ULIP Insurance Explained: The Pros, Limitations, and Everything in Between

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ULIP Insurance Explained: The Pros, Limitations, and Everything in Between (Image: Pixabay)
ULIP Insurance Explained: The Pros, Limitations, and Everything in Between (Image: Pixabay)

New Delhi : We all know that insurance is essential to everybody’s financial planning. Unit-linked insurance plans, or ULIPs, have been popular nowadays. This is because ULIP insurance is a universal life insurance policy that is entirely flexible and gives you tremendous financial freedom. 

Through this investment, you can invest in an insurance policy that saves your and your family's future. It also helps you invest your money in a secure way that further increases your savings. However, before investing in ULIP, you must be aware of its pros and cons and everything related to it.

The Characteristics Of Unit Linked Insurance Plan 

First, let us start with the unique features of the unit-linked insurance plan.

1. This plan offers investment and insurance simultaneously. For example, if you pay a premium or make contributions, you are also securing your money for the future and reaping profitable returns. 

2. This plan is not affected when you partially withdraw some amount from the plan.

3. ULIP is a flexible tool that lets you switch between debt-equity or balanced funds for your investments. 

4. You have the freedom to choose the premium amount and the assurance sum in this investment plan.

5. This plan helps you track your investment and see your money grow or decrease due to the fluctuating market when you invest in the stock market.

6. The ULIP is an investment plan with some degree of market risk.

The pros of investing in a ULIP

Let us now read about the advantages of this plan:

More returns: The money you invest through the ULIP is also invested in the stock market, so you have a high chance of better returns with this investment.

Numerous benefits for your family: With this plan, you can protect your future and also provide periodic investments or a legacy of an amount for your dependence or family.

Short-term Withdrawal—The best advantage of ULIPs is the ability to withdraw funds quickly in case of emergency or small investments.

More tax benefits: When you pay premiums under the ULIP, you can claim them as a deduction under section 80C of the Income Tax 1961, up to ₹1.5 lakhs. 

Practising Caution with ULIP

With so many benefits, of course, the ULIP also has some things to be careful about.

Exposure to market risk: When you invest your money in the stock market, you have to be ready for ups and downs that can even reduce your investment.

More expensive plan—ULIP is a bit more expensive than other insurance policies like whole life insurance, term insurance, and so on because not all common people can afford this plan.

ULIP can be an excellent insurance plan to save your future. Of course, this is only possible if you keep in mind its advantages and concentrate on making them more beneficial. However, getting expert guidance is extremely important when choosing your insurance plans.