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Worried About ULIP Premium? Consider These 4 Things

Posted: March 23, 2021

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The best ULIP plans in India are cost-efficient and provide the biggest bang for your buck.

Wealth creation plays an essential role in improving our financial condition. Over the years, equity investments have proven to be one of the most effective tools for building wealth. However, with numerous financial investment tools in the market, it is easy to get confused. But with assisted investment, you can start reaping considerable profits in the future.

And while you are busy on the field, you need to make sure that your family is protected financially. Especially be safe in the worst of times. To ensure that you are able to achieve both these things simultaneously, you can opt for a ULIP plan.

What is ULIP?

It is extremely vital to know what is ULIP before you invest in this plan. Unit Linked Insurance Plans are integrated plans that give life insurance and investment benefits under a single comprehensive policy. These plans provide financial security and considerable returns.

However, many people believe it to be a costly financial instrument. But there are several advantages, including faster wealth creation, life protection, and tax benefits that make it beneficial. The best ULIP plans in India are cost-efficient and provide the biggest bang for your buck.

Like other life insurance plans, the premium paid towards a ULIP plan is allowed as a deduction under the current permissible limit of Rs. 1.5 lakh under Section 80 C of the Income Tax Act. However, there is one condition that the premium amount should be less than or equal to 10 percent of the sum assured. If you are thinking about the long-run, then opting for a ULIP plan will prove advantageous.

One way to choose the best ULIP plan in India is to research online and go through the details of ULIP plans offered by different insurers. You should also consider some of these factors before you opt for a ULIP plan:

1. Life Cover and Investment

As discussed above, a ULIP plan is an answer for two products at the same time. On the one hand, you pay a premium for life insurance protection; on the other, you invest in funds according to your choice. In this manner, you guarantee protection and plan your finances for the future with investment returns.

For instance, you can fulfill your significant life goals like providing for your children’s higher education or ensuring a comfortable retirement. A ULIP plan is a long-term systematic investment option and will help you invest money in a disciplined manner.

2. Choice of Premium Payment Tenure

All ULIP plans generally offer three kinds of premium payment options. They are single premium payment, limited and regular premium payment. Before you select any, introspect and choose a payment type based on your financial profile. It is advisable to check your financial capacity before you opt for the premium payment tenure.

It would help if you always read between the lines. Maybe paying a premium for three years is sufficient for your short-term goals. However, note that once you stop paying the premium, the life cover will lapse.

If anything happens, only the residual fund value will be paid to your nominee in an unforeseen situation. Plus, numerous charges will be deducted from the residual fund value until the policy expires. Keep these pointers in mind while choosing your premium payment tenure.

3. Adequate Life Cover Availability and Flexibility

A confusion that you may go through is that since a ULIP plan is unit-linked, will you get adequate life cover or not? However, that is not the case. You can decide your insurance objectives and then opt for a ULIP plan. Generally, all plans come with a lock-in period of 5 years. They also enable you to pick the investment options even before investing in different funds.

You can choose from hybrid, equity, or debt plans as per your financial planning. With a ULIP plan, you can control the investment with the option of premium redirection and invest the future premium in different funds of your choice. It also gives you a top-up facility to invest additional money into your existing plan.

4. Manageable Risk Factor

It is vital to appraise your risk profile and financial stability before choosing a ULIP plan. In case you have a high-risk appetite, you can go for more equity-focused plans. It can be to the extent of 100% equity allocation. Otherwise, if you believe stability is of prime importance, you can opt for a plan that primarily invests in debt instruments. In this manner, you can achieve stability, albeit with limited returns.

If nothing more, you can also have the in-between fund option. Here the 40-60 % is invested in equity funds and the balance in conservative funds. Depending upon your requirement and financial planning, you can choose from a variety of ULIP plans available.

Simple and easy to understand, ULIP plans can generate steady returns. However, to find the best ULIP plan in India, you should read the policy wordings of plans offered by numerous insurance companies. Start building your money corpus today!

Source: https://www.incometaxindia.gov.in/tutorials/20.%20tax%20benefits%20due%20to%20health%20insurance.pdf

Picture Credits: Shutterstock

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