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4G ULIP Plans: Meaning and Benefits

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Meaning and Benefits of 4G ULIPs
July 18, 2023

In this policy, the investment risks in the investment portfolio is borne by the policyholder

Most Indians today know about Unit-Linked Insurance Plans (ULIPs). These unique plans allow individuals to invest for the future while enjoying life coverage in the present. The dual benefits ULIPs offer make them a popular investment option for many. Recently, 4G ULIPs have taken the market by storm. These evolved plans provide even more benefits. Let's learn more.

What Is a 4G ULIP?

4G ULIPs, or Fourth Generation Unit-Linked Insurance Plans, are a new type of ULIP that offer additional features and benefits compared to traditional ULIPs. They offer investors greater flexibility, tax benefits, life cover, transparency, wealth creation, risk mitigation, long-term savings, and liquidity.

Understanding 4G ULIPs: Features and Benefits

Flexibility

4G ULIPs offer greater flexibility in investment options and policy management. Investors can choose from various investment options, such as equity funds, debt funds, or a mix of both. They can also switch between funds based on market conditions or personal preferences. Additionally, investors can choose the premium payment frequency, policy term, and sum assured to meet their financial goals and requirements.

Tax Benefits

Like traditional ULIPs, 4G ULIPs also offer tax benefits. 4G ULIPs fall under the EEE or exempt-exempt-exempt category, subject to the provisions of the Income Tax Law, making them an attractive investment option for investors looking to save on taxes. Premiums paid towards the policy are eligible for tax deductions under Section 80C# of the Income Tax Act, 1961.

Proceeds received on surrender/partial withdrawal/maturity of ULIP plan are exempt from tax subject to provisions mentioned in Section 10(10D)# i.e if the premium payable for any of the years during the policy term does not exceeds 10% of the death sum assured.

In addition to the above, for policies issued after 1st Feb 2021 tax exemption on maturity proceeds will be available if premium paid in any of the years towards such matured polices does not exceed Rs.2,50,000. Out of the total matured policies in a financial year, exemption u/s 10(10D) will be available only towards those polices who’s aggregate premium in any years does not exceed Rs. 2,50,000/.

Income from rest of the policies exceeding the mentioned limit will be chargeable as capital gains.

Death proceeds are also exempt from tax for all ULIP plans.

Life Cover

4G ULIPs provide investors with life cover in addition to investment benefits. In the event of the policyholder's untimely demise, the policy offers a death benefit to the nominee. The death benefit can be a lump sum or a combination of a lump sum and regular payouts, depending on the policy terms. The life cover provides financial security to the policyholder's family in case of any unfortunate event.

Transparency

4G ULIPs offer greater transparency compared to traditional ULIPs. Insurance companies must disclose all charges upfront, and investors can make informed decisions based on the same. Additionally, the policy document clearly outlines the terms so investors know what they are signing up for. This transparency helps build trust between the policyholder and the insurance company.

Wealth Creation

4G ULIPs offer the potential for wealth creation in the long run. Investors can benefit from market fluctuations by investing in equities and debt instruments and earn higher returns than traditional investment options. Additionally, investors can benefit from compounding, which helps their investments grow over time. 4G ULIPs are an ideal investment option for investors looking for long-term wealth creation opportunities.

Risk Mitigation

4G ULIPs offer investors the option to invest in a mix of equity and debt instruments, which helps mitigate risks. By diversifying their investment portfolio, investors can reduce their exposure to market risks and volatility. Additionally, the insurance component of the policy provides financial protection in case of any unforeseen circumstances. The combination of investment and insurance helps mitigate risks and provides investors with complete peace of mind.

Long-term Savings

4G ULIPs are an ideal investment option for investors looking to save for long-term financial goals such as retirement, children's education, or buying a house. 4G ULIP investments benefit from compounding and earn higher returns than traditional investment options. Additionally, the insurance component of the policy provides financial security in case of any unfortunate event, ensuring that the policyholder's financial goals stay on track.

Liquidity

4G ULIPs offer investors the option to partially withdraw their investments, subject to policy terms and conditions. The withdrawals provide liquidity in financial emergencies, helping investors deal with unexpected expenses. These partial withdrawals allow investors to withdraw funds from the accumulated corpus without surrendering the policy.

Who Should Opt for 4G ULIPs?

4G ULIPs are an ideal investment option for individuals who want insurance and investment benefits. It is a suitable investment option for individuals with long-term financial goals such as retirement planning or children's education. These plans are ideal for individuals comfortable with market risks and volatility. They work well for investors looking for long-term wealth-creation opportunities.

4G ULIPs offer investors flexibility, tax benefits, life cover, transparency, wealth creation, risk mitigation, long-term savings, and liquidity. Before investing, check all your options and read the policy terms carefully. The returns depend on market fluctuations, so select your funds based on your financial goals and risk appetite.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Author Profile Written By:
Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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We at HDFC Life are committed to offer innovative products and services that enable individuals live a ‘Life of Pride’. For over two decades we have been providing life insurance plans - protection, pension, savings, investment, annuity and health.

Disclaimer

# Subject to conditions specified u/s 80C and u/s 10(10D)  of the Income Tax Act, 1961.

The afore stated views are based on the current Income-tax law. Tax Laws are also subject to change from time to time. Also, the customer is requested to seek tax advice from his Chartered Accountant or personal tax advisor with respect to his personal tax liabilities under the Income-tax law.

The Unit Linked Insurance products do not offer any liquidity during the first five years of the contract. The policyholders will not be able to surrender or withdraw the monies invested in Unit Linked Insurance Products completely or partially till the end of fifth year.

Unit Linked Life Insurance products are different from the traditional insurance products and are subject to the risk factors. The premium paid in Unit Linked Life Insurance policies are subject to investment risks associated with capital markets and the NAVs of the units may go up or down based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions. HDFC Life Insurance Company Limited is only the name of the Insurance Company, The name of the company, name of the contract does not in any way indicate the quality of the contract, its future prospects or returns. Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document of the insurer. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns.

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