Unit-Linked Insurance Plans (ULIPs) have been a popular investment option in India for quite some time now. However, new-age ULIP plans have recently emerged as a more attractive investment option. These plans offer a range of benefits, including greater flexibility in premium payments and investment options, higher transparency, and better returns. This article will explore the benefits of investing in new-age ULIPs and why they are worth considering as long-term investment options. We will also examine the key features of these plans and provide insights into how they can help you achieve your financial goals.
The traditional ULIPs have some drawbacks that deter some customers from investing in them. The five-year lock-in period and the high fees associated with these plans were among the primary concerns. The good news is that with the advent of new-age ULIPs, many of these issues have been addressed.
Making them a more attractive investment option.
One of the most significant benefits of new-age ULIPs is their flexibility. These plans allow policyholders to choose their premium payment frequency and the amount and the fund they want to invest in. Additionally, they come with a lower lock-in period of five years, which is much more manageable than the earlier 10- or 15-year lock-in periods.
Policy administration fees: The charges deducted each month for policy administration have been eliminated in modern ULIPs.
Fund management charges (FMC): The fees for managing investment funds were retained at 1.35%, which is about what ELSS fees are
Premium allocation charges: The premium allocation charges subtracted the percentage of the premium for the initial and renewal costs. The most recent ULIP calculator have eliminated these fees as well.
Mortality charges: As a component of life insurance coverage, mortality charges are assessed on the premium. The mortality charges on modern ULIPs have decreased, and some insurers even reimburse the mortality charges upon plan maturity.
Modern ULIPs have turned their drawbacks into advantages with the decrease in these fees, making it an accessible investment. Further to the increased gains from equity investments, ULIPs have the following advantages:
The Advantages of Buying New-Age ULIPs
The benefit of maturity: The maturity benefits after the policy term is the fund value, which can be received as a lump amount or as payments over a maximum of five years.
Easy funds switching:ULIP investments offer debt, equity, or a combination of the two types of funds. You have the choice to change from losing investments. You are only permitted a certain amount of switches per year; any more switches will incur charges.
Death benefit:When a ULIP includes a portion of a life insurance policy, the nominee will receive the life insurance policy’s sum insured upon your passing. Some insurers offer the fund value in addition to the sum assured, while others only offer it if the fund value exceeds the sum assured.
Partial withdrawal:After the lock-in period, the partial withdrawal facility offered by ULIP investments makes them an excellent choice for achieving short-term financial goals. The maximum number of withdrawals differs between insurance companies.
Tax benefit: ULIP tax benefits are one of the key reasons why consumers favour ULIPs. The investment amount and the returns are free from taxation under the Long Term Capital Gains (LTCG) tax.
Riders for a premium waiver:
The insurer waives the insurance premium in the event of passing away before the policy term. After the policy term, the candidate is given the sum promised. The premium will not be charged if an illness or accident results in the insured person’s entire or partial disability. Yet, the investment and life insurance will continue.
If you want a long-term investment with minimal policy fees, the ability to swap between funds, and larger returns that are tax-free, a ULIP investment is a good choice to avail of ULIP tax benefits. Higher returns are, however, susceptible to changes in the market.
But, if you want to make a quick investment, the minimum five-year lock-in period will work against you. For better returns, patiently invest for 10 to 15 years in addition to the lock-in term.
New-age ULIPs are a valuable investment option that provides the benefits of both insurance and investment. They offer flexibility in terms of premium payments, investment options, and tax benefits. Additionally, new-age ULIPs are more transparent and offer better returns than traditional ULIPs.