When you want to financially secure your loved one’s financial planning is essential. A good financial plan will involve insurance as well as investment in a single product. Unit link insurance plan ULIP plan is ideal for those who need protection and wealth creation on long term basis.

However, selecting the best ULIP plan may not be an easy task. Several questions arise in the buyer’s mind while investing. These plans offer triple benefits to the buyer such as investment insurance under tax deductions. Now let us understand some of the common questions with answers to them regarding the ULIP plans.

Common questions answered

How are the ulip plans providing insurance as well as investment in a single plan?

When policy holder pays the premium a small portion of it goes to the life cover. Rest of the funds get invested in the market which generate the returns and help to create wealth. These investments are prepared through several underlying funds which are offered by these plans.

What are the different kinds of funds ulip investments?

ULIP policy generally invest in a vast array of funds which have varying risk factors. This includes equity, balance, and debt etc. This depends entirely on the person’s risk appetite and the exposure level they choose for the funds.

Provide details about various fees and charges ulip are associated with ulip?

There are some charges associated with ULIP plans such as:

  1. Premium allocation

Before distributing the coverage, the insurer charges a portion of the first-year premium. These are the costs incurred by the insurance company when the policy is first issued. Fees such as underwriting costs, medical bills, agency commissions, and so on are included. After subtracting these fees, the remaining funds are invested in the fund of choice.

  1. Mortality

These charges get levied to provide the life insurance cover.

  1. Fund management

The charges which are imposed to manage different kinds of funds in the ulip policy. These charges get deducted before the calculation of NAV.

  1. Surrender Charge

There is a charge which gets levied if the insured person surrenders the ULIP plan prematurely.

  1. Policy administration

This can be considered as the total administration expenses regarding one’s policy.

  1. Switching

The charges arise when the person wants to switch to another fund provider.

What is the lock in period of a ULIP policy?

Before you can plan your investment in the policy, you must understand what is ULIP lock-in period. ULIP plans have a compulsory lock in period for 5 years.

Can a person make partial withdrawal from their ulip?

Ulip plans do offer a partial withdrawal facility. However, the charges on the withdrawals may differ depending on the policy terms and conditions.

What are the benefits of maturity in ulip?

Ulip offer both death benefit as well as maturity benefits. If the insured person dies during the term of the policy nominee receives the sum assured. Once the policy gets matured policyholder receives the sum or the fund value whichever is higher.

When a person is nearing the goal can they reduce equity exposure?

Yes, one gets an option to switch equity into a debt fund ulip plans offer. Moreover, one can always make a switch when they are not comfortable with the current plan. There are some ulip which can offer switching with a minimal switching charge.

Can ulip plans guarantee a return?

All the ulip are linked to the market. So, there is no guarantee. But when a person remains the investment for a long term such as 10 to 15 years, they can reap the returns from the investment plan along with the compounding that comes in the picture.

What happens if a person wants to surrender the plan within the lock in period of 5 years?

When person wants to surrender the ulip plan they not only miss the life insurance but also the wealth created. One must always know that these policies come with a 15-day period where they can choose to terminate it without any loss.

Should a person also pay LTCG tax for the ulip benefits?

All the ulip plans do not require LTCG are they are also life insurance products.

Selecting a right plan is crucial to secure the future financially as they also provide tax benefits in the present. Hence, compare different policies available to get the best set of benefits.


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