There is no better gift for your loved ones than the gift of financial security during the ongoing pandemic. Going straight for an insurance policy covering COVID-19 may appear to be one of your best bets, but there are a slew of pre-existing financial products that can provide you with the benefits you need to stay secure during and after this time. The unit linked insurance plans are one such financial product.
What Is ULIP?
Before investing in a ULIP Plan, it is important to understand what is ULIP?
ULIP is the short form for Unit Linked Insurance Plan. A ULIP is a product that combines investment and insurance. Policyholders in this plan can pay their premiums either annually or monthly. One portion of the premium is used to provide life insurance coverage, while the remainder is invested.
The investments in these plans are subject to the risks associated with the capital market. The policyholder is responsible for the investment risk in their portfolio. As a result, it is advised to make an investment decision based on one’s needs as well as one’s risk tolerance.
Another factor that policyholders must consider is the future needs of the funds they have invested. Furthermore, a unit linked insurance plan is far more transparent. The fees, which include fund management fees, allocation fees, and so on, are clearly stated upfront.
Unit linked insurance plan also allows its investors to switch from debt to equity and vice versa without having to run from pillar to post or worry about being charged.
Benefits Of a ULIP Plan During Covid-19
ULIPs are a unique financial product that can assist individuals in meeting both of these requirements. Unit linked insurance plans are a hybrid investment and insurance product that can be purchased for the same price. A portion of your ULIP premium goes toward life insurance. The remainder is used to invest in market-linked investment products of your choice.
Here are some of the reasons why a ULIP plan is a great investment during COVID-19.
1. Life coverage
One of the primary advantages of ULIPs is that a portion of your insurance premiums for ULIPs are invested in providing you with life insurance. If you die before the policy matures, the nominee you have designated will receive the Death benefit.
This is typically 105 percent of your annual premium payment. In an era when public health is under threat, this is a near-ideal way to help your loved ones when you are not present. The IRDAI now requires life insurance companies to provide COVID-19 insurance.
2. Systematic Investment Opportunity
Another advantage of ULIPs is that they are excellent tools for wealth creation. Many people are focusing on saving money during the COVID-19 pandemic to have enough funds to last the duration of the pandemic. Saving is essential, but so is growing your wealth.
Finally, beating inflation costs cannot be accomplished solely through your savings. You must also harness the power of market volatility. This opportunity is provided by ULIPs, which invest in market-linked funds of your choice. If your ULIP investments are underperforming or you want to reallocate your portfolio, you can switch funds.
3. Tax Benefits
The third advantage of ULIPs is that they can help you save money on your taxes. Reducing your tax burden is another way to weather the pandemic without straining your finances. Section 80C of the Income-tax laws exempts ULIP premiums up to 1.5 lakhs in a calendar year from taxation.
As a result, ULIPs not only save you money and grow your wealth, but they do so tax-free each year. Investing in tools that reduce your tax burden is an intelligent way to save money in the long run, whether or not there is a pandemic.
4. Can Be Used As Retirement Income
One of the underappreciated advantages of ULIPs is their ability to be tailored to individual needs. They can not only serve as life insurance, but they can also help you generate retirement income. If you live out the term of your policy, ULIPs will pay you the value of your total funds. This can be used as a retirement income, particularly for those who invest in equity funds, which generate a lot of wealth over time.
5. Customizable and Flexible Investments
You have a lot of freedom with your market-linked ULIP investments. You can tailor your financial portfolio to include debt, equity, or hybrid funds in the proportion that is most advantageous to you.
If you change your mind at any point during your policy, you can change the allocation of your mutual funds. As an investor, the customization and flexibility available to you can help you beat market volatility and generate long-term returns.
Best ULIP Plans Available In India
1. INVEST 4G Plan – Canara HSBC Oriental Bank of Commerce
Canara HSBC Oriental Bank of Commerce’s INVEST 4G plan is a non-participating unit linked insurance plan that helps you forget your financial problems. The policy offers a dual benefit of protection and savings, providing both life insurance protection and the opportunity to save for your life goals.
- To invest your money, the plan provides 7 different funds and 4 portfolio strategies.
- It provides the flexibility of redirecting and switching fund options to capitalize on market movement or reduce risk.
- Partial withdrawals are available to assist you in meeting unexpected expenses resulting from any unforeseeable event or meeting the family’s changing needs.
2. LIC New Endowment Plus
LIC New Endowment Plus is a unit linked insurance plan that provides customers with both investment and insurance options. Depending on the customer’s risk tolerance, the New Endowment Plus policy offers investment options in both low-risk debentures and high-risk private equity. This policy allows for up to four free switches per policy year. New Endowment Plus, which has a policy term of 10 to 20 years, allows for partial withdrawal after 5 years.
- On the death of the life assured before the date of risk initiation, an amount equal to the unit fund value is payable.
- If the life assured survives the maturity date, an amount equal to the unit fund would be paid to them.
- It provides the option of selecting an investment fund.
3. HDFC Life ProGrowth Plus;
HDFC Life ProGrowth Plus is a unit linked insurance plan in which the premium is invested in the capital market, earning high returns while also providing insurance coverage. This ULIP plan will assist you in making the most of equities by effectively channeling your savings.
- This plan offers two types of coverage: Life Options and Extra Life Options.
- This is a ULIP with a Regular Pay option.
Wrapping It Up
It is challenging to manage your finances during a pandemic to protect your savings and grow your wealth. Many people join the panic buying life insurance train by explicitly looking for an insurance plan covering COVID-19.
Fortunately, financial products such as Unit linked insurance plan provide both investment and protection, making them one of the preferred places to park your money during these difficult times. You go over the ULIP plans that we discussed above and select the best one for your needs.