Frequently Asked Questions on ULIPs

Unit-Linked Insurance Plan (ULIP) is a unique type of insurance policy that provides you with life coverage and helps you grow your wealth significantly. Therefore, it is one of the most sought-after investment instruments at present. Besides this, ULIP plan returns are higher when compared to most of the other financial products. So, ULIP can assist you in building a large corpus in the long run.

However, many people are still skeptical about the various features of ULIP. People commonly ask questions like what is ULIP policy and its offerings, such as switching of funds and withdrawal of money.

Here is a list of a few queries and their answers to help investors solve their confusion about ULIPs. 

1. Is it worth investing in ULIP?

Yes, ULIP is a lucrative financial product, as it offers the dual benefits of investment and life insurance in one policy. If you are investing with a long-term perspective, you can benefit from the power of compounding, which can multiply your money exponentially over a long duration of approximately 15 years. Besides this, ULIP offers tax deductions, which make it a worthwhile investment avenue.

2. What is fund switching in ULIP?

An important highlight of a ULIP investment is that it lets you move your investments from debt to equity funds or vice-versa. With this, you can maximize the returns on investment and have better control over your funds.  For instance, if the market is doing well, you can transfer your money from debt to equity funds to earn high returns. However, if you notice that the market is going through a rough phase, you can consider shifting your money from equity to debt funds to safeguard your investments.

3. What are the tax benefits offered by ULIP?

By investing in ULIP, you can get tax exemptions under Sections 80C and 10(10D) of the Income Tax Act, 1961. As per Section 80C, you are eligible to avail of a maximum deduction of INR 1.5 lakh per annum on the premium that you pay for the ULIP. Additionally, the maturity and death benefits are tax-free as per Section 10(10D).

4. Is it possible to withdraw funds partially?

Yes, partial withdrawal of funds is permitted in ULIP. However, this facility comes with certain terms and conditions. ULIPs have a compulsory five-year lock-in tenure. So, you cannot withdraw any funds until this duration is over. Even if you surrender or discontinue your plan during this tenure, you will receive the benefits only after five years are over.

5. How does a ULIP calculator work?

A ULIP calculator is a helpful tool for investors to ascertain the ULIP plan returns. It is quite easy to use this calculator. All you have to do is enter a few details like the sum you are considering to invest, the tenure, premium payment frequency, and type of funds.

Now that  your misconceptions about ULIP investment are clear, it is time to  you invest in the right plan to ensure a better financial future. ULIP has various plus points. It facilitates the possibility of switching among funds, offers tax-savings and transparency, and provides savings based on financial goals. These distinctive highlights make ULIP an attractive and investor-friendly option.

Lastly, no other life insurance plan will give you a complete package of insuring your life and earning substantial returns in the long term. So,  what are you waiting for? Secure the monetary well-being of your loved ones and build a corpus to meet your long-term life goals, such as buying a new house or car and sponsoring your children’s education and their wedding.