Things To Know Before You Buy A ULIP Plan
People always prefer insurance as a guaranteed investment scheme. And when it comes to other modes of investment, especially market-linked investments, they try to avoid them. They avoid it due to the high risks involved in market-dependent products, even if these plans can provide high returns. If only there were a way to invest in an insurance scheme that provides similar returns as investments. But wait. There is a way. They are known as Unit Linked Insurance Plans or ULIPs. A ULIP combines the guaranteed returns and life cover of insurance with the high returns of investments. Read on to learn more about them in detail to help us find the best ULIP plan in India.
What Are the ULIP Plans?
A ULIP plan is a common life insurance policy, but it invests the premium into nationalized bonds. The bonds available in a ULIP plan are up to the insurer’s discretion. However, a policyholder can choose how to diversify the risk by opting for bonds and choosing the investment ratio for each one of those. There is no restriction on the selection or risk diversification as the policyholder can choose to invest all premiums into a single bond or equally distribute among them.
The ULIP already has a high interest rate which is more than that of any other type of insurance. But it is also linked to the market so the interest rate can increase depending on the performance of the selected bond. There are different types of ULIP plans based on different insurers and risk factors. Knowing its features and benefits to understand a ULIP plan further is also important. It will help any potential ULIP policyholder choose the best ULIP plan in India.
Benefits and Features Of the ULIP Plan
In India, there are 24 life insurers as of 2022, and all of them have their own set of ULIP plans. So selecting the best ULIP plan in India can be somewhat of a tough job. But there is a sure-shot method to select plans. Only a perfect comparison can be it after understanding the features of ULIP plans and how each feature affects the returns of the plan. Given below are some of the best features of the ULIP plan. Verifying that a plan has all these features will ensure the best returns and a credible plan.
High-Interest Rates
ULIP plans always have the highest interest rates than any other insurance scheme. Their interest rates can go up to 24 to 28%, which is much more than the highest interest rate provided by term insurance for senior citizens, which can give around 8 or 9 %. This vast difference shows how beneficial investing in the best ULIP plan in India can be.
Higher Returns to Investment Ratio
With the help of the ULIP plan, the maturity and mortality benefits of the schemes are also high. The total amount a policyholder gets at term maturity, or the nominee gets as mortality benefits are the sum of the return of investment and the interest rates. And considering the tax relaxations on the returns, a person can enjoy almost the entire funds.
Varying Returns Based on Market Dependency
Sometimes ULIP plans also allow market-dependent interest rates apart from the fixed interest rate. With it, the life insured can further increase the returns to form a profitable bond. But if the bond proves to be a failure, it will reflect in the final interest rates. So it is advisable to choose such market-dependent interest rates with utmost caution.
Tax Deductions on Premium
ULIP plans also have the best tax deductions in the insurance sector. The premium amount has a maximum deduction of INR 1,50,000 per annum. So, if the policyholder chooses a plan with a longer duration, they can claim relaxation every year and save much money over the years. They can then use this money for other purposes and family requirements.
Guaranteed Capital
Guaranteed returns are the greatest highlight of a ULIP plan. This is because these plans are security investments, and no major security investment provides guaranteed capital. Making ULIP a great exception in investments and a replacement for any good investment.
