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Get Market-Linked Returns with Tax Benefits$




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


$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.

$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.

Know everything about Sum Assured in ULIP plans


How does ULIP work?


The unit-linked insurance plan (ULIP) combines the best of both worlds: insurance and investment. A portion of your premium goes toward your life insurance coverage, while the remainder is invested in equities, bonds, and other market linked instruments. But how can you figure out how much money your family will receive if you die during the policy term or when the policy matures? So, let's try to make things as simple as possible for you!


What is the sum assured in ULIP?


In the event of a misfortune, the insurer will pay the sum assured to the policyholder's nominee. As an example, suppose you purchased a policy that promises to pay Rs 10 lakh to your nominee/s in the event of a disaster. The sum assured is the amount that has been pledged. It's worth noting that the premium amount and the sum assured are inextricably linked. The greater the sum assured, the higher the premium paid.

Let's say Mukesh buys a ULIP plan with a sum assured of Rs 10 lakh and a 20-year premium of Rs 50,000. Assume that Rs 25,000 of the premium is spent on insurance and the remaining Rs 25,000 is invested in the stock market. As per the terms and conditions of the policy, the following scenarios could be included in the policy:

  • Only if Mukesh died within 5 years of the policy's start date would the nominee/s get the money promised.
  • If Mukesh died between the ages of 5 and 10 years after the insurance began, the nominees would get the sum assured or the fund value, whichever is greater. The fund value is the return on the money invested in the capital market.
  • If Mukesh died after 10 years from the start of the policy, the nominees would get both the fund value and the money promised.
  • Mukesh would receive the entire fund value if the policy was to be matured, but not the sum assured.

Let's have a look at the various payout scenarios:

  • Situation 1: If Mukesh dies within the first five years of purchasing the ULIP plan, his nominees will receive the sum insured of Rs 10 lakh.
  • Situation 2: If he dies between the ages of five and ten, his nominees will get the sum assured or the fund value. Whichever amount is higher would determine the outcome. The nominees will receive the latter amount if the fund value is rupees nine lakh and the sum assured is rupees ten lakh. If the fund value, in this example Rs 12 lakh, is greater than the sum assured, the nominees will receive the former.
  • Situation 3: If he dies after 10 years, the nominee/s will get the fund value as well as the sum assured.
  • Situation 4: Mukesh would receive the entire fund value if he lives the maturity period. He would not, however, receive the sum assured in this case.

It's worth noting that the fund's value is determined by the percentage of premium you choose to invest in the market. In addition, the payout terms fluctuate depending on the type of policy. As a result, you should verify ahead of time to see if the ULIP plan matches your needs.


How is sum assured different from fund value in ULIP?


Term insurance plans and ULIPs are not the same thing. In the event of the policyholder's death, the nominee/s get a specified value as the sum assured in a term insurance policy. The final value in a ULIP can be made up of the sum assured, the fund amount, or both of them.


Wrapping Up


You can make an informed decision before purchasing a ULIP now that you know the various payment matrix. Use the ULIP calculator to figure out how much your sum insured will be. Additionally, one may invest in ULIP Plans to earn market-linked returns while protecting the future of your loved ones.


#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.

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.