Investors are confused between choosing ULIP and SIP as a mode of their investment. The reason behind this dilemma is that ULIP policy is one of the most versatile financial products in India. It is not only an insurance policy but an investment avenue that offers capital gains as well.
The main reason for spreading misinformation about ULIP is that the first generation ULIP has higher Commissions (of about 60%) that go directly into the pockets of insurance agents. After strict actions by the Information Regulatory and Development Authority (IRDA) in 2010, the commissions are low but insurance agents have been providing misinformation to this day.
However, ULIP itself is very beneficial for a modern-day investor. With ULIP, an investor gets an insurance cover and also can invest in shares and bonds of their choice for higher returns. In this way, one can get higher returns on the invested amount and fulfil their insurance needs at the same time.
5 Promising Benefits of ULIP
ULIP is designed in such a way that an investor can get the fruits of both investment and insurance in one single plan. It carries certain other benefits that make it one of the best investment plans in India as follows:
1. Tax-Free Long term Capital gains
The maturity benefits of ULIP plans that also include long-term capital gains is 100% tax-free as per the Income Tax Act of India. With this feature, these plans offer long-term capital appreciation without worrying about losing a considerable amount in taxes.
2. Transparency on investments
ULIP is an improvement by the insurance companies on the traditional insurance plans that are opaque. In traditional insurance plans, the investors are not able to get the transparency of their invested money and do not even get the company’s annual profit shares until their plans mature.
ULIPs provide whole transparency to investors and that’s why it’s a unique and efficient scheme over others.
3. Market-Linked ROI
In the ULIP policy, investors get returns related to the market directly because a part of their premium is invested in different funds including equity and debt. An investor can also easily shift between equity and debt funds without any additional tax that is generally imposed during direct Investments in mutual fund schemes.
4. Maturity and Death Benefits
Maturity and Death benefits are also packed in a ULIP policy similar to a traditional insurance plan. Some insurers also provide add-on benefits when the insured endures the maturity period, based on their terms and conditions of their policy.
5. Long Term Investment benefits
Long-term investment benefits are one of the most promising features of ULIP. During a long-term period, an insured person minimizes the fluctuation as well as market volatility and, at the same time, enjoys the returns on investment based on the market’s performance.
Thus, creating profit that is vastly emerging with higher returns over time. Moreover, as an additional benefit, the withdrawals are also free from taxation.
Best ULIP plans available in India
With ULIP plans, even an investor with minimum knowledge of volatile markets like equity and debt can also get higher returns, provided the investment horizon is long-term that is required to minimize the risk of fluctuations, volatility, etc. Here’s a list of some best ULIP plans in India:
1. INVEST 4G Plan by Canara HSBC Oriental Bank Of Commerce
INVEST 4G Plan by Canara HSBC Oriental Bank Of Commerce is one of the most demanding ULIP policies due to its core functionality of savings and protection benefits. This plan helps create higher returns for your wealth to fulfill long-term life goals with a protected risk environment. This ULIP plan comprises various additional benefits like Maturity benefits, Loyalty Additions, Return of Mortality charge, Wealth boosters, Partial Withdrawal, etc.
Key Features:
- Offers 7 different funds and 4 portfolio strategies
- Provide Add-ons like wealth booster and loyalty bonuses
- Return of Mortality benefit on Maturity of the plan
- The flexibility of Switching and Redirecting funds
- Option to receive Maternity benefits with Settlement options with installments
2. Bajaj Allianz Future Gains
Bajaj Allianz Future Gains is a ULIP plan that comes with Limited and Regular pay premium payment options. It also comprises features like flexible premium payments, Risk level selections, selection of funds, etc. The plan also offers a double benefit of chance as an additional feature on your regular investment, including protection under a life insurance policy.
Key Features:
- Personal portfolio strategies option of 7 Different funds
- Wheel of life strategy portfolio options
- Offers Guaranteed death benefits
- Includes Free look period
- Option of Policy termination or surrender benefits
3. Aegon Life IMaximise Secure Plan
Aegon life’s IMaximize secure plan is a non-Participating unit-linked plan. A Non-participating unit-linked plan is one in which an insured person is not able to participate in the insurer company’s business. It means that insured policyholders do not get the benefits of any bonuses and add-ons that generally the company provides as dividends from their profit margins over several intervals during the policy period. It also comes with Limited and Regular pay premium payment options.
Key Features:
- 7 different fund options for asset allocations
- Both Systematic and normal Partial withdrawals are allowed
- Provides Loyalty additions every tenth year
- Offers Top-up premium facility by lump sum amount
- Comprises Accidental Death Benefits as an Inbuilt Feature
4. Aviva LifeBond Advantage Plan
The Aviva LifeBond Advantage Plan is a single premium-based Unit linked insurance plan. A single premium-based ULIP means that an insured person can pay the premium amount in a lump sum and get the coverage for full-term, unlike the regular premium ULIP where the insured needs to pay premiums on regular intervals like monthly, quarterly, yearly, etc.
So in the Aviva Life Bond Advantage plan, insured’s can make a one-time investment and enjoy life coverage and saving facilities for longer periods, the same as regular premium ULIP.
Key Features:
- No premium allocation charges
- Death benefits comprise two additional benefit options
- Death benefits options also include Additional savings and income benefits
- Blue-chip, debt, and secure funds are available for investment
- Offers total fund Value on Maturity of the plan
The Takeaway
A ULIP policy is a great step to conquer high returns within your insurance schemes. However, various functionalities come into play like periods of investment, market fluctuations, and so on that determine the returns you gain through it. Therefore, it is advisable to attain proper knowledge before investment. We hope that this guide clears your basics related to ULIP policy.
