Over the years, while the market for pure protection plans has grown significantly, the launch of low-cost 4G ULIPs has successfully added an impetus to the plethora of opportunities available. The 4G or new-age ULIPs - as many refer - are playing a vital role in the insurance sector. And with implementation of numerous positive changes to ULIP regulations over the last few years, especially those in the favour of customers, this category of product has come of age. The 4G ULIPs available in the market today rightly compete with other alternate investments options, and mostly turn out to be a better choice given the ample benefits of ULIPs in wealth creation, long term investment and retirement solution.
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Another important facet of ULIPs is that it helps in catering to the risks associated with market instability and absence of financial discipline that often go unacknowledged. 4G ULIPs are surely the best tool to manage these risks through life insurance, policy lock-in period and investment options of fund options and provision for fund switching. For those who are new and do not completely understand the concept of ULIPs, these products integrally have an advantage of in-built life cover, tax advantages, long term disciplined investment, low charges, and most importantly the very flexibility of partial withdrawals and fund switching.
In the last few years, the new-age online ULIPs have successfully become more customer oriented by completely removing unwanted charges, except the fund management cost which is also charged in the mutual funds. As per the IRDAI guidelines, the fund management charges in new age ULIPs are restricted to of 1.35% or less.
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Yet another important characteristic of new-age ULIPs that makes the product different from others in the league is the flexibility of investment. On the basis of your return expectations, you can choose to invest in equity or debt, or even just schedule your investments to shift amongst the two, subject to age and returns. In the later stage, once the corpus is built-up, the mortality charges are also exempted, making the product a cost-efficient solution.
However, one must understand that for investing in ULIPs, one certainly needs to have an excessive risk appetite for market linked investment. Apart from the regular tax benefits, there are some other important features of 4G ULIPs as well which include zero premium allocation charges, ROMC (return of mortality charges) and no policy administration charges that together make the product a great investment option.
The new-age ULIPs, apart from helping you to stay on the monetary front, gives the prerogative of adding or withdrawing from the corpus over the time. The product comes equipped with an in-built feature to furnish to rapidly evolving demands of a customer by allowing switches. As per your specific needs and requirements, you may choose to switch between planning regular withdrawals to complement your income, enhance investments during working years for a specified goal and switch returns to ensure better returns.
These are some of the crucial factors that collectively make ULIP a holistic insurance-cum-investment product for one’s monetary journey of accumulation of best returns, guaranteed protection, and maximum tax savings. As per the industry pundits, 4G ULIPs together with term insurance work relatively cheaper than investing in mutual funds over a longer period.
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While you create plans for your life goals, ULIP’s commit to stay throughout the life, meaning the plans will be serviced as a promise made throughout the life. Moreover, ULIP as an unacknowledged product is well capable of switching itself to meet the needs of easiness, agility, and as a shield against unforeseen risks. One of the greatest advantages of ULIP is that it is the only investment product that offers maximum transparency to its customers as all expenses are clearly stated beforehand.
Santosh Agarwal, Chief Business Officer- Life Insurance, Policybazaar.com
