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Should People Over 60 Buy ULIPs?

ULIP plans aim to fulfil the protection and investment needs of individuals. They let you enjoy insurance coverage and also help you save up for your goals by earning market-linked returns on your savings. While you can buy the ULIP in your 30s and 40s for your financial goals, the plan might prove relevant in your 60s too, depending upon various factors. Let’s understand how.

Investment plans also act as tax-planning tools, as many avenues help reduce tax liability. There are different types of investment plans, and by choosing the right one, you can invest according to your needs and grow your savings.Read Less

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Written ByPalak Bagadia
AboutPalak Bagadia
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Palak Bagadia, Associate – Digital Marketing at Bajaj Allianz Life, with experience spanning content and performance marketing, recruitment, employee engagement in the BFSI industry.
Reviewed ByRituraj Singh
AboutRituraj Singh
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Rituraj Singh,With over 6.5 years of experience in the insurance industry, Rituraj Singh, Manager- Product & Brand Marketing at Bajaj Allianz Life Insurance overlooks new product launches, compliance, and brand projects, leveraging artificial intelligence and technology to enhance outcomes.
Written on: 7th July 2024
Modified on: 7th July 2024
Reading Time: 15 Mins
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What is ULIP?

ULIP is Unit Linked Insurance Plan wherein you get a combination of insurance and market linked investments. Each ULIP plan has a choice of funds for the policyholders to choose from according to their asset allocation and risk appetite.

ULIPs for senior citizens

Whether you start early or later in life, you may aim at creating an investment corpus for your financial goals. Hence, ULIPs may be a preferred option to consider for senior citizens as well, i.e., for individuals aged 60 years and above.

You may choose to pay the premium at once (single premium) or for a limited tenure (limited premium). Alternatively, if feasible, you may also pay the premium throughout the life insurance policy tenure (regular premium).

Benefits of ULIPs for senior citizens:

If you are still wondering what is ULIP and how you can plan for your financial goals even in your old age, here’s how –

1. Creation of a retirement corpus:

As your retirement might be approaching soon, you may use ULIPs to create a retirement corpus for your golden years. Since ULIPs invest in market linked securities, you may get market-linked returns associated with risk. This may help you create an adequate corpus for retirement that might help you meet your lifestyle expenses and financial goals post-retirement. You can use the ULIP calculator to estimate the corpus that you can accumulate and then save accordingly.

2. Estate planning:

A ULIP may also help you in estate planning as you may leave behind a legacy for your loved ones. The plan offers insurance coverage throughout the policy tenure. In the case of your sudden demise, your nominee(s) get a lump sum benefit that can help them meet their financial obligations.

3. Manage your investment:

ULIPs give you flexibility in choosing your investments. Here’s how –

  • You can choose from a range of investment funds for allocating the premium as per your risk appetite.
  • Some plans also offer an automated investment strategy that invests your premium based on predefined investment objectives.
  • You can choose to invest additional premiums through top-ups with additional sum assured subject to conditions stated in the policy.
  • You can switch between the chosen funds as and when required subject to the limits as per the policy. This switching helps you manage your investment depending on your changing preferences and market dynamics. Switching between funds does not attract any income tax liability.
  • The premium redirection feature allows you to redirect the premium towards another fund subject to policy terms & conditions.
  • These facilities help you manage, control, and customise your investment as per your investment strategy.

 

4. The facility of withdrawals in emergencies:

ULIPs allow partial withdrawals after the first five years of the policy subject to policy terms and conditions. These tax-free* withdrawals give instant liquidity when you need funds in case of any unforeseen emergencies.

5. Tax benefits1:

Lastly, you can enjoy tax benefits with the ULIP plan, subject to the provisions stated and amendments made from time to time in the Income Tax Act 1961, which helps you lessen your tax liability and create a tax-efficient retirement corpus.

  • Firstly, the ULIP premiums are allowed as a deduction from your taxable income. You can claim a deduction up to Rs.1.5 lakhs under Section 80C of the Income Tax Act, 1961 for up to 10% of the sum assured.
  • If you switch the investment funds, no tax is levied on such switching from equity to debt or vice versa.
  • Partial withdrawals also qualify as tax-free* withdrawals.
  • The death benefit is always tax-free.
  • The maturity benefit is also tax-free* if the aggregate annual premium is less than or equal to Rs.2.5 lakhs in a financial year and you are buying the ULIP on or after 1st February 2021.

 

So, even though you might have fulfilled most of your financial goals in your 60s, a ULIP may still prove relevant because of the various uses that you can put it to. So, use the ULIP calculator and plan an adequate retirement corpus. Choose a suitable ULIP and enjoy your golden years in financial independence.

Ref:

1https://www.policybazaar.com/life-insurance/ulip-plans/articles/things-to-know-about-tax-benefits-of-ulips/

BJAZ-WEB-EC-01873/22

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#Survey conducted by brand equity – Nielsen in March 2020

~Tax benefits as per prevailing Income tax laws shall apply. Please check with your tax consultant for eligibility.

*Benefits are tax free subject to satisfaction of conditions mentioned in Section 10(10D) of Income Tax Act, 1961 and amendments made thereafter.

The above information is for general understanding and is meant to educate the general public at large. The reader will have to verify the facts, law and content with the prevailing tax statutes and seek appropriate professional advice before acting on the basis of the above information.

In this policy, the investment risk in investment portfolio is borne by the policyholder. Investment in ULIPs is subject to risks associated with the capital markets. The policy holder is solely responsible for his/her decisions while investing in ULIPs. The views stated in this article is not to be construed as investment advice and readers are suggested to seek independent financial advice before making any investment decisions. For more details on risk factors, terms and conditions please read sales brochure & policy document (available on www.bajajallianzlife.com) carefully before concluding a sale.

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*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.

~Individual Death Claim Settlement Ratio for FY 2023-2024

1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions


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%%Above illustration is for Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V03) considering Male aged 25 years | Non-Smoker | Policy Term (PT)– 30 years | Premium Payment Term (PPT) – 30 years | Sum Assured opted is Rs. 1,00,00,000 | Online Channel | Standard Life | 1st Year Premium is Rs. 6,238. 2nd Year onwards premium is Rs. 6,659. Total Premium Paid is Rs. 1,99,349 | Medical Rates | Yearly Premium Payment Mode | Death benefit opted is lumpsum payout and monthly installments (Lumpsum Payout Percentage : 45, Income Payout Percentage : 55) | Premium shown above is exclusive of Goods & Service Tax/any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only. This is inclusive of all the discounts mentioned above.

##Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

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