How Unit-Linked Insurance Plans Protect Your Family and Build Wealth for Goals

A Unit Linked Insurance Plan (ULIP) integrates life insurance and investment, providing both financial protection and wealth creation.

- By: Sanjeev Puri

ULIPs aid in achieving long-term objectives, facilitating tax savings, and promoting disciplined savings via market-linked growth.

They are designed to meet both savings and protection needs, helping investors build wealth for long-term goals while providing protection against death. A portion of the premium pays for insurance coverage, while the remainder is invested in market-linked instruments like bonds and equities. ULIPs offer flexibility in choosing both life insurance coverage and investment options.

Choosing a Unit Linked Insurance Plan

When selecting a Unit Linked Insurance Plan (ULIP), prioritize assessing the life cover amount to ensure adequate family protection. Evaluate fund options (equity, debt, balanced) to match your risk appetite and financial goals. Look at all charges, including premium allocation, fund management, and policy administration fees, as they impact returns. Consider fund switching and premium payment flexibility for adaptability. Review the lock-in period and withdrawal rules for liquidity. Finally, assess past fund performance, the insurer's reputation, and applicable tax benefits (Section 80C, 10(10D)) for comprehensive protection, disciplined investment, and long-term wealth creation.

Unit Linked Insurance Plan Features

ULIPs provide a flexible annual premium structure, allowing policyholders to select their desired insurance coverage. Premiums are allocated to cover mortality charges, with the balance invested in a fund aligned with the policyholder's risk appetite, ranging from 100% debt to 100% equity.

Upon surviving a policy term, the policyholder receives an amount equivalent to their number of units multiplied by the current net asset value of the fund, determined by the insurance company's performance. In the event of the policyholder's death, the nominee is entitled to the greater of the sum assured or the fund value.