Often asked: What Is Ulip Investment?

What is the purpose of ULIP?

ULIPs requires you (as a policyholder) to make regular premium payments, part of which is utilised to provide life insurance coverage. The remaining is pooled with the assets received from other policyholders, and then invested in financial instruments (i.e. equity and debt), similar to mutual funds.

Is ULIP good or bad?

The problem with the ULIP is you neither get decent returns nor do you get decent insurance coverage. An investor has the option of choosing where your premium is invested in an ULIP. Your premium can be invested in equity mutual funds, debt mutual funds or a combination of both.

Is ULIP better than MF?

The reason being, ULIPs promise a fixed sum whether or not the investment plan makes money. In comparison, the returns from mutual funds vary depending on the risk factor. Equity mutual funds have the potential to offer higher returns, while debt mutual funds offer slightly lower returns.

Is ULIP better than LIC?

If your purpose is insurance for life, along with investment, choose ULIP. If your purpose is protection against mishaps in the future, choose a pure insurance policy as it is risk free and premiums to be paid on it is also comparatively lower than a ULIP.

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Can I withdraw money from ULIP?

Yes. You can withdraw+ a part of your earnings at any time after completion of five years. However, the value of withdrawals in a year cannot be more than 20% of the fund value. For example, if your fund value is `1,00,000, you can withdraw a maximum of `20,000 in the year.

What happens to ULIP after maturity?

Typically, on maturity of an Ulip, a lumpsum is paid. The 2013 regulation allowed insurers to pay the maturity value over a five-year period in instalments but it was left to the insurers’ discretion whether they want to include this feature in all their policies or not.

Is it good to invest in ULIP?

ULIPs are best suited for individuals with a long term financial plan of wealth creation and insurance. Whether it is for retirement, children’s education or for other financial goals, a ULIP continued till maturity works as an advantage. It gives you the dual benefit of savings and protection, all in a single plan.

Why should I invest in ULIP now?

Potentially Better than Others – ULIPs offer much better returns as compared to other insurance products. ULIPs invest the money in different asset classes. Though tax-saving funds offer considerably higher returns, the policyholder can opt for a different fund each year as per its performance.

Can ULIPs give higher returns?

ULIPs have the potential to garner better returns than any other insurance product because of its equity advantage. ULIPs invest the premium paid by you in various asset classesthrough different funds.

Why you should not invest in ULIP?

To beat the post-tax net return from a ULIP, an equity MF would have to give a much higher net return as an equity MF investor will have to pay a 10% LTCG tax on LTCG of above Rs 1 lakh. ULIPs are not meant to give you adequate insurance cover which should ideally be taken through a good term plan.

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How is ULIP calculated?

The Net Asset Value or NAV of a ULIP plan is calculated by adding up the total ULIP funds on a date and deducting various expenses like operating and management charges from it.

How is ULIP return calculated?

Generally, high-risk funds, comprising more equity, offer higher returns, whereas low-risk funds, comprising bonds, offer stable returns.

  1. There are two ways to calculate ULIP policy returns:
  2. Absolute Returns = [(Current NAV- Initial NAV)/Initial NAV] *100.
  3. Swati Tumar – Travel & Finance Writer.

What is 80C and 10D?

Section 80C offers deductions of up to Rs. 1.5 lakh on life insurance premiums paid in a particular year. Section 10(10D) specializes in offering tax deductions on claims, i.e. death and maturity benefit, which includes all forms of accrued bonuses against the respective life insurance policies.

How do ULIPs work?

How ULIPs Work. The insurer pools money from all the policyholders and invests the same in the funds chosen by them. Once the money is invested, the total corpus is divided into ‘units’ with a certain face value. Each investor is then allocated ‘Units’ in proportion to the invested amount.

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