ULIP - Unit-Related Insurance System

Best suited for people with long-term financial planning, Unit Linked Investment Plans (ULIPs) come with investment benefits and bond and share insurance. It comes with the usual premium payment option and fulfills the goal of covering life and creating wealth.


What is ULIP (Unit-Based Insurance System)?

ULIP is a summary of the Unit Linked Insurance Plan. ULIP is a combination of investment and insurance. Within the scheme, policyholders can make annual or monthly premium payments. One-half of the premium amount is used to provide life insurance cover and the remaining amount is invested.

In these systems, investments are subject to risks associated with the financial market. The policy owner risks investing in his or her investment portfolio. Therefore, it is recommended to make investment choices based on needs and risk incentives.

Another factor to consider with a policy owner is the future needs of invested funds. In addition, the unit-linked system is very transparent. Expenses including fund management costs, distribution costs etc. they are clearly stated in advance.

The Unit Linked Insurance Plan also allows its investors to shift their investments from debt to equity and vice versa, without moving from one pillar to another with any payment problems.

The ULIP programs were first introduced in India by the Unit Trust of India (UTI) in 1971. This was followed by ULIP of Life Insurance Corporation in 1989. Initially, many investors avoided investing in ULIPs because of the high cost of this insurance-investment product. However, in recent times, major health insurance providers including Bajaj Life, HDFC, ICICI Pru, and Edelweiss Tokio have come out with new year-old ULIP products with minimal charge and many features to ensure maximum return and complete insurance protection. to investors.


How do ULIPs work?

In unit-linked systems, one part of the premium paid to the system goes to ensure the life cover of the policyholder, while the other premium-paid portion is invested in a variety of fund options. Investors can choose fund options based on their goals of creating wealth and the desire to eat at risk. In the event that the policy owner dies suddenly and unfortunately, the nominated beneficiaries will be provided with insurance and / or the amount of the fund, depending on the maximum, based on the type of insurance scheme associated with the unit.

Similar to the joint venture, the insurance company will provide a base of ‘units’ the average investor investment in the market. This unit is an investment representation and assigned to the NAV which is assessed and announced on a daily basis.

To understand how these programs work, here is an example:

Akash, a 30-year-old man, is investing in a unit-linked insurance program with an annual premium of Rs. 50,000 for a period of 20 years. The essence of the policy will be:

Policy Details:


Amount First Verified = Rs. 5,00,000 (annual premium x 10)
Annual Management and Other Payments = Rs. 2500
Annual Investment Amount = Rs. 47,500
Initial amount of NAV = Rs. 10
Purchased units = (47500/10) = 4750


Income Tax Benefits on ULIP

In addition to insurance and investment benefits, the Unit Linked Insurance Plan also offers the benefits of exemption from a maximum income tax of Rs. 1.5 Lakh u / s 80C of the Income Tax Act, 1961. In addition, maturity benefits in ULIPs are also tax-exempt. However, there is a warning. Minimum Amount or Death Benefit must be at least 10 times the annual premium. If this is not the case, income tax benefits are covered by 10% of SA and its Growth Benefits are not taxable.

How to Apply Taxes to a Unit-Related Insurance System?

The policy owner may receive a tax exemption benefit under the ULIP scheme. ULIP premium pay and maturity benefit are taxable under Section 80C and 10 (10D) of the Income Tax Act.



Why Invest in ULIP?

ULIP combines the benefits of insurance and investment into a single financial instrument. In any case, they are better than just insurance or investment. With the coverage of life insurance, they also offer the opportunity to reap market-related benefits to take care of important health goals.


Reasons why ULIPs can help you save for a long time
Nowadays, it is very important to invest in well-thought-out investment options, which helps to increase revenue and help achieve investment objectives. In terms of return on investment and financial protection, the Unit Integrated Insurance Program (ULIP) is a point above other investment tools. Let's look at some of the reasons why ULIPs can help you save for a long time.


ULIP Calculator

Online insurance comparison sites and insurance company website provide ULIP calculations to better understand the cover amount and chorus you need. This ULIP calculator helps calculate future investment value. You can prove details such as investment value, investment frequency, number of years you want to invest, percentage of total annual post-tax return on investment, etc. in the ULIP calculator and get an idea of ​​which investment makes sense. for you.

Online insurance comparison sites and insurance company website provide ULIP calculations to better understand the cover amount and chorus you need. This ULIP calculator helps calculate future investment value. You can prove details such as investment value, investment frequency, number of years you want to invest, percentage of total annual post-tax return on investment, etc. in the ULIP calculator and get an idea of ​​which investment makes sense. for you.


What is the ULIP NAV?

ULIP NAV, in everyday use, refers to the Net Asset Value (NAV) for each U.S. unit.