Here’s why ULIPs Are Excellent Long-term Investment Purposes

Have you ever come across the word ULIP as you were buying life insurance online? They are often listed on many insurer’s websites as one of the best insurance plans to choose. If you are considering to buy one, here are a few things you need to know about them.

UnitLinked Insurance Plans (ULIP):

Insurance companies offer ULIPs as an alternative to traditional life insurance plans. When you invest in ULIP, a part of the premium is invested in assets such as debt and equity instruments. The remaining premium is to give you a life cover. The double benefits of life cover and investment attract many consumers to buy ULIPs. 

Types of ULIPs:

There are types of ULIPs

1.    Type 1 – This ULIP provides you either the sum assured (insurance cover) or the Fund value (total value of the investment) based on whichever is higher.

2.    Type 2 – Thus ULIP provides you with both the sum assured and the Fund Value. Although, the premium for Type 2 ULIP is higher.

Tax benefits:

A major factor which consumers look for when buying life insurance online is the tax benefits. Under ULIPs, premiums up to INR 1.5 lakh are exempt under Section 80C of the IT Act, 1961. At the time of maturity, all payouts are exempt from tax.

Investment options:

The major benefit of ULIP is that a certain sum of the premium you pay is invested. You get the power to choose the where your money should be invested. The most popular ones are equity and debt funds. You need to choose the investment strategy based on your experience and risk appetite.

Surrender Charges

ULIPs come with a lock-in period of five years unlike the three-year lock-in period for traditional insurance plans. If for any reason, you need to surrender your plan, the charges levied with traditional insurance plans will leave you with near zero profit. With ULIPs, the surrender charges is small or zero sometimes and you are often left with a higher profit.

Cost

Many insurers such as Aegon Life, HDFC, and SBI offer ULIPs at low costs thanks to the internet which has reduced maintenance costs. You will find many ULIPs in the market which cost less and perform better than Mutual Funds.

Whether you going through an agent or buying life insurance online, make sure you know the ins and outs. ULIP is a hybrid insurance product tailor-made for long-term investment purposes. It’s an excellent way to meet your future needs.