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Benefits of ULIPS

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August 26, 2022

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

In today’s fast-paced world, you cannot rely on protection plans alone. You also need to invest for a financially secure future. A Unit-Linked Insurance Plan (ULIP) offers the ideal combination of life cover with investment opportunities.

When you purchase a ULIP, the insurance company uses a part of your premium for the insurance component. The rest of the money gets invested in equity, debt or balanced funds based on your long-term financial goals and risk appetite. You may opt to purchase a ULIP to plan your retirement, fund your child’s education or marriage, or even meet your future wealth creation goals.

Advantages of Investing in a ULIP Plan

  • Life Cover

The primary advantage of purchasing a ULIP is the life insurance cover. In today’s uncertain world, the insurance policy acts as a financial safety net for your loved ones.

  • Good Returns

As a ULIP investor, you choose the amount you want/wish to invest in various funds. You can decide on the allocation of investment in equity and debt funds to earn good returns.

  • Flexibility

ULIPs allow you to change your investment portfolio based on market fluctuations. You can switch money from debt funds to equity funds when the market is performing well or vice-versa.

  • Tax Deductions Under Section 80C

The premium you pay towards a ULIP in a financial year is eligible for deductions under 80C of the Income Tax Act#. You can avail of a maximum deduction of up to INR 1,50,000 per financial year.

  • Tax Deductions on Maturity/Insurance Payout

The returns you receive on the plan’s maturity are exempted from taxes under Section 10(10D) # of the Income Tax Act. For policies issued after 1stFebruary 2021, you can enjoy the exemption on returns as long as the premiums paid in any given year do not exceed INR 2,50,000.
Say you have invested in multiple ULIPs concurrently. Two or more plans mature within one financial year. You can claim the exemption under Section 10(10D) only for policies where the aggregate premium is below INR 2,50,000. The returns on policies that exceed this amount will attract capital gains tax.

You do not have to worry about any limitations on the exemption for ULIPs issued before 1st February 2021, except for the conditions detailed under Section 10(10D) #. If your nominee files a claim against the insurance coverage part of the plan, the payout they receive will be exempted from all taxes.

  • Partial Withdrawals

If you need emergency funds, you can make partial withdrawals from the collected funds in your ULIP. Every ULIP outlines a few limits on the withdrawals policyholders can make.

Unit-Linked Insurance Plans offer the ideal mix of insurance and investment while providing benefits including tax deductions, good returns and partial withdrawals. If you’re looking for a new investment avenue, a ULIP could be the right choice for you.

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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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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

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.

For more details on risk factors, associated terms and conditions and exclusions please read sales brochure carefully before concluding a sale. 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.

#Always seek advice from your Chartered Accountant or personal tax advisor regarding your tax liabilities under the Income Tax Law.

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