ULIPs: Some Frequently Asked Questions
Published On Feb 26, 2022 11:30 AM By InsuranceDekho
Table of Contents
- ULIPS: Frequently Asked Questions
- Is ULIP Insurance a High-Risk Investment?
- Is it Possible to Withdraw a Portion of a ULIP Plan?
- Is it possible for a ULIP plan investor to switch funds?
- What Are the Benefits of ULIPs in Terms of Taxation?
- What Are the Exclusions in the ULIP Plans?
- What Does the Top-Up Feature in ULIP Plans Mean?
- What is the length of these plans' lock-in period?
- ULIPs: Are They a Good Long-Term Investment?
- ULIPs Offer What Kind of Flexibility?
- Take Away
ULIPs are well-known among investors as a fantastic investment tool for establishing investing habits and giving flexibility to clients. As a result, because these programs are flexible enough to match your investing goals, investors are unconcerned about them. In this post, we've addressed the most frequently asked questions concerning ULIP programs.
ULIPS: Frequently Asked Questions
The following are the most typical questions that all investors have while considering a ULIP investment:
Is ULIP Insurance a High-Risk Investment?
The premium paid in unit-linked life insurance policies is subject to capital market investment risks, and the Unit Price of the units may grow or fall based on the fund's performance and other variables impacting the capital market and the insured/policy. This is why these programs guarantee a greater rate of return.
Is it Possible to Withdraw a Portion of a ULIP Plan?
ULIPs allow investors to withdraw funds from their accounts to cover unforeseen expenses, thereby creating an emergency fund. The money can be taken out in one single payment or in installments. In other cases, however, the policy stipulates that the life guaranteed must be at least 18 years old to make withdrawals.
Is it possible for a ULIP plan investor to switch funds?
You can move units between your investment funds based on your risk tolerance and investing preferences. ULIPs are basically combined investment and insurance products with a wide range of investment terms and conditions. This aspect of fund switching helps to safeguard your returns by insulating them from market fluctuations and the subsequent expected reduction in fund performance.
What Are the Benefits of ULIPs in Terms of Taxation?
Under sections 80C and 10 of the Income Tax Act, you may be entitled to tax advantages on the premiums you pay for ULIP plans (10D). Investors can benefit from higher profits based on current market circumstances with these strategies.
What Are the Exclusions in the ULIP Plans?
If the policyholder dies by suicide within 12 months of the policy's start date, the nominee or beneficiary is entitled to the single premium fund value and top-up premium fund value, as available on the date of intimation of death.
What Does the Top-Up Feature in ULIP Plans Mean?
Additional contributions can be made in addition to the normal premiums if the possibility is indicated in the Policy. In ULIP plans, this is referred to as the Top-Up Feature.
What is the length of these plans' lock-in period?
The policyholder cannot receive the funds of the policy until the policyholder dies or the policy's covered events occur, which is a 5-year term commencing on the policy's commencement date. During this time, the benefit of partial withdrawal is not available.
ULIPs: Are They a Good Long-Term Investment?
Investors like ULIPs as a long-term investment choice. These plans' net returns are nonetheless high when compared to their peers. These plans operate well under the correct circumstances and produce strong long-term returns.
ULIPs Offer What Kind of Flexibility?
The following is a list of the types of flexibility offered by ULIP plans:
1. Switching: You can move your collected funds from one fund to another at any moment.
2. Premium Redirection: Depending on your needs, you can direct your future premium payments to alternative funds. In any insurance year, the first four premium redirections are free. Premium redirections that have not been utilized are not transferable.
Due to the obvious vast amount of information available on the internet, it is easy to be swayed. As a result, it's critical to grasp the specific components of your insurance plan before making a decision. This is when the knowledge in the earlier post will come in handy.
You may also like: Important Reasons To Purchase A Unit-Linked Insurance Plan
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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.