Unit Linked Insurance Plan (ULIP)

Finding the right insurance plan for a better tomorrow can be an overwhelming task. But what if we tell you that you can seek the benefits of investment as well as insurance both under a single policy? That’s right! ULIPs or unit-linked insurance plans offer you the potential to grow your wealth along with the security of a life insurance cover. It can help you achieve your financial goals, such as saving for a stable retirement, your child’s higher education, or even retire early. Thus, a unit-linked insurance plan (ULIP) can help you smartly achieve your long-term financial goals while protecting you with a life cover.

A ULIP is a goal-based investment tool. It is designed in a way to help you meet your financial goals in time. However, before you buy the policy, you should understand where your money goes when investing in ULIPs.

Primarily being an insurance policy, you have to pay premiums towards your ULIP investments. A part of the premium paid is to provide the life insurance cover and the remaining amount is invested in different funds, i.e. equity, debt, or a combination of the two. The type of fund(s) you choose to invest in depends on your risk appetite.

So, if you are willing to take higher risk on your investments, we suggest you opt for equity-oriented funds. On the other hand, if you do not want to risk your hard-earned money, it is best to park it in debt funds. To earn reasonable returns without high risks, people often prefer investing in balanced funds, i.e. a combination of debt and equity funds. Since the investment component of ULIP helps you meet your financial goals, you have the liberty to choose the kind of fund(s) you want to invest in.

With a ULIP investment, you can switch from debt to equity funds and vice versa (known as fund switching facility in ULIP), depending on the market performance. For instance, if certain funds are underperforming, you can make necessary changes to your investment portfolio and switch to ones that deliver better returns.

Besides, you can use the fund switching facility to meet your changing life goals. For instance, if you purchase a ULIP at an early stage in life, you can opt for a higher risk investment (equity funds) as you have lesser financial liabilities. However, as your financial responsibilities increase and you move closer to your retirement, you can switch to debt funds that offer lower risks.

A ULIP investment is one of the most reliable wealth creation instruments available in the market. With this product, you can reap multiple benefits. Let us tell you why to invest in ULIP.

• Helps Build Wealth Over Time

With the liberty to invest in equity and debt funds along with a minimum lock-in period of five years, ULIP is the best investment instrument for accomplishing long-term goals.

• Dual Benefits

ULIP offers dual benefits – to make investments of your choice as well as avail an insurance coverage – all under a single plan.

• Flexibility

You get the flexibility to choose the type of funds you want to invest in. Moreover, you can also switch the funds based on market movement.

• High Returns

Since you have the flexibility to switch funds based on market movements, you can choose to invest in funds that reap higher returns on the invested amount.

• Tax Benefits

ULIP is one of the best tax-saving tools available in the market. The policy provides several tax benefits under various sections of the Income Tax Act, 1961. We have explained the ULIP tax benefits in detail further ahead.

• Protection for Self and Family

With the life insurance coverage, you will be able to protect yourself as well as your loved ones, even in your absence.  

We, at Bajaj Markets, focus on helping you accomplish your future financial goals. So, whether you are planning for a care-free retirement, your child’s future, or building your wealth, we offer goal-based ULIPs on our platform. Depending on your financial needs, you can choose to invest in one of the options available. But before you make any decisions, let us first understand each of these plans in detail.

• Child Plan

With a child plan, you take a step towards securing your child’s future. Whether it’s your child’s education, marriage, or any other important event, this plan helps you to stay financially secure. A child plan also offers life insurance cover for your child. This way, you can protect your child against unforeseen situations and ensure they realise all their dreams.

For instance: Shalini is a young mother wanting to save for her child’s future monetary needs:

• Retirement Plan

Invest in a pension plan to prepare yourself for a secured life post-retirement. Under this plan, an individual pays the premium during the tenure of his/her employment. This premium is divided into two parts – one part goes towards your life insurance cover and the other part is invested in an instrument of your choice. This small amount that you periodically invest builds a corpus that you can use after retirement.

Take this example for instance: Nitin is working towards saving for his retirement:

• Investment Plan

Your earnings today might not be adequate tomorrow. Moreover, high inflation rates and constantly rising prices of commodities can eat away your savings. Therefore, it is necessary to invest today to secure your future! Here’s where an investment plan comes in to help you achieve your goals of long-term wealth creation and provide security for your family. What’s more? Your investment in ULIPs as well as the returns earned on maturity are tax-free!

For instance: Radhika is a young professional wanting to invest in the market to grow a steady corpus:

Let us dive deeper into ULIPs to understand them in more detail.

Types of ULIP

Here are the features of unit-linked insurance plans that you need to know.

1. ULIP Premium Payments

ULIP offers several premium payment methods. These include:

• You can pay your ULIP premiums annually, bi-annually, or monthly, based on your convenience.

• ULIPs also allow you to pay a single premium payment, wherein you invest a lump sum amount at the time of buying the policy.

• Typically, you pay premiums towards a ULIP investment for the policy term you opt for at the time of purchase. However, some insurers allow you to decide the number of premium payment years.

2. ULIP Lock-In Period

The lock-in period for ULIPs is five years. This means that for the first five years, the money that you invest in ULIPs cannot be accessed. You are only allowed to withdraw funds from your ULIP investment after this five-year lock-in period; however, this is not recommended. The longer you stay invested in a ULIP plan, the better are your chances of earning good returns.

Income Tax Benefits on ULIP

ULIP investments provide several features and benefits that you can avail. However, the highlighting factor of the instrument is its tax benefits. Along with building your wealth over time and securing your family’s financial future, ULIPs allows you to save money on tax.

Here’s a quick overview of ULIP tax benefits:

With this, we believe that you have adequate information on unit-linked insurance plans. Now, let’s take a look at the different ULIPs available on Bajaj Markets.

ULIPs on Bajaj Markets

No matter what your financial goal is, Bajaj Markets has you covered. The different ULIPs available on our platform are:

In the long run, each investment makes a significant difference to your portfolio, further taking you closer to your financial goals. Hence, for each financial purpose in your life, there is a ULIP plan available in the market. Bajaj Allianz Life’s ULIP Plans are a reliable mode of investment for accomplishing your dual needs – insurance as well as building your wealth alongside.

That’s not it!

With Bajaj Allianz Life’s ULIP plans available on Bajaj Markets, you can benefit from facilities such as partial withdrawal of funds, alter premium payment frequency, rider options, and more. Some plans also offer features like the return of mortality charges, return enhancers, loyalty additions, fund boosters, and more.

Just browse the range of online plans and choose a policy that best suits your financial needs to get high ULIP returns.

Why Choose ULIPs Over Traditional Investment Options?

Whether you have invested in Mutual Funds or FDs, buying ULIPs will diversify your investment portfolio. The following table summarises why investing in ULIPs over/along with other investment options should be your go-to financial strategy.

• What are the best funds/plans to invest in?

The best ULIP plans allow you the choice of investing in equity, debt or a mix of both. Though volatile, equity funds come with long-term high growth potential whereas debt funds are a safer choice. In addition to this, there's always the choice of investing in balanced funds (a mix of equity and debt). Based on your risk appetite, you can choose to invest in either of the three options. 

• Are you getting maximum leverage from the tax-free nature of ULIPs offered by your insurer?

Under the Income Tax Act of 1916, you can save money by investing in a ULIP. In doing so, you must know that there are tax advantages at various stages of your life insurance policy which should be offered by the insurance provider you choose to go with. The advantages of the best ULIP plans in the markets include tax exemption at the time of investment (under sections 80C, 80CCC and 80D), tax exemption when the money invested grows, tax exemption during fund switches, and finally, exemption during maturity benefit. 

• What are the charges you pay when investing in ULIPs?

Two of the most important financial needs of life are met when one invests in a ULIP - protecting and savings. Transparency is important and hence it is important that your insurance provider clearly mentions the following charges before you purchase – 1. Premium Allocation charge, 2. Policy Administration charge, 3. Mortality charge and 4. Fund Management charge.

ULIP funds are usually classified based on the risk and their investment objective. Following are some top-performing ULIP funds we know of.

• Equity Funds - Large-Cap and Mid-Cap Funds (High Risk)

Here, your money is primarily invested in company stocks and equities. Since they are high-risk funds, equity funds are best-suited for people with a high risk appetite. The main investment objective here is to earn higher returns in a shorter duration.

• Income and Bond Funds (Medium Risk)

Here, your money is invested in fixed-income options such as government securities and corporate bonds. The risk involved in medium and so are the returns.

• Balanced or Asset Allocation Funds (Medium to High Risk)

These are hybrid ULIP funds. Your money will be invested in a combination of equity and fixed interest funds. The amount is distributed between high-risk equities (company stocks) and low-risk funds (fixed-income options).

• Cash Funds (Low Risk)

These are also known as money market funds or liquid funds and are meant for investors with a low risk appetite. Here, your money will be invested in short-term market instruments such as cash and bank deposits, treasury bills, and commercial papers.

After this, it is obvious to have questions like how ULIP funds will perform? Is there a way to calculate the risk involved? Well, the answer is yes! Keep reading to know how you can calculate your ULIP fund performance.

When you make ULIP investments, it is essential to understand the risk involved. Hence, ensure that you calculate the risk before you zero in on your ULIP.

As mentioned earlier, you can either invest in high-risk equity funds or low-risk debt funds. Moreover, with ULIPs, you also get an option to invest in funds that are a combination of the two (balanced funds). The risk involved for you, as an investor, can be calculated with the help of our ULIP risk calculator. So, look no further!

The charges associated with your ULIP investments can vary from insurer to insurer in India. Also, the amount charged can vary depending on your plan. Some ULIP charges that you should be aware of before buying the policy are as follows:

• Fund management charges

• Surrender charge

• Policy administration charges

• Premium allocation charges

• Fund switching charges

• Partial withdrawal charges

• Mortality charges

• Premium redirection charges

• Rider charges

• Miscellaneous charges

• Guarantee charges

   

Visit Bajaj Markets to read about ULIP charges in detail.

Lack of adequate knowledge and misinformation has led to a lot of myths hovering around investments in ULIPs. Let’s break them!

• Myth #1: ULIPs carry high risk as they invest only in equity.

ULIPs give you an option to invest in market instruments that can either be debt only, equity only or a mixture of debt and equity. You can choose funds that best suit your need, risk appetite, and long-term objectives. With Bajaj Allianz ULIPs, you also get the facility to switch between funds at any given point in time depending on your personal preference and risk appetite.

• Myth #2: You cannot add to your existing funds.

You can! ULIPs allow you to invest your surplus funds. You can pay a top-up premium at any given point in time during the tenure of the ULIP and enjoy the same benefits and tax deductions.

• Myth #3: The insurance cover gets affected due to market conditions

Market volatility has no effect on your insurance cover. Your insurance policy remains intact irrespective of the rise or fall in the market. In case the insured dies during the tenure of the policy, he / she gets the full amount of the life cover as stated in the policy.

• Myth #4: ULIPs do not provide good returns

ULIPs are long term investment products, where returns are dependent on the performance of the funds that one has invested in. With a good selection of funds and efficient switching between funds at the right time, Bajaj Allianz ULIPs can give good returns over a long-term period along with an insurance cover.

• Myth #5: ULIPs have high charges

It is still unknown to people that charges of investing in ULIPs have reduced significantly. The charges that are typically levied on your premium amount are – premium allocation charges, policy admin charges, fund management charges and mortality charges. Insurance Regulation Development Authority of India (IRDAI) has capped these annual charges to a good extent. If the lock-in period of your ULIP plan is 10 years or less, these charges may be a little higher as compared to ULIP plans with a 10 year+ lock-in period. Therefore, it makes sense to invest in ULIPs for long durations. 

Latest ULIP News

Have a look at our exclusive Bajaj Allianz Life’s ULIP plans available on Bajaj Markets designed to help you achieve your financial goals.

Learn more about Unit Linked Insurance Plans. Read in detail about the terminology used in these plans, the investment options, the top myths about ULIPs, current trends and much more. Have a look at the top articles on ULIPs before you explore Bajaj Allianz Life's exclusive ULIP plans available on Bajaj Markets.