ULIP stands for a unit-linked investment plan. ULIPs provide market-linked returns while a small portion of your premium goes into providing protection i.e. life cover. ULIPs are considered as a good investment option because of the tax benefits they provide. However, is tax exemption the only reason for you to invest in ULIPs?
Here are some ULIP plan features that you should know while investing.
Double Benefits – ULIP Plans Returns And Insurance Cover
When you choose to opt for a ULIP online or otherwise you get an insurance cover plus investment option. This will not only give your family protection throughout the policy term but also provide good returns on investment at the time of maturity. You get an option to invest in a range of funds which is a mix of equity and debt so that you can fulfil your long-term financial goals.
Triple EEE Benefit
ULIPs provide the benefit of EEE i.e. Exempt-Exempt-Exempt. This means that the customers are eligible for a tax deduction during all three phases ie; the investment, earnings and withdrawal stage. The premiums paid can be claimed as deductions from your taxable income during the year under section 80C of the Income Tax Act. The interest or profit gained and the maturity amount is also exempted from tax under section 10(10D) of the Income Tax Act. This means that all the amount you invest in ULIP scheme online is free of the tax burden.
Top-Up Facility Available
Certain ULIPs allow you to increase the amount of investment. This facility is known as the top-up facility where you get to put an added amount over and above the existing policy. You can even avail tax benefits on these top-ups.
Flexible Investment Options
ULIPs provide an option to switch between funds. Switching option allows you to change the ratio of invested amount where you can shift your funds from equity to debt or a mixture of both the funds as per your risk appetite and life stages.
This unique feature is non-existent in other investment options such as mutual funds. The new age ULIP schemes allow you to switch without any charges so that you can invest without any worries.
Charges in ULIP Plans
Generally, there are around 5 charges in ULIP plans – premium allocation charges, policy administration charge, mortality charge, fund management charge and surrender charge.
These charges in ULIP plans make most people think twice before investing in ULIPs. However, the ULIPs today have evolved for the better. The new age ULIP doesn’t have a premium allocation, policy administration and surrender charges after a specified period. So if you were hesitant to invest in ULIPs since long this is one worry you can take off your plate and start considering opting for ULIPs.
Also for a long-term ULIP, these charges should not bother you. In the long-term, ULIP plans returns will help you recover all the charges borne in the initial years of investment. Once you have gone through these features and thought over them carefully, you can simply choose to invest in a ULIP online.
Learn more about ULIPs here.