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Is It Advisable To Have ULIP Along with a Term Plan?

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Is It Advisable to Have ULIP Along with a Term Plan?
December 18, 2023

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

If you are shopping for your very first life insurance policy, it’s likely that you may opt for a term insurance plan. This is a pure life cover that offers only death benefits. The upside is that term plans are highly cost-effective, so you can purchase a sizable cover of Rs. 1 crore or more at extremely affordable premiums.

However, if you want to expand your life insurance coverage, you may consider buying other types of policies later. One such type of life cover is a Unit Linked Insurance Plan (ULIP). Let’s take a closer look at the meaning of ULIPs, how they work and whether it is advisable to have a ULIP along with a term plan.

ULIP: Meaning and How it Works

A Unit Linked Insurance Plan is a type of life insurance plan that gives you a life cover along with various investment opportunities. Your insurance premium is utilised in part to cover the cost of life insurance and in part to meet your investment goals.

You can choose from different kinds of ULIP funds to invest in, such as debt funds, equity funds and hybrid funds. At the time of maturity, you will receive the sum assured under the ULIP and/or the fund value of your investments.

Buying a ULIP Along with a Term Plan

If you already have a term insurance plan, you may be unsure about buying a ULIP as an additional cover. However, depending on your goals and financial requirements, buying a Unit Linked Insurance Plan along with a term plan may actually benefit you and make it easier to achieve your goals.  

Check out some of the top advantages of having the best ULIP plan in addition to term insurance.

  • Investment Opportunities

The best ULIP plans offer a unique blend of insurance and investment. Unlike pure term insurance plans, a portion of the premium you pay for a ULIP is invested in different ULIP funds of your choice. This provides potential opportunities for capital appreciation and allows you to tap into the returns from debt instruments, equity or both, based on your risk appetite.

  • Maturity Benefits

Term insurance plans provide a significant life cover in the form of death benefits. ULIPs supplement this cover and offer maturity benefits as well. If you survive the policy term, you can benefit from the investment corpus that you have created over the years. So, by purchasing a ULIP in addition to a term plan, you get the advantage of death benefits and maturity benefits.

  • Maximisation of Tax Benefits

The premiums you pay for term insurance plans and ULIPs both qualify for tax deductions under 80C of the Income Tax Act. This deduction is capped at Rs. 1.5 lakhs. With the best ULIP plan and term plan in your portfolio, you can maximise your tax benefits and reduce your overall tax liability easily.

Conclusion

The bottom line is that a term plan and a Unit Linked Insurance Plan both offer different types of benefits. The choice of life insurance between these two types of coverage depends on your financial situation and goals.

If you are looking for a pure life cover at affordable premiums, a term plan may be suitable. However, if you want the benefit of insurance and market-linked investments, the best ULIP plans offer you both these benefits. To get the best of both worlds, you can start by purchasing a term plan and then expand your life insurance coverage with the best ULIP plans.

Related Articles:

ARN- ED/11/23/6471

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Life Insurance Articles Life Insurance Articles

Tax Articles Tax Articles

Retirement Articles Retirement Articles

ULIP Articles ULIP Articles

Health Plans Articles Health Plans Articles

Child Plans Articles Child Plans Articles

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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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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.

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