ULIP, or Unit-Linked Insurance Plan, is a type of financial product that combines investment and insurance benefits. In ULIPs, a portion of the premium is invested in market-linked funds, and the other portion is used to provide life cover. Depending on your preference, the premium paid is invested in equity, debt, or a mix of both to create wealth that you can get upon maturity. This article explains ULIP insurance and the key reasons to invest in it.
Why ULIPs are good for the long term
Here’s why ULIP plans can be a great addition to your investments and life insurance protection option for the long term
Dual benefit
When you holistically look at your financial portfolio for the long term, you have to consider different financial needs such as wealth creation, life insurance, health insurance, retirement planning, tax* saving, etc. A product like ULIP insurance designed to cover two separate financial needs by way of one policy is advantageous to your portfolio. With a ULIP plan, you get life insurance cover with the opportunity to invest and grow your money. And it doesn’t stop here. Depending on the ULIP policy you opt for, you can also add health riders# such as hospitalisation, disability, critical illness, etc.
Variety and flexibility to switch
New age ULIP plans offer investors benefits on par with mutual fund schemes. This means you can choose funds according to your financial goals and decide between equity, debt, liquid, balanced, cash, etc. There’s variety in the funds to choose from and added flexibility with the fund switching facility. Tata AIA Life Insurance offers Smart Sampoorna Raksha (UIN- 110L156V02), a unit-linked, non-participating, individual life insurance plan for savings and protection. You have 11 different fund options to choose from under this ULIP insurance plan, and you can pick any or all of them, depending on your goals.
Tax saving
When you’re making a long-term investment, you cannot ignore the tax planning aspect. Even though your primary investment goal may not be to save tax, it’s prudent to figure out if you can. With a ULIP policy, you get a tax* deduction for the premium you pay for the policy under Section 80C of the Income Tax Act, 1961. The proceeds from your ULIP plan could also be tax-free*. Considering the tax-saving aspect, ULIP plans are definitely an investment to consider for the long term coupled with life insurance protection. It’s essential to note that ULIP is a kind of investment where you buy the policy once, but you avail of the tax* benefits every year when you pay the premium.
Premium redirection
Premium redirection allows you to invest future premiums in a different fund. Your previous premiums will stay in the fund you chose before. As per your selection, all future premium payments will be invested into the new fund. This lets you change your investments without affecting your past ones.
Option to top-up
Depending on your life stage, you may have different goals and needs. In order to achieve these goals, you may want to increase your investment in your plan. The top-up feature of ULIPs allows you to invest more money in your existing plan at any time during the policy term.
Lock-in period withdrawal facility
A ULIP's lock-in period can range from three to five years. A key characteristic of ULIPs is that they allow partial withdrawals throughout the lock-in period. Having this option ensures you are prepared financially in case of an emergency.
How ULIPs can give high returns
Returns are a primary aspect to consider while making any investment, especially one for the long term. ULIP plans are capable of providing high returns. You just have to keep certain things in mind when investing in a ULIP insurance plan.
Asset allocation
Life stage-oriented decisions
While saving in a ULIP policy, remember to optimise your asset allocation. By investing in different types of funds, you can diversify your portfolio and minimise market risks. So, if one of the asset classes you invested in is making a loss, it can be compensated by another asset class that is making a profit. This advantage of asset allocation is further enhanced in ULIP plans due to the fund switching facility.
ULIP plans make for a good long-term investment as they allow you to consider your changing goals as per your life stage and also offer life insurance protection. For instance, if your ULIP plan is for 25 years, then as time passes, your risk appetite and priorities will change. As you get closer to retirement and your risk appetite decreases, you may want to switch from equity to debt funds.
Conclusion
ULIPs are a unique investment instrument that offers a double advantage of insurance as well as investment, both at the same time. ULIP plans offer numerous benefits, including a life cover, high returns, tax*-saving, and flexibility, and qualify as a safe and lucrative long-term investment. You can figure out the right plan and premium amount for yourself using an online ULIP calculator. Investing in suitable ULIPs can help you align your portfolio better with your long-term financial aspirations.
FOR EXISTING POLICY 
FOR NEW POLICY 
