Until some years back, the insurance market was ruled by the simple and straight forward, term and endowment plans. With the opening up of the sector, buying a life insurance policy came up with more options in the form of Unit linked Plans. Primarily insurance policies, Unit Linked Insurance Plans (ULIP) provide protection and also help accumulate wealth.
USP of ULIP
What sets ULIP apart from the traditional insurance policies is its ability to blend investment and insurance in one single plan. In a ULIP you get to invest in the capital markets, as per your risk profile, through its various fund options.
Key Advantages of ULIP
- Insurance Cover
- Tax Benefits under Section 80C
- Option of Systematic Investment
- Gives you a range of investment options to choose from as per your risk profile
How does a ULIP Work?
The premium in a ULIP goes towards meeting the insurance needs and towards building wealth. In the initial policy years, a large part of the premium goes towards policy expenses. Post the deduction of these expenses, the premium is divided between providing a life cover and making an investment. Units are allocated for the amount invested, in a fund of your choice. The fund could be equity, debt, or a combination of the two. The value of the units allocated depends on the performance of the underlying fund. In the first 2 to 3 policy years, the fund value may remain low may remain low due to the high expenses deducted initially.
Canara HSBC Oriental Bank of Commerce Life Insurance has launched a new linked insurance product ‘iNVESTSHIELD’ that designed to protect and meet an individual’s present and future financial needs.
iNVESTSHIELD is an exclusive online Linked plan designed for customers who are looking for a hassle free experience and convenience of buying online. It’s a feature rich product with the USP being the ‘Premium Funding’ option whereby in the event of the life insured’s death – in addition to the immediate benefit payout (higher of Sum Assured or 105% premium paid), the Insurance Company funds the remaining premiums for the remaining policy term and the fund value is also paid on maturity. Therefore, the plan provides a solution to meet wealth accumulation needs along with a protection cover, with the convenience of buying online through a simple and user friendly process. The customer also has a flexibility of multiple funds depending upon the risk appetite and switching between funds as well as systematic investment.
Salient features of the Plan #InvestShield are:
- Zero Premium Allocation Charge throughout the premium payment term of the Policy
- Loyalty Additions for additional allocation of units to boost the retirement fund
- Choice of Investment Funds ranging from 0% to 100% equity exposure, to match one’s risk appetite
- Premium waiver benefit option which helps the parents to plan a secure future for their children.
- Safety Switch Option enables one to move funds systematically to a relatively low risk Liquid Fund to avoid market movements in the last four Policy years
- Liquidity through partial withdrawals to help meet unplanned financial needs
- Tax benefits on premium paid and benefit received during Policy term under Section 80C and Section 10(10D), as per the Income Tax Act, 1961, as amended from time to time
Heres the link to the plan : www.canarahsbclife.com/lifeinsurance/portal/canh/home/for-individual/iNVESTSHIELD_Plan
ULIP and Tax Benefits
The premiums on a ULIP are eligible for tax benefits under Section 80C where a deduction of up to Rs 1 lakh from the taxable income of the individual is permitted. In case of policy holder’s death, the amount received by the nominee is totally tax free in their hands. The maturity too is classified as a payout under Section 10 (10D) and the entire amount is tax free in the hands of the receiver.
Making the Most of Your ULIP
- Look at the long term: The most important thing about ULIP is that they are long term investments. You stand to gain the most if you stay invested till maturity. They are not to be looked as short term investment vehicles to earn quick gains.
- Be clear of your Objective: Your prime objective should be to have adequate life insurance cover to protect yourself from unforeseen events. Work out the required life cover on the basis of your age, income, and dependents.
- Customize your plan as per your requirement: You could use the various add-on benefits to customize a plan.
- Riders: A rider with a ULIP is an additional cover along with the base policy available for an extra charge. This could be accidental death or disability benefit, or a critical illness cover.
- Top ups: For an additional amount over your regular premium, you could increase your investment component in the base policy. In such cases, partial withdrawals are permitted generally only after five years.
- Switches: You could switch your investments from one fund to another in case of changes in risk profile. Five to six switches are generally not charged for, further to which you may have to pay a nominal charge.