Investing in ULIPs at low costs


While a Unit Linked Insurance Plan is a great way to acquire protection for your family through life insurance, it also offers the benefit of growing your premium amount by investing the same in securities markets. Many individuals are averse to such plans because securities markets are subject to risks and they don’t want to lose out on their precious savings and family protection. Others find ULIPs to be slightly more expensive than a regular insurance policy. However, you will find after reading this article that investing in a Unit Linked Life Insurance Plan can be done without cutting a hole in your pocket.

Let’s start with busting a myth. ULIPs are not expensive, they are cost effective. The Insurance Regulatory and Development Authority of India (IRDAI) has capped fund management charges at 1.35 per cent. They have also reduced allocation charges so when you purchase a ULIP today, there are negligible or no allocation charges.

Additionally, there is a cap on the maximum charges on a Unit Linked Life Insurance Plan annually. Also, because ULIPs are also available for purchasing online, most insurance providers no longer change a premium allocation fee.

When you buy a ULIP you can also ask your insurance provider about Return of Mortality charges that are provided against your life cover. The Return of Mortality charge ensures that mortality charges that were previously paid by the policyholder are returned to them.

A ULIP is a long term investment that offers long term gains. That being said, there are insurance providers that offer short term plans between 5 to 10 years. You are free to pay the premium for those years and then take back your investment amount along with returns.

Because ULIPs offer long term capital gains, these plans are virtually tax free – you don’t have to pay tax on capital returns from long term plans – think about the money saved in taxes. Additionally, when you invest in a unit linked insurance plan, you can claim exemption on the premium amount under Section 80C of the Income Tax Act.

What makes a Unit Linked Life Insurance Plan so lucrative is the fact that if you are not happy with your fund’s performance, you can always switch to an alternate fund – so you can actually see your money growing.

And finally, to best understand how a unit linked life insurance plan can be inexpensive, you must also explore the type of plan that best suits your financial inclusion goals. If your goal is long term like retirement or planning a wedding or higher education for your infant child, you can do with investing in a ULIP. These plans offer you the choice of having a diverse investment portfolio by investing in equity, debt or balanced funds. Each kind of fun feeds a different kind of risk appetite – so the cost of investing can be lower or higher or a bit of both depending on how risk averse you are. A ULIP is a proven long term investment plan that works wonderfully for long term financial goals.