It is name suggest is an insurance called ULIP (Unit linked Insurance Scheme). And it is combination of both insurance and investment. Moreover, see best unit linked insurance schemes. Probably, check ULIP plans vs Mutual fund. Hence, for better understand see best ULIP plans in India. You can also view ULIP calculator.
Benefits of Tax
You will buy ULIP in order to avail income tax benefits. Moreover, premium paid for ULIP is eligible for tax benefits u/s 80 C up to Rs 1.50 lakh per year. And you can purchase policy to claim tax benefits. Hence, view details why insurance is important?
In order to ensure that you cannot reverse tax benefits under section 80 C. But you need to keep ULIP policy alive by paying premium for two years. In case if your are exceeds 10% of sum assured for premium payable for ULIP policy. And tax benefits will restricted to 10% of sum assured of policy u/s 80 C.
However, under section 80 c excess premium will not allow. Therefore amount claim received on death of policy holder is fully exempt under section 10(10D). In case of policy holder survives policy period. And maturity proceeds will become fully tax free unless premium paid. Thus, policy exceeds 10% of sum assured of ULIP policy for any year in term of premium paying.
How does it work?
In case of whole life policies where you have paid premium will be invested in insurance company. But this policy works like any other insurance product. However, you can opt underlying product where your money will invested under ULIP.
In addition, it is either equity or debt or combination of both. If you have made investment in pure investment product you need bear risk. Due to market volatile you need to borne fluctuation of risk.
ULIP policy levied various charges
You have paid premium for your ULIP policy is appropriated for various charges. Hence, you can see below these charges. And you can check Points to remember when you plan retirement
Charges of Premium allocation
Before any money is invested there are charges which are deducted upfront. And this is expressed as percentage of premium paid by you. To recover initial cost incurred towards procuring and issuing policy these charges are levied. Like commission to insurance adviser, marketing expenses for selling product and underwriting cost.
Similarly, after all charges deducted. But this left out money will purchase of units of funds chosen by you. Therefore IRDA has set guidelines ensure on these charges from fifth year onward. Because, initial premium allocation charges are too high. And it effect reducing your investible funds.
Administration policy Charges
These charges collect for recurring administrative and maintenance charges for your policy. And this cost will cover like paper work, premium intimation etc. Usually on monthly basis it is levied. Similarly, this charge is expressed as flat amount per month. But it also expressed as percentage also.
Charges of mortality
You will charges this cost dependent on your age. In addition, like sum assured, fund value of your policy, health conditions and gender. And this is buying cost underlying insurance in ULIP policy.
Management fund charges
Fund management expenses charged by various mutual fund schemes. And is levied as a percentage of assets value. Before computing net asset value it is deducted from fund. However, IRDA has mandate that life insurance companies cannot charge more than 1.35% per annum.
Therefore, equity oriented ULIPs will have higher fund management chareges. As compared to ULIPs oriented debt. You have a note that this is charges on fund value and not on insurance premium year after year.
Switching fund charge
You are allowed to switch from one fund to another fund in any ULIP product. But you can switch in case of same insurance company is free of cost for limited number of times. In addition, you may have to pay these charges if you wish to switch more than free switches.
Finally, check compare best ULIP plans in India. And you can also see different types of ULIP plans. Therefore see introduction of Unit Linked Insurance Plans. Hence, check top 10 ULIP plans in India. But check ULIP returns in 10 years.