UNIT LINKED INSURANCE PLAN (ULIP)

ULIP stands for Unit Linked Insurance Plans. ULIP is a combination of insurance and investment. Here policyholder can pay a premium monthly or quarterly or annually. A small amount of the premium goes to secure life insurance and rest of the money is invested in any number of qualified investments such as stocks, bonds or mutual funds .

Term:   Policyholder goes on investing through the term of the policy – 5,10 or 15 years upto 30 years and accumulates the units.

Investment option:  ULIP offers investors options that invest in equity and debt.

 An aggressive investor can pick equity oriented fund option whereas a conservative one can go with debt option. 

Returns: The recently launched ULIP are better than the older ULIP due to lower charges. One can pick and choose the low cost ULIP. While traditional insurance plans offer 5% to 6.5% returns, ULIP can offer you double digit returns if you are invested in equity funds and debt fund can also give 7% to 9% returns according to past data.

Lock in Period: 5 Years , even the policy holder surrender the plan after 1 year the invested amount will not be withdrawn before 5 years and the amount will be transferred (after deducting surrender charges) to DP Fund where policy holder’s invested amount will earn 4 % interest per annum.

Deth Benefit:   higher from following:

(a)  Sum assured – Withdrawal (if any)

(b)  Minimum death benefit which is defined in policy (e.g. 105%, 125% etc. of sum assured)

(c)  Fund value.

Maturity Benefit:    Fund value

Balancing option: ULIPS provide Balancing Option i.e. as per your life stage you can reduce your risk level by reducing equity allocation to increasing debt allocation. But it is fully option able to the insurer.

Taxation: No upper limit for investment, but u/s 80c of IT Act, 1969 individual can claim tax exemption up to rs. 1,50,000/-.

Maturity amount is tax free if

Sum assured > 10x annual premium

If your annual premium is more than 1 lakh TDS would be applicable 2% on

Maturity amount.

If individual surrender the plan within lock in period, his/her tax exemption will be withdrawn in the year of surrender. 

HDFC Life is a leading provider of ULIP investments. The firm’s plans offer varying provisions, terms and investment options. Other ULIP providers include Aegon Life, PNB MetLife, Kotak Life, ICICI, IndiaFirst, SBI Life, IDBI Federal and UTI.