What is a Unit Linked Insurance Plan?

A Unit Linked Insurance Plan (ULIP) combines investment and insurance into one package. It is a capital market-related plan that allows you to invest in debt or equity funds depending on your risk tolerance. In other words, it enables you to benefit from insurance and investing.

The insurance provider invests a portion of the premium you pay for a ULIP plan in bonds or stocks. The balance is utilized to finance coverage. As an investor, you do not need to track your investment frequently because the insurance company’s fund managers are in charge. You can also switch between debt- and equity-based funds in your portfolio. The lock-in term for ULIPs is five years.

The ULIP calculator is a simple tool that you can use to predict the return you might get at maturity by entering a few details.

Type 1 & Type 2 unit linked insurance plans (ULIPs)?

Claim process

You must file claims if the insured suddenly dies, enlightened in the policy. To ensure a seamless ULIP claim process, you should be informed.

  • Please notify your insurance provider right away if there is any unfortunate event.
  • Provide the necessary documents, such as the claim form, following the registration of the claim.
  • The business will transfer the amount to the specified account once it has validated the case.
  • The assertion may be disproved if there is any uncertainty.

Necessary documents for the claims procedure

To ensure a smooth ULIP claim process, the insurance company must receive several important papers. Let’s examine a few of them below:

  • Properly completed claim form
  • Policy documents
  • Medical certificate
  • Photo id
  • Police FIR for accidental passing away
  • Certificate and medical data from the doctor or hospital for a fatal illness

Exclusions

The range of circumstances that ULIPs cover is limited. To avoid issues when filing claims, you should know these situations before deciding on an insurance plan. Exclusions are another name for these.

  • Alcohol-related accidents that result in passing away
  • Suicide-related demise
  • Passing away brought on by drug or alcohol use
  • Mortality as a result of racing or other risky sports

Considerations before making a purchase

Before making a final decision, you should be certain of your motivations for purchasing a ULIP plan and how it would improve your financial situation.

  • Financial objectives: A ULIP can be a bankable alternative if you want to build wealth for future investments in your family’s well-being, your children’s futures, their marriages, and your retirement.
  • Comparing plans: Choosing a policy that meets your needs is most important. The returns of a certain ULIP can then be calculated by comparing the various ULIP plans currently on the market regarding costs, premiums, performance, and the types of funds they invest in.

The estimated value of your ULIP investment can be calculated using a ULIP calculator based on the premiums, tenures, and other information you enter.

Benefits of investing in a unit-linked insurance plan

A ULIP offers the policyholder and their family several advantages. Let’s examine a few of them.

  • Flexibility: It allows you to modify the fund according to your demands. The insurance company also permits a few switches without charging extra. Again, there are no fees associated with partial withdrawals from the fund. If you ever need to make an additional investment, you can do so as a top-up to your regular premiums.
  • Excellent for long-term goals: ULIP is a good alternative to reach your long-term objectives, such as purchasing a new car or home, getting married, etc., because the money grows compounded. Compared to making no investment and keeping the money in a fixed deposit or a savings account, the net returns are even larger after five years.
  • Create corpus for family’s needs: ULIPs offer the chance to earn market-like returns, which can be used to build up a sizeable corpus or fund for your future. This money can eventually be put to greater use for you and your family, the child’s future, and marriage.
  • Financial security after retirement: Because of the excellent returns that ULIP offers, it may be a sensible choice if you intend to establish a corpus for your retirement.
  • Advantages of income taxes: If you own a policy, you may be eligible for a tax exemption under Section 80C of the Income Tax Act of 1961 for the premium you pay (up to Rs.1.5 lakh a year). Additionally, Section 10(10D) of the Income Tax Act exempts the returns you receive from the policy from income tax.

* There are two tax regimes in India – new and old. Choose the correct one after consulting an expert to get the desired tax benefit. You can opt for a regime change during the next financial year.