What is the Best ULIP Insurance Plan & Different Types of ULIP Funds

1. Best ULIP Insurance Plan

2. WHAT IS A BEST ULIP INSURANCE PLAN & DIFFERENT TYPES OF ULIP FUNDS

3. A Unit-Linked Insurance Plan or a ULIP is a hybrid type of plan offered insurance companies that gives you the benefit of both Insurance as well as Investments. In a ULIP, a part of the premium that you pay is allocated towards insurance and the remaining is utilized for investment in funds available within the plan. In this way, ULIP gives you both insurance cover as well as returns on investment through a singular medium.

4. Types of Funds under ULIP While the specific nature of a fund varies from one plan to the other, the investment plans under ULIPs are generally of three types: – Equity Funds – These funds are focused towards towards investment in stock market where the risk-return ratio is high. The Fund performs in tune with the volatility present in the stock market. Debt Funds – These funds invest in debt instruments like Bonds where the returns are comparatively lower as compared to equity but the risk is low as well. Balanced Funds – Hybrid funds which give you adequate exposure to stock market as well as debt instruments. The risks accompanied by the equity portion is balanced out by the safer investment in the debt portion.

5. Features of Unit Lined Insurance Plan (ULIP) • Best ULIP Insurance Planinitially had a lock-in period of 3 years but in 2012, IRDA (Insurance Regulatory and Development Authority) intervened and defined new guidelines which changed the lock-in period to 5 years. From a tax saving angle, ULIPs provide deduction under section 80C of the Income Tax Act, 1961. ULIPs also have surrender options but it is important to note here that if you have availed tax deduction from ULIP and surrendered it before the lock-in period matures, then the deduction availed in the previous years will be considered as a part of the income and will be taxed accordingly. • The second important feature is switching between funds. At the time you bought a ULIP, you would have selected the best fund according to market conditions. However, it may happen sometimes that the Fund doesn’t perform as well as anticipated or that the market conditions change. In such an instance, you have the option to switch to a better performing Fund and this is generally facilitated free of charge by most products upto a certain number of switches in a year.

6. How to select a ULIP Plan: • When selecting a ULIP, understand all the charges involved like fund management fee, premium allocation fee, surrender charges, administration and service charges. Apart from that, try to be well-versed with the features and benefits of the ULIP that you have selected.

7. Another important thing is to time your fund investments well. For example, when the market rates fall, there are lot of stocks that can be purchased at a lower value and when the market is at its peak, going for debt instruments is a safer bet. This is where a Fund Manager plays a big role. But most importantly, you must understand that ULIP is a long term investment option which is why you should be clear about your investment and insurance objectives when putting your money in a ULIP to get the maximum benefit from the investment.

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