You will do anything for the ones you love.Thinking about why you need life insurance can be an emotional and stressful task. However, life insurance is one of the most responsible decisions you can make to help ensure that your spouse, children or other loved ones can continue to enjoy the quality of the life they deserve. Life is unpredictable.
So it is important to ensure that your family and loved ones are taken care of financially in case something should happen to you. This is where life insurance comes in.It can provide some financial peace of mind if the worst were to happen.
Life insurance offers a way to replace the loss of income that occurs when someone dies. Life insurance is insurance for you and your family’s peace of mind. With a life insurance policy in place, you can:
UNIT LINKED INSURANCE PLAN
A Unit Linked Insurance Plan (ULIP) is a product offered by insurance companies that, unlike a pure insurance policy, gives investors both insurance and investment under a single integrated plan.
A Unit-Linked Insurance Plan is essentially a combination of insurance and an investment vehicle. A portion of the premium paid by the policyholder is utilized to provide insurance coverage to the policyholder and the remaining portion is invested in equity and debt instruments. The aggregate premiums collected by the insurance company providing such plans is pooled and invested in varying proportions of debt and equity securities in a similar manner to mutual funds.Each policyholder has the option to select a personalized investment mix based on his/her investment needs and risk appetite. Like mutual funds, each policyholder’s Unit-Linked Insurance Plan holds a certain number of fund units, each of which has a net asset value (NAV) that is declared on a daily basis. The NAV is the value upon which net rates of return on ULIPs are determined. The NAV varies from one ULIP to another based on market conditions and fund performance.
A portion of premium goes towards mortality charges i.e. providing life cover. The remaining portion gets invested funds of policyholder’s choice. Invested funds continue to earn market linked returns.
ULIP policy holders can make use of features such as top-up facilities, switching between various funds during the tenure of the policy, reduce or increase the level of protection, options to surrender, additional riders to enhance coverage and returns as well as tax benefits.
Depending upon the death benefit, there are broadly two types of ULIPs. Under Type-I ULIP, the nominee gets the higher of Sum Assured and Fund Value while under Type-II ULIPs, the nominee of the policy holder gets the Sum of Sum Assured and Fund Value in the event of demise of the policy holder.
There are a variety of ULIP plans to choose from based on the investment objectives of the investor, his risk appetite as well as the investment horizon. Some ULIPs play it safe by allocating a larger portion of the invested capital in debt instruments while others purely invest in equity. Again, all this is totally based on the type of ULIP chosen for investment and the investor preference and risk appetite.
Since ULIP (Unit Linked Insurance Plan) returns are directly linked to market performance and the investment risk in investment portfolio is borne entirely by the policy holder, one needs to thoroughly understand the risks involved and one’s own risk absorption capacity before deciding to invest in ULIPs.
Investment in ULIPs is eligible for tax benefit up to a maximum of Rs 1.5 lacs under Section 80C of the Income Tax Act.
Maturity proceeds are also exempt from income tax. There is a caveat. The Sum Assured or the minimum death benefit must be at least 10 times the annual premium. If this condition is not met, the benefit under Section 80C shall be capped at 10% of Sum Assured while the maturity proceeds will not be exempt from income tax