Imagine an insurance product that works as an investment tool and gives you better returns while helping you save tax under section 80D and section 10(10D) . Then there’s the icing on the cake. It also allows you to increase the maturity amount on the plan according to various life stages.

For instance, you can increase the maturity benefit on child birth and then when your child starts going to school. You can also change the maturity amount based on life goals such as home purchase, child’s higher education or marriage, etc. All this is possible with a unit-linked insurance plan (ULIP), one of the most innovative insurance and investment products ever designed. But what is a ULIP?

What is a ULIP?

A ULIP is an insurance product that can be used as an investment tool. In traditional insurance or term insurance, the entire part of the premium paid goes to providing insurance protection. But in an ULIP a part of the premium goes for insurance protection and the other part is invested in funds of different types based on your choice. You can choose to invest in equity, debt and balanced funds depending upon investment goals and risk appetite. Apart from these, there are several benefits of ULIP plans that we will discuss below.

How to increase ULIP maturity benefit during various life stages?

Among the many benefits of ULIP plans, this is one of the best for those who believe in prudent financial planning. ULIPs allow you to increase your maturity amount or sum assured by topping up your premium to meet various investment goals or changes in life.

A top-up premium is the additional amount paid over your regular premium to increase your maturity benefit. The extra premium can be paid at irregular intervals according to various milestones in your life. For example, you may top-up your ULIP premium after you get married in anticipation of increased financial responsibilities in the future. After that you may again top up your premium to increase your corpus as your first child is born. According to insurance regulations, the extra premium that you pay is also invested in increasing your insurance cover. [1]

Benefits of ULIP plans

1. Flexibility in investmentWith ULIP plans you can switch between equity-linked, debt and balance funds based on market movement, investment goals and risk appetite.
2. Loyalty additionsInsurance companies increase your premium or fund value by a few percentages if you stick long enough with the ULIP plan. These are called loyalty additions and these little bonuses can add up to a substantial amount over the years. For instance, investors in Generali Central Big Dreams Plan , a ULIP plan, are eligible for extra allocation up to 7%.
3. ULIPs offer better returnsCompared to various other investment instruments, ULIPs offer better returns (up to 12%) with life protection and a lock-in period of 5 years.
4. Tax benefitsULIPs were spared from the long-term capital gains (LTCG) tax introduced by the 2018 budget. While income from various investment tools is taxable, ULIPs are tax-free both ways. The premium that you pay for your ULIP is eligible for tax deductions under section 80(D) while the maturity benefit or death benefit is tax-free under section 10 D(D) up to a specified amount.
5. Riders for additional coverageWhile as a market-linked investment tool, ULIPs give you the opportunity to create wealth, they also allow you to provide additional cover to your loved ones with accidental death, accidental permanent disability and critical illness riders.

When you buy a ULIP plan, understand that the insurance company will not invest the entire premium amount on your behalf. Some ULIP charges such as premium allocation charges, mortality charges and fund management charges are deducted from the premium amount before it is invested.

If you want to save on ULIP charges, Generali Central Big Dreams Plan is a good option because it does not deduct allocation and administration charges. This ensures that the maximum amount of premium is invested to add to your corpus . If you want to know more on what is ULIP and the benefits of ULIP plans, you can visit this ULIP resource page .

Whenever you buy a ULIP plan, be clear about your investment horizon and the amount you want to accumulate within a specified number of years. Use this ULIP calculator to draw out your investment goals and horizon, as well as to decide your risk appetite.