A Unit-Linked Insurance Plan (ULIP) is a multi-faceted product that offers both insurance coverage and investment exposure in equities or bonds. It is a combination of life insurance and investment instruments that allows policyholders to invest in different funds based on their investment goals and risk appetite. ULIPs offer various features like a life cover, an option to switch funds during the tenure of the policy, a top-up option to invest surplus money during the policy tenure, and partial withdrawal of funds in times of need.
ULIPs are structured to help policyholders secure their key goals such as the potential for wealth creation, retirement planning, or saving for their child’s education. They also give the added benefit of knowing that their premium is working towards securing their future goals. ULIPs offer tax benefits under the Income Tax Act, 1961, which allows policyholders to save tax on their hard-earned money by investing in a ULIP.
ULIPs are offered by several public and private sector insurance providers that either operate solo or have partnered with foreign insurance companies to sell unit-linked insurance plans in India. Before opting for a ULIP, it is important to keep in mind that since plan returns are directly linked to market performance and the investment risk in the investment portfolio is borne entirely by the policyholder, one needs to thoroughly understand the risks involved and their own risk absorption capacity before deciding to invest.
