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What is a ULIP?

A Unit Linked Insurance Plan (ULIP) is a life insurance plan with an additional feature of investing your money in the market for future financial goals. This means that you get the dual benefit of protecting your family as well as securing your own future. To ensure you fulfil your financial goal, you need first choose the right plan suited for your needs.
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How does a ULIP work?

Contrary to popular conception, many life insurance products are instruments for investment, including ULIPs. A Unit Linked Insurance Plan (ULIP) is a market-linked product. This means that along with providing you with a life cover, your investment is diversified in the open market and the returns are incidental to the market performance, helping you in generating better returns in the long term.

In a ULIP, there is a death benefit which is the amount payable to the nominee in the event of death of the policyholder during the policy term. The policyholder will receive a maturity benefit if he or she survives the term of the ULIP.

Investments in ULIP can be customized to your preferences. You can choose the funds to invest in based on your risk appetite. Investors seeking lower risk may opt for debt funds while equity investments are desired by investors with higher risk. Moreover, you have the flexibility - you may switch between funds based on circumstantial dynamics so that you do not miss out on better performing funds.

A ULIP also provides tax benefits as the premium or amount invested into the ULIP is exempted from tax under Section 80C. The amount received on maturity of this investment plan, is also tax exempted under Section 10(10D) of the Income Tax Act, 1961

ULIP plan

What are Death and Maturity Benefits in a ULIP?

Death and maturity benefits are central to any ULIP policy irrespective of the insurance provider the scheme is availed from.

Long Term Protection

Death Benefits

Death benefits of ULIPs are offered in case of unfortunate demise of the policyholder. Generally, death benefit is equal to the sum assured plus fund value.

Long Term Protection

Maturity Benefits

Maturity benefits are offered to policyholders when the policyholder survives beyond the maturity period. Maturity benefits are equal to the amount of fund value.

Benefits of Investing in a ULIP

  • Flexibility:
    ULIPs let you choose the premium amount, as per your requirements. They also give you the option of selecting funds as per your choice. Many ULIPs also offer the possibility of increasing your premiums during your premium paying term. One can opt for a particular plan based on their financial goals and risk appetite.
  • Liquidity:
    No matter what your premium paying term or policy term is, after the lock-in period of 5 years, you can fully or partially withdraw funds from your account when you are in need of urgent funds.
  • Systematic Savings:
    ULIPs give you the benefit of putting aside a chunk of your income and save it for future use.
  • Wealth Accumulation:
    ULIPs not only let you save your earnings, but also help in growing wealth by allocating it to market-linked funds.
  • Tax Benefit u/s 80c:
    Premiums paid are deductible from taxable income under Section 80C. The maturity amount received is also exempt subject to conditions under Section 10(10D) of the Income Tax Act, 1961.

Why Should You Buy a ULIP?

Saving for Future Goals

When it comes to fulfilling future goals such as buying a new home, child’s education, retirement planning etc., savings are a must. Without long term savings plans, it is difficult to balance short term needs and future goals. ULIPs help you save systematically and help you plan for these future goals.

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Family’s Protection

Family’s Protection

ULIP is a life insurance plus investment plan that offers a life cover to the policyholder. In case of an unfortunate death, the dependant family of the policyholder will still be financially secured.

Tax Benefits

Provides Tax Benefit

All premiums are exempt from tax under Section 80C. The maturity amount received is also exempt subject to conditions under Section 10(10D) of the Income Tax Act, 1961.

High Returns

Good Returns

Unlike other investment plans, ULIP gives you the advantage of switching between funds depending upon their performance. This helps you to get a higher return on your invested amount by monitoring the growth

Two Main Reasons Why You Should Invest in an ULIP Early On

As young investors, you should be aware of the two pillars of sound investing;

Long Term Protection

The Power of Compounding

The biggest benefit of starting early is the power of compounding which provides the foundation for time value for money. Even if you invest a small amount for several years consistently, it will grow into a large corpus.

Long Term Protection

Balanced Investment Portfolio

The other basic rule is to have a balanced investment portfolio. This simply means that you need a mix of financial plans that can fulfil different needs so that the future of you and your loved ones is always secure and stable. This strategy attempts to balance risk versus rewards by adjusting and rebalancing each asset in an investment portfolio according to the investor’s risk-taking ability.

Steps to Buy a ULIP Plan Online

Step2 >> Choose your premium and policy term

Step3 >> Make Payment

You can opt from monthly, half-yearly or yearly mode of payment and choose from a list of payment options such as:

  • Credit Card
  • Debit Card
  • Netbanking
  • Online Wallets

How can you save tax by investing in a ULIP?

All premiums are deductible from taxable income under Section 80C. The maturity amount received is also exempt subject to conditions under Section 10(10D) of the Income Tax Act, 1961.

Tax Exemption under Section 80C on Premium Paid:
The premium paid in a financial year is eligible for deduction under section 80C of the Income Tax Act. An individual or a HUF can claim this deduction under Section 80C.
The premium paid by a tax payer is eligible for deduction irrespective of which Life Insurer you choose. Premium paid towards a life cover taken with any insurer that is approved by the Insurance Regulatory and Development Authority of India (IRDAI), is eligible for a Section 80C deduction.
In order to claim deduction under section 80C, the premium paid should not exceed 10% of the sum assured. Further, here it is important to note that covering the life of an individual with a disability referred to under Section 80U or a disease referred to under Section 80DDB, the requirement to claim the deduction under Section 80C is that the premium should not exceed 15% of the sum assured.

term plan

Tax Exemption under section 10(10D) on Maturity amount received
The maturity amount in a ULIP is fully exempt from Income Tax under Section 10(10D).
When the premium paid is more than 10% of the sum assured for policy issued after 1st April 2012 or more than 20% for policies issued prior to 1 April 2012, the maturity amount received from life insurance policy is fully taxable.


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Frequently Asked Questions

  • What affects the growth percentage of my funds in an investment plan?

    As the funds in an investment plan like a ULIP are linked with the share market, their performance is directly affected by the very market. The performance of any ULIP is hence market-driven.

  • How do I make the most out of the funds in a ULIP?
  • What are the types of funds you offer in your savings plan?
  • How can I see the performance of my funds in a savings plan?
  • When will my money invested in a savings plan start profiting?
  • Are ULIPs safe as an investment plan?
  • Are investment plans like endowment plans safe?
  • Is a term plan better than a ULIP?
  • What’s the difference between a ULIP and an endowment plan?
  • What’s the difference between mutual funds and ULIPs?
  • Is the return in Edelweiss Tokio Life – GCAP guaranteed?
  • Do I get any tax benefit?
  • Do I get death benefit?
  • Do I get additional benefit on my returns?


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