Unit Link Insurance Plan Compare

Additional Useful Information

• ULIPs come in different configurations. Some of them are:
• Equity ULIPs – Part of the premium is invested in equity shares/funds. It is the riskiest of all ULIPs.
• Debt ULIPs - Part of the premium is invested in debt instruments. The risk is lower.
• Balanced Funds ULIPs – A portion is invested in debt, while the other portion is invested in equity. It is less risky than Equity ULIPs.

• ULIPs are also classified on the premium payment structure and the type of payouts. Some of them are:
• Regular Premium ULIPs – Premiums are paid regularly till maturity in flexible intervals.
• Single Premium ULIPs – Premium is paid once at purchase of the policy.
• Guaranteed ULIPs – Focus on wealth preservation. They invest majorly in debt to generate regular income.
• Non – Guaranteed ULIPs – Focus on creating wealth. Invest majorly in equity for higher returns.
• Life Stage ULIPs – Focus on the stage of life the policyholder is at and invest accordingly.

• Specific terms of ULIPs will differ from company to company.

• ULIPs allow policyholders to flexibly shift between funds as per their changing preferences and risk appetite.

• ULIPs are suitable for individuals who have dependents in their family and want to make sure that they are financially secured in case of an untimely death while enjoying some regular income.

Returns *

• Cash Value / Bonuses – A part of the premium paid by the policyholder is used to generate returns in the form of cash value of the policy or bonuses. The cash value can be accessed by the policy holder if there is a need. Bonuses are paid out from time to time based on the specific terms.

• Death Benefit – This amount is received by the nominee upon the death of the policyholder.

• Maturity Benefit - If policyholders survive the policy duration, they will receive the maturity benefit.

• Surrender Value – This amount is received if the policyholder decides to surrender the policy before the maturity of the policy.

• Specific returns in terms of percentages are not possible to be defined due to the combination of insurance and investment. However, typical maturity benefits / returns from such ULIP Policies are based on chosen products for investment purposes.

Risk Level

• ULIPs are very low risk investments. In fact, they are used to mitigate risk by guaranteeing a death benefit.

• Failure to pay premiums would terminate the insurance coverage and put the policyholder at risk.

• All insurance providers are regulated by the government. Therefore, any default risk is negligible.

Liquidity

• ULIPs have a lock in period of 5 years. Hence, they are illiquid up until the lock in period ends.

• The policy can be surrendered at any time even before the lock in period ends but the surrender value of the policy at that time will be received by the policyholder after the lock in period of 5 years ends.

Interesting Facts

• ULIPs have higher premiums as compared to term plans since term plans only provide life cover.

• Endowment Insurance policies provide the option to avail of personal loans against the cash value of the policy at competitive rates of interest.

• ULIPs combine the lower coverage period of term life plans and the investment part of whole life plans.

Tax Implications

• The maturity benefit is tax free if the annual premium paid is up to ₹2,50,000. Otherwise, the maturity benefit amount is taxed as capital gain depending on the type of funds used for investment. If the funds are equity-based, the tax liability will be as per equity taxation. If the funds are debt based, the tax liability will be taxed as per debt taxation.

• The death benefit which is the amount that the nominee of the policy receives in the event of the demise of the policyholder, is tax free.

• The premiums of the ULIP can be used towards claiming the ₹1,50,000 tax deduction available under Section 80C of the income tax act. This is only applicable when the premium paid is less than 10% of the sum assured.

• Any surrender value that exceeds the total amount of premiums paid is taxed according to the tax slab of the policyholder if they policy is surrendered before the 5-year lock in period ends. The surrender value will be tax free after the 5-year lock in period ends.

Where To Invest

• https://www.sbilife.co.in/en/individual-life-insurance/wealth-creation-plans

• https://www.policybazaar.com/life-insurance/ulip-plans/