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4 Reasons Why ULIPs are Important

25-August-2021 |

The uncertain global situation has highlighted the importance of insurance and investment in an individual’s life. Investments are vital to ensure a comfortable standard of living in the future, considering the increasing inflation rate. And, insurance is extremely important if you have a dependent family.

A single premium term policy might suffice for your family’s protection needs. However, if you are looking for an investment-linked insurance solution, a ULIP policy is a fair option. A Unit Linked Insurance Plan (ULIP) is a comprehensive life insurance plan that offers twin benefits of insurance and investments.

Let us now discuss what a ULIP is and four important reasons that emphasise its critical importance. 

 

What is a ULIP policy?

A ULIP policy is a distinct life insurance plan that provides two benefits: life cover and investment benefits. Insurers utilise one portion of the premium amount you pay for the life cover and the other to invest in financial instruments for market-linked returns.

In addition, the plan also provides add-on rider# options such as accidental death benefit rider#, total and permanent disability rider#, critical illness rider#, etc.

For example, the critical illness rider# will provide the insured amount to pay for your medical expenses when you get diagnosed with a critical illness for the first time in your life. With this basic overview, let us understand the critical importance of the ULIP plan.

 

The Critical Importance of ULIP Plans

 

  1. Investment benefits with life cover: Affordability and risk appetite are major constraints while considering market-linked investment options. You have to spend more and assume a considerable amount of risk to make reasonable returns. However, family commitments generally restrict the extent of risk you can take and the amount you can confidently invest.

    With the ULIP policy, you can be assured of a life cover and market-based investments as per your risk profile. The life cover will ensure the sum assured to your nominee in case of your unexpected death during the policy term. It is a cost-effective solution for all your financial needs.

  2. Flexibility: Flexibility is an important aspect of any financial instrument. It will help you customize the plan for your financial requirements. ULIP benefits have critical importance due to their flexible features. Here are a few to mention:

    • The portion of the fund invested for market-linked returns in the financial securities can be based on your risk appetite. For example, you can choose to invest in equities for high-risk investments, debt funds for low-risk investments and the hybrid fund for moderate risk investments.

    • You also get the option to switch between the funds based on the market volatility. For example, if an economic slowdown is expected shortly due to a government policy announcement, you can switch to a debt fund to secure your investment and ULIP returns. Tata AIA ULIP plans allow you to make such switches online through simple and easy procedures.

    • The plan also provides flexible premium payment options. For example, you can opt for regular pay for a longer duration, such as 15 - 20 years, a limited pay duration of about 5 - 7 years, or a single premium payment. The single premium life insurance plan is preferred by many people who seek safe and higher returns in the long term. The premium can become cheaper if you start investing early in life. The reason is that the possibility of having a pre-existing illness or any other health disorder is less at a younger age, reducing the probability of death, which is a major consideration for the insurers while calculating the premium and sum assured.

  3. Secure and long-term benefits: Every investor considers safety as a prominent factor while choosing investment options. ULIP plans are considered safe for three reasons.

    • Insurers provide different combinations of funds that you can choose to invest in based on your risk tolerance level. As the funds are managed by an expert team facilitated by the insurance provider, they are extremely reliable.

    • By switching between the funds based on the market volatility you can safeguard from drastic losses. The plan also provides complete transparency of the fund value at definite intervals. You can either opt for the fund manager to make the necessary switches on time or let you notify of the requirement and permit you to do the fund switches.

    • Furthermore, ULIP has a lock-in period of five years, after which partial withdrawal is permitted. Even if the market volatility persists for a while, it corrects itself to ensure consistent returns within the five-year lock-in period. Also, it ensures you invest in the long term for higher ULIP returns.

  4. Tax* benefits: Of late, the ULIP policy holds critical importance due to the tax* benefits that it offers. The premium amount paid towards the ULIP plan and the payouts provided as returns are applicable for the tax* deduction and tax* exemption under Section 80C and Section 10(10D) of the Income Tax Act, 1969. 

 
Conclusion

The ULIP plan has critical importance in the financial investment platform for varied reasons. Firstly, it ensures dual benefits of life cover and investment options based on risk appetite. Secondly, it offers flexible options to switch between the funds based on the market volatility and price fluctuations.

Therefore, if you feel investment and insurance are critical components in your life to ensure financial security for you and your family, a ULIP policy is just the ideal choice!

L&C/Advt/2021/Oct/1870

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Need more information?
Let us help you

TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in.

Looking to get a new plan? 
Connect with us now

+91

TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in.

People Like You Also Read

All You Need to Know About ULIP Policies
Read More
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Read More
Everything you Need to Know About Premium Redirection in ULIPs
Read More
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Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

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Disclaimers
  • Insurance cover is available under the product.

  • The products are underwritten by Tata AIA Life Insurance Company Ltd.

  • The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.

  • For more details on risk factors, terms and conditions please read the sales brochure carefully before concluding a sale.

  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.

  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.

  • *Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.

  • #Rider is not mandatory and is available for a nominal extra cost. For more details on benefits, premiums, and exclusions under the Rider, please refer to the rider brochure or contact Tata AIA Life's Insurance Advisor/ branch

  • IN THIS POLICY, THE INVESTMENT RISK IN THE INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER

  • THE LINKED INSURANCE PRODUCT DO NOT OFFER ANY LIQUIDITY DURING THE FIRST FIVE YEARS OF THE CONTRACT. THE POLICYHOLDER WILL NOT BE ABLE TO SURRENDER/WITHDRAW THE MONIES INVESTED IN LINKED INSURANCE PRODUCTS COMPLETELY OR PARTIALLY TILL THE END OF THE FIFTH YEAR.

  • Past performance is not indicative of future performance.

  • All investments made by the Company are subject to market risks. The Company does not guarantee any assured returns. The investment income and price may go down as well as up depending on several factors influencing the market.

  • Please make your own independent decision after consulting your financial or other professional advisors.

Need more information?
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TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in.

Looking to get a new plan? 
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TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in.