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IN THIS POLICY, THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE BY THE POLICY HOLDER

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Get Market-Linked Returns with Tax Benefits$

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* T&C apply | BJAZ-WB-EC-04728/23

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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.

Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116.
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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.

Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116.

Benefits of ULIP

Unit Linked Insurance Plans, or ULIP, is a type of life insurance plan that comes with the unique benefit of investing in market-linked funds. Depending on your risk appetite and future financial goals, you can choose your investment funds, such as equity, debt, balanced funds or a mixture of all. This is what makes ULIPs a combination of investment and protection in one single plan.

 

Benefits of ULIPs

 

Let us take a look at the various benefits you can expect by investing in ULIPs:

1. Get the dual benefit

A ULIP can be a one-stop solution for people who plan to invest their money and are also looking for life cover. Along with coverage, you can invest your money in market-linked investment funds.

2. Control your investment

ULIPs offer you the option of choosing funds as per your preferences and risk appetite. You may decide your future financial goals and invest in a fund that suits your requirements. You also have the option of switching your funds whenever you want, subject to policy terms & conditions. This way, you can manage your investment to your benefit.

3. Distribute the risk

When it comes to the investment plan under ULIP, you can create a well-balanced portfolio. If you are a moderate risk-taker and wish to spread the risk, you may also choose to invest in a combination of equity and debt and thereby distribute your risk of investing across funds and is one of the crucial benefits of ULIPs.

4. Liquidating is easy

ULIPs offer a partial withdrawal feature. This means you can withdraw a specific part/percentage of your policy to meet your essential financial needs. Once the lock-in period is over, you can liquidate your ULIP investments, subject to the policy terms & conditions.

5. Disciplined way of long-term saving

People have different financial goals. For some, it may be their child's wedding or higher education and for others, it may be a trip to their favorite destinations, a business expansion, and so on. A ULIP may be a simple way to help in achieving such financial goals. It helps inculcate a habit of disciplined saving by investing in regular premiums, which can be monthly, quarterly, half-yearly or annual.

6. Get tax benefits1

ULIP comes with tax benefits as offered under the Income Tax Act of 1961 (the Act). Here are the details of the taxation benefits of ULIPs:

  • Under Section 80C5, the premium paid towards the ULIP is eligible for tax benefits. You can get a tax deduction of up to ₹1.5 lakhs on premiums up to 10% of the sum assured under old tax regime.
  • The maturity benefit under ULIP is not taxable² if policy is issued before 1 February 2021 subject to satisfaction of conditions mentioned under Section 10(10D) of the Income Tax Act.
  • For policies issued on or after 1st February 2021 if annual aggregate premium of policy is less than Rs. 2.50 lakhs, proceeds from such policy will be tax-free subject to satisfaction of conditions mentioned under Section 10(10D) of the Income Tax Act. If annual aggregate premium exceeds Rs. 2.50 lakhs, gain from such policy will be taxable as Capital Gain.
  • In case the policyholder passes away during the policy tenure, the nominee/family receives the death benefit. This amount is not taxable in the hands of the nominee³.
  • In case you switch between funds for investment under ULIP, there are no tax implications4.

 

Reasons for investing in ULIP

 

Here are some of the reasons ULIP investment can suit you:

  • ULIPS are a kind of life insurance policy, which offers you coverage for a specific term. In case of your unfortunate death during this time, your nominee will receive the death benefit.
  • One of the ULIP benefits is that it allows you to invest your premium in market-linked investment funds. Along with life cover, you can invest in the market-linked funds as well.
  • ULIPs come with an innate tax-saving component. You can enjoy tax benefits on the premium that you pay, the death benefits are tax-free in the hands of recipient and maturity benefits are tax-free, if you fulfil certain conditions mentioned under Section 10(10D) of the Income Tax Act are satisfied.

 

Benefits of investing early in ULIP

 

Simply put, there’s no perfect age to make an investment. However, to get optimum returns, you may try to start a ULIP as early as possible. ULIPs help you in building a corpus, so, the sooner you commit to the plan, the more likely you are to build a bigger one. As the premium frequency can be monthly, it allows you to save in smaller amounts and still build up a considerable corpus.

As life coverage is one of the major advantages of ULIPs, you also enjoy financial security against unfortunate mishaps. Apart from this, the inherent tax benefits also make investing early in ULIPs a wiser choice.

 

How ULIPs benefit individuals starting a family?

 

A ULIP generally works better when it is treated as a long-term investment. It may offer you a long list of advantages which make it quite suitable if you are planning to start a family soon. Let’s take a look at how a ULIP plan benefits individuals starting a family:

1. Build a corpus for new pursuits

Planning to get married soon, or a new baby is on the way? ULIPs may allow you to save towards your new pursuits.

2. Secure your child’s future

Having a baby may increase your responsibilities manifold. Securing their financial future seems manageable when you invest in the suitable ULIP. One of the other advantages of ULIP is the premium waiver benefit that waives off future premiums in case of the death of the insured.

 

Conclusion

 

From collecting money to buying a new house or planning a destination wedding, a ULIP is a suitable investment product that can help you with goal-based savings. Along with building a suitable corpus for your future needs, ULIP may offer that your family receives financial support in case of your unfortunate death. A ULIP may, thus, allows you to safeguard your as well as your family’s future financial needs.

As far as investments go, ULIPs offer you market-linked returns which come with associated risks. One can choose the investments depending on their risk appetite, which may make ULIPs a well-suited option for almost all kinds of investors. As the policyholder has control over the investments, it offers the much-needed flexibility that investors these days look for.

 

FAQs

 

1. What are the features of ULIP?

ULIPs come with several distinct features:

  • Along with life coverage, you invest in market-linked funds
  • With fund switching, you can switch your money in different funds
  • Once the 5-year lock-in is over, you can withdraw partially
  • Keep up with your changing goals with top-up premiums, where you invest additional sum into your ULIPs apart from the regular premium payment, as per policy terms & conditions.

2. What is the average lock-in period with ULIP?

Typically, ULIPs come with a lock-in period of 5 years. In case you wish to surrender your policy, you can do so at any time, subject to the terms & conditions prescribed in the policy2.

3. How does a ULIP provide a combination of insurance and investment?

ULIP is a type of life insurance plan that comes with the advantage of market-linked returns. In the dual-purpose plan, one part of the premium is used towards life cover, while the other is invested in market-linked funds.

4. How does a ULIP offer flexibility in terms of investment options?

While the terms of each plan may vary, flexibility is one of the prime ULIP benefits, which you can enjoy in the form of fund switching, top-ups, partial withdrawals, premium redirections, etc.

Sources:

1. https://cleartax.in/s/unit-linked-insurance-plan-taxation-rules

2. https://www.livemint.com/money/personal-finance/should-you-surrender-a-ulip-policy-during-the-lock-in-period-11665596522754.html

3. https://economictimes.indiatimes.com/wealth/insure/how-to-claim-death-benefits-out-of-unit-linked-insurance-plans/articleshow/44932964.cms

4. https://economictimes.indiatimes.com/markets/expert-view/can-you-ditch-mutual-funds-and-stocks-and-just-buy-ulips-vivek-jain-answers/articleshow/98168722.cms

5. https://cleartax.in/s/ulips-vs-mutual-funds

BJAZ-WEB-EC-04661/23

#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.

**Past performance is not indicative of future performance.

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 are not to be construed as investment advice and readers are suggested to seek independent financial advice before making any investment decisions.

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.

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.