Ever thought about whether you are financially prepared or not,
- Meet with a severe accident and end up in total disability?
- Diagnosed with chronic illness such as cancer or other deadly diseases?
- Have an untimely death?
For instance, you are the sole bread earner in the family. If you end up in any of the above-mentioned unfortunate circumstances, do you think you have any monetary backup plan for your family?
Even if we keep death aside, are you earning, saving, and investing enough to provide a good lifestyle for your loved ones or to live a tension-free post-retirement time?
This blog addresses youth and mid-aged souls who haven’t thought of all these real-life troubles; this blog will help you in understanding,
- What is life insurance, its importance, and its types?
- What is a Unit Linked Insurance Plan, and how is it the best of both worlds?
- How does ULIP work?
- What are the benefits of investing in a ULIP plan?
- What are the best ULIP Plans to consider in India?
Life Insurance: Importance and Types
As we all know, life is what you expect the least at an unexpected time. One is not always prepared for all the unexpected situations, if you have zero back-ups for the financial drawbacks one might face in different stages of life. It is where life insurance emerges as an angel in disguise that gives financial strength to your family in your unbearable absence.
Life insurance is an agreement between the policyholder and insurer. After their untimely death, the insurance company pays the insured’s beneficiary a lump sum (based on the opted life plan). Here, the payout is given in exchange for the timely premiums deposited by the insured.
Life insurance is considered an asset for the long term rather than an addition to the kitty. Investing in life insurance ensures that you and your family receive financial support when you need money or disrupt the status quo of remittance, such as – death, accident, chronic illness, retirement, and many more.
Life steps in with a different set of problems, and to help you in such situations, life insurance companies have different types of life insurance plans. They are as follows:
- Term insurance: Term insurance is a pure insurance policy that is not market-linked. It is one of the most preferred insurance types because they include all the benefits. The premiums are also less expensive if purchased early in life. Apart from giving death benefits, it can also be utilized for multiple purposes such as – loan, increasing the term plan based on the additions in family, and many more.
- Unit Linked Insurance Plans: This type of insurance is the best of both worlds because it combines insurance with investing. A percentage of the premium you pay for ULIP is utilized to provide the necessary insurance coverage in this sort of insurance. At the same time, the residue amount is invested in stock markets. It is undoubtedly a beneficial road.
- Endowment plans: This insurance policy combines life insurance benefits with savings. It is one of the most helpful life insurance plans because they help people achieve long-term life goals. However, if you outlive the policy’s term, you will also get the maturity amount.
- Group life insurance: This insurance policy covers people under one parent policy. These forms of life insurance are typically given as part of an employee benefits package. If you remain a group member, you will receive insurance coverage under this type of insurance. And, it differs from individual forms of life insurance policies where the coverage lasts throughout the policy.
- Child Insurance Plans: Buying this life insurance secures your child’s future. Under this plan, the maturity benefits come in yearly installments or as a one-time payoff when the child reaches the age of 18. For instance, if the parent meets with an untimely death when the policy term is active, child insurance can provide prompt money to meet a child’s expenditures.
- Term insurance with return of premium: It functions like a life insurance policy that pays out the death benefit to the policy’s beneficiaries. The maturity benefit available on a term plan with a return of premium is the fundamental feature that differentiates it. The insured might benefit from a term plan with a premium return by paying an extra premium. You can pay the premiums based on the needed sum assured and insurance term. The insurer will refund the concerned person’s premiums when the policy matures.
- Retirement Plans: Ever thought about a smooth financial sail if your children disown you? If not, then retirement insurance is the answer. It is intended to assist you in accumulating a sizable corpus for your post-retirement phase. A retirement plan enables you to save and invest for the long term, potentially earning a large amount of money. Moreover, the money you get at maturity is tax-free under Section 10(10D).
What is a Unit Linked Insurance Plan (ULIP)?
The premiums you pay for ULIP are tax-deductible under Section 80C of the Income Tax Act of 1961 (Under this provision you can deduct up to Rs.1.5 lakh from your total taxable profits), and the returns are likewise tax-free under Section 10 (10D).
As discussed above, a Unit Linked Insurance Plan (ULIP) is a crucial financial decision since it combines insurance with investing. A portion of the premium you pay for a unit-linked insurance plan is utilized to provide the necessary insurance coverage in this sort of life insurance. At the same time, the remainder is invested in financial markets. It’s a two-way street that will lead you to a prosperous road in the long run.
However, investments in Unit Linked Insurance Plans are vulnerable to the risks associated with the capital markets. The insured carries the investment risk, which is why you should make your investment selection after considering your risk tolerance, budget, and demands.
But, the question is, when to start investing in a ULIP plan?
It is never too late to begin investing in a ULIP plan, but the sooner you start, the better. It is recommended that young individuals in their twenties purchase life insurance because they would have more time to expand their money and fulfill their financial goals, and at the same time, the insurance premiums are also less while in their 20’s.
You should pick the funds you wish to invest in based on your age, financial risk tolerance, and other variables.
How does ULIP work?
In the previous sections, we understood why we should own life insurance, types, ULIP, and other related details. This blog section will now understand how this good two-way road of ULIP operates. So, the insurer receives money from all policyholders and invests it in their preferred funds under the ULIP plan. And, after the funds have been invested, the entire corpus is divided into units with a fixed face value.
Later, according to the amount deposited, each investor is allotted units. And, then when the policyholder withdraws from the corpus in part, you sell the corresponding number of units.
When the policyholder withdraws from the corpus in part, you sell the corresponding number of units. Some policy charges are sliced in the form of units as well.
It should be noted that Net Asset Worth is the worth of each unit at any given time (NAV). It symbolizes the impact of changes in the equities value.
What are the Advantages of ULIP?
There are different types of unit-linked insurance plans available with various insurance companies, and they are as follows:
- ULIP plan for Children
- ULIP plan for Wealth Creation
- ULIP plan for Post-Retirement Phase
- ULIP plan for Health Security
With different types of ULIP plans, there are many benefits and advantages of bagging a ULIP plan.
People nowadays lack patience and take up crooked shortcuts to earn more quickly. But, if you look at insurance and ULIP specifically, it is a road that would help you reap whopping monetary benefits. When assessed over a lengthy period, the insured can earn up to ten times the money put in the ULIP, as it assists policyholders in methodically achieving their financial goals.
The grabbing advantage of investing in a ULIP plan is that the policyholder can select the shares in which they want to invest their money if dissatisfied with the assigned units of the claims. It would result in a direct and evident impact on the growth and result of the ULIP.
What is the best ULIP Plan to buy in India 2022?
Aditya Birla Sun Life Insurance Wealth Assure Plus Plan
ABSLI’s Wealth Assure Plus ULIP policy will protect you against untimely death, disability, and ill health. Apart from saving the policyholder from different adversities of life, I also guarantee to assist the policyholder in attaining their wealth-building goals.
The policyholder is in charge of the portfolio’s investment in this case. Furthermore, with this ULIP plan, you have the option of investing in one of five investment techniques or one of sixteen funds.
After the tenth policy anniversary, there are no premium allocation or policy management fees.
The policyholder can add top-ups anytime they have extra money to invest. Moreover, the insured can take advantage of tax benefits mentioned under sections 80C and 10 (10D).
To know more about this dynamic ULIP plan by ABSLI, click here.
Owning the correct type of insurance at the right age can help in enjoying one’s later stages of life. Therefore, informed and well-researched choices never go wrong.
Understand your needs, know your pocket allowances, and invest at the right place.