additions to policyholders as a reward for keeping the policy active. These bonuses are typically offered if the policyholder has maintained the policy for at least a few years.
8. Partial Withdrawal: ULIPs usually have a lock-in period of 5 years. However, after completion of the lock-in period, policyholders can make partial withdrawals from the fund value. Thus, ULIPs can also provide emergency liquidity during your times of need.
9. Maturity Benefit: If the life assured survives till the completion of the policy term, most insurance providers offer the policy fund value as the maturity benefit to the policyholder. Thus, these policies can serve as an effective savings/investment instrument.
10. Option to Purchase Riders: Policy buyers can choose to enhance the coverage provided by a ULIP by purchasing additional riders like the Accidental Death and Disability Benefit Rider, Critical Illness Rider, etc. Make sure to assess your coverage needs and purchase the riders that you require accordingly.

Purchasing a ULIP is a smart choice if you wish to enhance your returns and avail a comprehensive life cover for yourself. However, before you purchase an insurance plan, make sure to first assess your requirements and opt for a policy that is best suited to your coverage needs.