ULIP or Unit Linked Insurance Plan are very beneficial investment tools for those who want a like cover along with their good returning investments. This post discusses the ULIP or Unit Linked Insurance Plan with their working along with top ULIPs in India.
What is ULIP or Unit Linked Insurance Plan?
ULIP or Unit Linked Insurance Plan is an investment plan which is the mix of insurance plan and investment plan. When the plan holder pays the fixed premium, a part of the payment goes to secure the life and rest of the amount is invested in equity stocks and/or debts.
These plans are generally offered by insurance companies where unlike an insurance policy, they offer both investment and insurance schemes under a single plan. These plans have a lock-in period of 5 years. However, as offered by insurance companies, to avail the insurance benefits, investors may have to remain invested in the plan from 10 to 15 years.
Investment in ULIPs is eligible for tax benefit up to 1.5 Lakhs under section 80c of Income Tax Act.
Working of ULIP or Unit Linked Insurance Plan
When an investor invests in ULIP, the company providing the plan invests a part of the premium in equity shares and/or bonds and the rest of the balance is used to cover the insurance. This investment is done by the fund managers of the company which is providing the plan. Depending on the risk appetite of the investors, investment advisors advise investors a variety of ULIPs ranging among equity, balanced and hybrid plans.
Benefits of ULIP or Unit Linked Insurance Plan
Following are the benefits of ULIPs or Unit Linked Insurance Plans:-
- Life Cover
- Income Tax Benefits
- Long-Term Financial Goals
- The flexibility of a portfolio switch
- Balanced Risk
ULIP or Unit Linked Insurance Plan and Mutual Funds
The differences between ULIPs and mutual funds are given below:-
| ULIPs | Mutual Funds | |
|---|---|---|
| Scheme | Investment cum Insurance Scheme | Only Investment Scheme |
| Redemption | Redeemed after 5 years lock-in period | can be redeemed at any time |
| Charges | Mortality charge, premium allocation charges, fund management charge, administration charge |
Entry Load: Not Applicable Exit Load: 1%, if redeemed within 1 year |
| Portfolio Switching | Portfolio switching is permitted |
Not permitted, conditions apply |
Top ULIPs or Unit Linked Insurance Plans in India
According to the policybazaar.com, these are the top performing ULIPs offering companies in India which give up to 21.2% return in 5 years on an investment of Rs 5,000 per month:-
- Bajaj Allianz
- HDFC Life
- Edelweiss Tokio
- Max Life Insurance
- ICICI Prudential Life Insurance
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Disclaimer: This post does not give any advice or recommendation. Mutual Fund investments are subject to market risk. Please read all the related documents carefully before investing. It is also advised to consult your financial advisor for necessary suggestions.
Tags: #mutual funds #investments #ULIP #Tax Saving
