ULIPs (Unit Linked Insurance Plans) are financial products that combine life insurance and investment benefits. When you pay the premium for a ULIP, it is divided into two parts: one part provides life insurance cover, protecting your family financially in case of your death during the policy term, while the other part is invested in market-linked funds such as equity, debt, or hybrid funds based on your risk preference.
Key details about ULIPs include:
- Life Insurance Component: Provides a death benefit to your nominee, which is usually the higher of the sum assured or the fund value accumulated by your investments.
- Investment Component: Your money is invested in units of chosen funds, and the value of these units fluctuates with market performance (Net Asset Value or NAV). You can switch funds as per your choice without tax implications.
- Benefits: ULIPs offer potential for wealth creation along with life cover, partial withdrawals after a lock-in period (commonly 5 years), tax benefits under section 80C, and maturity proceeds that are typically tax-free.
- Plans allow customization with optional riders such as critical illness or accidental death cover.
- At maturity, you receive the fund value accumulated as per the market performance of your chosen investments.
- Death Benefit Example: If the sum assured is ₹1 Crore and the fund value at demise is ₹1.2 Crore, the nominee receives ₹1.2 Crore (the higher amount).
Popular ULIP plan features:
- Flexibility in premium payment terms and policy term.
- Multiple fund options to match risk appetites.
- Transparent charges and professional fund management.
- Long-term financial goal fulfillment, such as retirement, children’s education, or wealth creation.
In summary, ULIPs serve as a dual-purpose plan offering life insurance protection along with market-linked investment opportunities, making them suitable for individuals seeking financial security and wealth growth over time.