What is a ULIP?
A ULIP (Unit Linked Insurance Plan) is a perfect Wealth Solution with multiple Fund options, total investment flexibility and inbuilt insurance cover. It offers you the opportunity of investing your premium amount into multiple funds of your choice, while a tiny part of the premium is used for providing life cover. A ULIP helps achieve life goals and enhances wealth creation through its high market-linked returns and the insurance cover provides financial security to your loved ones.
ULIP vs other Financial Instruments:
| POINT OF COMPARISON | ULIP | MUTUAL FUND | PPF |
|---|---|---|---|
| Type of product (Scope) | Insurance (Life Cover) + Investment | Only Investment (No Life Cover) | Only Investment (No Life Cover) |
| Financial Security for loved ones | YES, death benefit = higher of SA or Fund Value | No such benefit available | No such benefit available |
| Risk/Return | High, Medium, Low risk, and gain depending on the fund | High, Medium, Low risk, and gain depending on the fund | Low Risk, Low Gain only |
| Fund Management Charges | 1.35% p.a. | 2.5% p.a. for Equity Fund 2.25% p.a. for Debt Fund | N.A |
| Riders to enhance protection and value of the investment | Complete protection with riders | Not Available | Not Available |
| Liquidity/Lock-in-Period | 5 years for exit/partial withdrawal | Only for ELSS Funds-3 years | Partial withdrawal – 7 years Full withdrawal - 15 years |
| Flexible Fund Switching Options | Flexibility in switching funds | No switching option | No switching option |
| Tax-savings and benefits | Rs.1.5 lakh u/s 80 C Maturity/death benefit tax-free u/s10 (10D) | Only available in ELSS - Rs.1.5 lakh u/s 80 C | Rs.1.5 lakh u/s 80 C Maturity/Interest tax-free u/s10 (10D) |
Tax benefits under ULIPs:
Get tax benefits up to Rs 47,668* on premiums paid under section 80C
Get tax benefits on maturity proceeds under section 10(10D)
Death benefit paid in a ULIP is also completely tax-free.
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