Online ULIPs - Flexible Investment & Protection Option

Unit Linked Insurance Plan or ULIP is a type of life insurance policy that provides the double benefit of investment and protection under a single plan. While it is primarily an insurance product, ULIPs are linked to the capital market and give you the flexibility to invest in units or debt funds or equity funds based on your risk appetite and financial goals.Unlike traditional life insurance policies, ULIPs allow you to accumulate a corpus while you get protection against the uncertainties of life.Until a decade ago, ULIPs were infamous for their high charges, and low returns on investment. But, in 2010, the Insurance Regulatory and Development Authority of India (IRDAI) issued new guidelines for ULIPs to provide valuable returns to the policyholders by reducing the charges. Today, a lot of people invest in Unit Linked Insurance Plans to get protection and for long-term savings.Today, most insurance companies in India offer online ULIPs, which provide a convenient way for the people to get exposure to investment in the equity market and get attractive returns in the long run. Almost all the major life insurance companies have introduced online ULIPs that are easy to buy and are incredibly cost-efficient. With disciplined investment in ULIPs, you can achieve your financial goals.

• Flexibility Online ULIPs allow you to invest in various funds options that have 0% to 100% exposure to equities in a single plan. This means you can choose to invest in either debt funds or equities as per your risk appetite and financial goals. Most insurance companies also allow free switching of funds (limited to a few times in a year), and redirection of investments as per your changing financial status, and risk-taking ability. The annual free switch allows you to shift your investment in equities to debt funds or vice-verse and get optimal returns.The flexible nature of the ULIP is critical. Since it provides market-linked returns, there is an inherent element of risk, and it is paramount that you keep your investment protected from the volatile market condition. The flexibility to switch funds allows you to benefit from the stock market movements and maximise your returns.
• Tax-efficient investment One of the significant benefits of Link unit-linked insurance plans is that it is categorised under the EEE (Exempt-Exempt-Exempt) tax regime. All the three components, i.e. the premium amount you pay for the policy, the returns earned from the fund, and the fund value at maturity, are exempted from tax.The premium paid for the policy is eligible for tax benefit under Section 80C of the Indian Income Tax Act, 1969. However, the tax benefit is subject to a maximum limit of Rs. 1,50,000 in a year. Also, the sum received on maturity of the policy is tax-free. The tax benefits increase the returns on your investment, which makes it a must-have investment in your portfolio.
• Life Cover While ULIPs offer several investment benefits, it is primarily a life insurance policy that provides coverage against life risks. In the event of your unfortunate demise during the policy period, a minimum death benefit amount will be paid to the nominee in a lump sum.For example, if you have invested Rs. 1 lakhs in an online ULIP that has a sum assured of Rs. 10 lakhs, and if the fund value at the time of your demise is Rs. 5 lakhs, the nominee will get Rs. 10 lakhs as a death benefit in a lump sum.

Thus, online unit-linked insurance plans are an excellent investment avenue that provides valuable returns and offers life protection at the same time.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.