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Need assistance in choosing the right insurance plan? Get a call from our Expert.

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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. T&C apply.

How ULIP Plan Works - Know The Features and Benefits

While considering a safe investment option for market returns, Unit Linked Insurance Plan(ULIP) is one of the most popular options. It helps you secure funds for protecting your family's financial future in your absence and increase wealth during the long term. The ULIP plan has various flexible features that provide a range of benefits based on your financial requirements. Here is a detail about how it works, its features and its benefits for your reference.
 

Before we get started, let us understand the ULIP plan meaning.
 

What is a Unit Linked Insurance Plan?
 

A Unit Linked Insurance Plan(ULIP) is a comprehensive life insurance plan that provides dual benefits, a life cover to secure your family in the event of your unexpected demise and market returns as the maturity benefit. In addition, it provides various flexible features to help you customise them based on your financial needs.


How ULIP Works?

 

The premium you pay for the unit-linked insurance plans will be utilised by your insurer for two different purposes. One portion of the premium will be utilised to ensure the life cover, and the other will be invested in the financial markets. Expert fund managers will monitor your fund investment and suggest changes if required.
 

Features of a ULIP Investment Plan
 

 

The flexible ULIP plan features will help you invest based on your risk appetite and ensure you accumulate wealth during the policy term.

 

  • Fund options based on risk appetite - In ULIP insurance you can invest in the fund options based on your risk appetite. For example, if you are a conservative investor, you can choose to invest in debt funds. On the other hand, if you are an aggressive investor, you can choose equity funds. There are also hybrid funds that help you balance your investment between equity and debt funds.

    Therefore, you can analyse your financial condition and your family's financial commitments to determine the risk profile and the suitable fund option.

  • Flexible premium payment - The ULIP insurance plan provides flexible payment options, such as single payment, regular and limited premium payment options. And for the regular and the limited premium payment option, you can choose the frequency of payment, whether monthly, quarterly, semi-annually or annually.

  • Rider# options - The ULIP policy also provides the option to choose the add-on rider# options for the enhanced financial benefits during specific scenarios, such as when you get affected due to a minor or major illness, critical illness, disability, etc.,

  • Switching between the fund options - While you can choose the fund option based on your risk appetite, you can always switch to a different one based on the changing market conditions or your priorities. It is one of the most important features of the unit-linked insurance plan.

    For example, if you have invested in the equity fund option in your ULIP plan, you can always switch to a hybrid fund or debt fund if the market conditions are reducing your investment value. There are a few free switches available, after which the switching is charged at a minimal rate.
     
Benefits Of ULIP Policy
 

The various flexible features help you customise the ULIP insurance plan to maximise the financial benefits.
 

  • Dual ULIP benefits - With a single investment plan, you can ensure a life cover to secure your family while increasing the market returns to appreciate your wealth.

  • Safe investment benefit - As the ULIP insurance plan provides the option to invest based on your risk profile and switch between the fund options considering the changing global economic conditions, it is a safe investment option.

  • Loyalty additions - In addition to the maturity benefit of ULIP, you can receive loyalty additions for being invested in the ULIP policy for the long term. It gets added to the total corpus increasing your wealth.

  • Long-term investment option - Long-term benefits ULIP investment. ULIP as a lock-in period of 5 years. Partial withdrawal is applicable after this term. Therefore, it encourages you to invest for the long term. The longer the investment is made, the higher the returns earned.

  • ULIP Calculator - At Tata AIA Life, we also provide the online ULIP calculator that helps you decide the right product choice, sum assured, investment, policy term and premium based on your financial conditions and requirements.

  • Tax* Benefits - The Income Tax Act 1961 provides tax* deductions and exemption benefits.

    • Tax deduction - The premium for the ULIP investment qualifies for a tax* deduction under Section 80C of the Income Tax Act 1961 of up ₹1,50,000 when the annual premium does not exceed 10% of the sum assured. If you plan to top-up your investment, the additional premium will also qualify for the tax* deduction, subject to the terms and conditions.

    • Tax* exemption - For ULIP policies purchased before 1 February 2021, the payout received will qualify for tax* exemption under Section 10(10D) if the premium does not exceed 10% of the actual capital sum assured. And for ULIP1 policies purchased after 1 February 2021, the payout received will qualify for tax* exemption on satisfying the above condition while the premium is not more than ₹2,50,000. Furthermore, if you have purchased multiple ULIP policies, the aggregate premium should not exceed ₹2,50,000.

      If the investment qualifies for a tax* exemption, the maturity benefit, bonus@ if earned and the partial withdrawal after 5 years are tax*-free. And, in the event of the policyholder's death, the death payout and the investment benefit will qualify for the exemption irrespective of the stated terms and conditions.

      The tax* benefits are applicable if you pay the premium for the ULIP1 insurance for 5 consecutive years.

  •  

    Therefore, if you have compared the ULIP features and benefits of the different insurers and chose the apt ULIP plan in India, you can secure your family and increase your wealth, considering your financial condition and commitments.
     

    Conclusion
     

    The ULIP policy in India is becoming increasingly popular, considering its importance in ensuring financial protection for the family and enhancing wealth in the long term. It helps you invest in the financial market based on your risk appetite, switch between the fund options during volatile market conditions and provide a tax* deduction and exemption benefits. Therefore, you need to understand your financial requirements,analyze the different ULIP plans and choose the best product to help satisfy your financial needs and benefit from it maximally through the long term.


    L&C/Advt/2022/Dec/3163 

Get Flexibility to Choose from 10+ Fund Options with our ULIP

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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!

View all posts by Tata AIA Life Insurance

Frequently Asked Questions

Can I withdraw funds from the ULIP policy?

ULIP plans have a lock-in period of 5 years. Partial withdrawal is permissible after this lock-in period.

Is it risky to invest in a ULIP plan?

As the returns are market-linked in a ULIP plan, there is a risk associated with the investment. However, you can choose the fund options based on your risk profile and switch between the fund options during a volatile market scenario and secure your investment at any time. 

Disclaimer

  • 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 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.
  • #Riders are not mandatory and are available for a nominal extra cost. For more details on the benefits, premiums and exclusions under the riders please refer to the Rider Brochure or contact our Insurance Advisor or visit our nearest branch office.
  • @These bonuses are not guaranteed in nature. The Company may declare Cash Bonus rate annually in advance. The Cash Bonuses if declared, will be applicable provided all due premiums have been paid.
  • THE LINKED INSURANCE PRODUCT DO NOT OFFER ANY LIQUIDITY DURING THE FIRST FIVE YEARS OF THE CONTRACT. THE POLICY HOLDER 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 advisor.