Know How Your ULIP Premium Is Utilized
Published On Sep 28, 2021 8:07 PM By InsuranceDekho
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A ULIP is a modern-day life insurance policy that combines insurance and investment benefits. It's a backup plan that ensures your family's financial security while you're away, while also earning market-linked returns to help them build a bright future while you're still there. Furthermore, ULIPs provide tax benefits both at the time of investment and at the time of maturity, according to the tax laws' requirements. The difference between income and inflation is widening, and the only way to narrow it is to make prudent investments. Among the greatest investment alternatives available today is ULIPs. You can choose a goal-based ULIP if you have financial goals in mind, such as your children's marriage or higher education, or your retirement. The lock-in period for ULIPs is five years, and your money may grow over time due to market-linked returns.
Everything You Need To Know About How Your ULIP Premium Is Utilized
Below is everything you need to know to know about how your ULIP premium is utilized:
1. Dual Benefits Of ULIP
A ULIP could be used to fund your retirement, your kid's higher education and marriage, or any other financial requirement you may have in the future. The ULIP's insurance component provides death benefit life insurance. If the policyholder dies during the policy term, the death benefit will be paid to the nominee. Furthermore, if the customer lives to the end of the ULIP's term, she or he might contribute to the maturity value.
2. Efficient Long-term Instrument
ULIPs are appropriate for investors looking for a long-term insurance plan that includes both market-linked returns and life insurance in a single policy. Based on market conditions, equity can help provide high-growth potential returns over the long term. Your corpus is better protected against market swings thanks to the debt component. You can invest in a ULIP based on your objectives and risk tolerance. After a specific period, ULIPs allow you to make a partial withdrawal. There may also be a top-up option, allowing you to increase your investment in your plan.
Also read - Do ULIPs Allow Partial Withdrawal?
3. Tax Advantages
You can also get a tax break with ULIPs. Investments in ULIPs are deductible from taxable income under Section 80C of the Income Tax Act of 1961, subject to certain conditions. This section allows you to deduct a total of Rs 1.50 lakh per year. A ULIP's maturity proceeds are likewise tax-free under Section 10(10D) of the Income Tax Act, subject to certain conditions. The death benefit provided to the nominee in the event of a ULIP investor's death during the plan's term is tax-free under Section 10(10D) of the Income Tax Act, 1961.
4. Partial Withdrawal Charge
If you make a partial withdrawal during the policy's term, you will be charged a partial withdrawal charge.
Various funds levy all or a portion of these fees. You must be aware of the ULIP's terms and conditions, as well as the numerous charges incurred when investing. These fees are significant because they affect the total return on your investment in the insurance. If you're unsure how much premium you'll need to build a corpus large enough to meet your financial goals
5. Mortality Fees
Everyone is expected to recover or renew their unit-linked insurance plan's life insurance policy every year. Many factors, like the policyholder's medical history, Sum Assured, age, and others, play a part in deciding these mortality fees. As a result, the fund units invested under your ULIP are reduced in proportion to the expenses associated with your insurance.
ULIPs can help you reach your life goals and live a more fulfilled existence. ULIPs provide not only the twin benefits of life insurance and market-linked wealth growth but also additional tax advantages. To find a balance between your insurance and investment demands, you should consider adding ULIPs to your investment portfolio because of the multi-dimensional benefits they provide.
Also read - How to Compare & Buy ULIPs in India?
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.