Unit Linked Insurance Plans (ULIPs) provide the necessary life insurance protection for a family while helping to create wealth through a variety of investments in the long-run. ULIP is a unique financial product which provides dual benefits of investment and life cover.
Life insurance providers have come up with ULIP products with new improved features, which provide great flexibility, transparency and ease of access. With the introduction of ULIPs, an individual have option to invest in the market via ULIP.
Commenting on the importance of ULIPs, Madhu Burugupalli, Head of Products, ICICI Prudential Life Insurance, said, “It is important for an individual to have a financial plan which addresses their short, medium and long term savings needs. ULIPs are specifically designed to enable customers to achieve their long-term financial goals in a cost effective manner. The 10 times life cover component provides a safety net to their families in case of an untimely demise”.
There are various options in ULIPs like tax benefits, fund switching, premium payment term, premium redirection, partial withdrawal or increase or decrease of policy term which makes more flexible than many investment products. ULIPs are best for long term financial goals.
“To keep pace with changing preferences and needs of customers, insurers have developed ULIPs products, which offer more to customers by way of returning all premium allocation charges multiple times over the tenure of the policy, provide a systematic withdrawal plan option to meet financial milestones, offer life stage based portfolio strategies are few to mention”, added Burugupalli.
According to industry experts, starting an investment in a ULIP at an early stage in life has major advantages. One can derive significant benefits from the power of compounding in their journey to achieve one’s financial goals. Most insurers also offer additions to the fund such as loyalty benefits to encourage premium payment.
Ideally, one should stay invested over the long-term for a period of at least 10 years, as this is likely to earn reasonable returns for them and help them achieve their goals, along with managing inflation. If the policy is surrendered after the lock-in-period of 5 years, then the surrender value will be exempt from taxation and assured can avail the tax benefit.
Burugupalli further added, “ULIPs are long-term savings products and should be bought with a minimum time horizon of 5 years. The key is to stay invested and contribute for the tenure of the policy. That is why it is important to select a premium that is both affordable and can help build a relevant corpus for your goal”.
ULIPs also offer a transparent and tax efficient route to achieve financial goals. They inculcate a discipline to regularly save towards the objective. Unit linked products offer exposure to the capital markets they also provide the customer the flexibility to choose the asset allocation as per their risk profile. Have patience and wait for the right time to reap the maximum returns on your investment plans.