Linking Insurance with Investment: Everything You Need to Know About ULIPs Explained in 5 Simple Steps

We all know how simple the insurance market used to be several years ago. They were simply ruled by endowment plans and terms, and everything was relatively to understand. However, this all changed when Unit Linked Plans (ULIPs) came into the life insurance sector.

Linking Insurance with Investment ULIPs explained - life insurance image

While ULIPs add protection to your life, they can also be used to help you accumulate wealth, which means they are an investment opportunity. If this is something you’re unfamiliar with, never fear. Today, we’re going to explore five important things you need to know when it comes to ULIPs.

#1 – The Costs

This is perhaps one of the most important things you’ll need to know about when investing in a ULIP. There are several expenses that come with ULIPs, which include administration fees, fund management charges, mortality charges and more, depending on which one you invest in.

Whatever the case, make sure you’re aware of the charges that come with a ULIP since they will occur on all of them. Some costs won’t be fixed, and many will start high but will reduce after three years. You’ll need to bear all this in mind when it comes to your investment plan.

#2 – Paying for Premium

In addition to the costs involved, you also want to be aware that you have three payment options available when taking out a ULIP. With regular payments, you’ll be able to pay the entire term of your policy for the duration of your policy.

A limited payment means you can choose the number of years you want to pay for your policy, whereas a single payment means you can make the entire policy in one go. There are various benefits and savings to each, but this will depend on your provider.

#3 – Tax Benefits

While we might have been putting you off with all the costs, it’s worth noting that you can expect tax benefits when you’ve invested in a ULIP, thanks to Section 80C. But, the condition that the premium paid needs to be less than 10% of the sum assured.

However, this value is subject to change along the duration of your policy and can become a much higher value as your premium ages.

#4 – ULIPs are Flexible

When you’re taking out a ULIP, you’ll have the ability to choose how you want your funds to be allocated when necessary. However, as time goes on, your priorities can change, and you may want these allocations changed.

Luckily, thanks to the nature ULIPs, this is easy to do so, although you may have a limited number of changes per year, or there may be a small switching cost.

#5 – The Risk Factor

As with any kind of investment, there’s always going to be risk factor, and this will depend on the nature of your investor. You may have someone who is aggressively investing in equities or perhaps a more conservative investor who invest in money and debt markets.

When taking out your ULIP, it’s important for you to pay attention to the type of investor you’re using, so you can find the one that works best for you.

Summary

If you’re planning on investing in a ULIP policy, these five points are important considerations when it comes to what you need to know. Make sure you’re not rushing the decision when it comes to choosing the right investment/insurance plan for you, and you’ll be able to benefit greatly in the long-term.

About AEGON Life

AEGON Life Insurance Company Limited launched its pan-India operations in July 2008 with a vision to be the most recommended new age life insurance Company. AEGON is one of the world’s leading financial services organizations (providing life insurance, pension plans, and asset management) and Bennett, Coleman & Company (India’s leading media conglomerate) have come together to launch AEGON Life Insurance. This joint venture adopts a local approach with the power of global expertise to facilitate a direct to customer approach, leveraging digital platforms to bring transparent solutions to customers and to prioritize their needs.

 

One Response

Leave a Reply