Unit Linked Insurance Plan – ULIP

Unit Linked Insurance Plan (ULIP) – Unit Linked Insurance Plan is popular insurance plan among the community who want to take financial risk to increase their wealth with the waves of Equity market.

As name defines, an insurance plan where unit or equity involve is ULIP. ULIP is best option to multi-fold your investment with the risk cover of your own life. In long term there is definite profit in ULIP but not guaranteed at what rate it will grow, as its market based investment.

ULIP provides Life Risk Coverage along-with the investment option in equity with five different funds per the risk appetite of the insured person and help to multi-fold his investment in short term with the enjoying double tax benefits.

How does ULIP work: When you pay premium, after deducting the fixed charges, your premium used to purchase the Units of funds (funds selected by you at the time of purchasing ULIP), and units/fund allocated to your policy.

An ULIP is best in comparison to Mutual Funds, and there is tax free returns in ULIP while not in MFs, we have free fund switch in ULIP while in MFs there exit and entry loading, and main benefit over the MFs is 10 times Risk Coverage in ULIPs.

We have below mentioned Funds with ULIPs;

  1. Growth Super Fund – High Risk with upto 100% investment in Equity.
  2. Growth Fund – High Risk with upto 70% investment in Equity and rest in Govt. Security / Corporate Bonds / Money Market.
  3. Balanced Fund – Medium Risk with upto 40% investment in Equity and rest in Govt. Security / Corporate Bonds / Money Market.
  4. Conservative Fund – Low Risk with upto 15% investment in Equity and rest in Govt. Security / Corporate Bonds / Money Market.
  5. Secure Fund – High Risk with upto 100% investment in Govt. Security / Corporate Bonds / Money Market, and NIL in Equity.

 

Below mentioned charges involve in ULIPs;

  1. Premium Allocation Charge for up-to first five years, 4-5%.
  2. Fund Management Charge 0.5% to 1.25% fund wise.
  3. Policy Administration Charge for up-to first five years.
  4. Mortality Charge per the age of investor to provide Insurance Coverage.

 

Why go for ULIP instead of the Share Market or Mutual Funds;

  1. Risk Coverage
  2. Portfolio Management by highly profiled professionals
  3. Tax-Free Liquidity.
  4. Free switches between funds, without entry and exit loading.
  5. Guaranteed Loyalty Additions in some ULIPs.
  6. Guaranteed Wealth Boosters in some ULIPs.
  7. Double Tax Benefits, at entry benefit of 80(c) and at exit benefit of 10(10D).

SIP(Systematic Investment Plan) and ATP (Automatic Transfer Plan, you paid annual premium then every month equal fund will transfer to fund till 12 months) are available there.

Amit Saxena

Financial & Insurance Consultant
MaxLife Insurance Co Ltd & MaxBupa Health Insurance

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