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ULIP Plans : What are Unit Linked Insurance Plans?

A Unit Linked Insurance Plans (ULIP) is one of the preferred mode of investment to meet your dual needs of insurance cover and wealth creation, and to help you realize your life goals 

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What is ULIP Plan

What is a ULIP?

Achieving our life goals allows us to lead a more fulfilling life. Be it retiring early, going for long vacations or saving for your child’s higher education, our dreams and aspirations demand smart investments. Unit Linked Insurance Plans (ULIPs) have emerged as one of the preferred investment options that allow you to invest in a range of market-linked funds in keeping with your risk taking capability and life goals.

ULIPs come with the dual benefit of protection and wealth creation. You can choose your funds under a ULIP plan as per your long-term financial goals and allocate your money in equity and/or debt funds accordingly, thus giving you the freedom to invest in the equity market as per your financial goals and also protect your family from life’s untoward situations.

The new-age ULIP is a flexible investment tool. The option of buying a ULIP plan online further allows you to invest at your own pace. ULIPs also offer tax benefits making them a must-have in your investment portfolio. Today, ULIPs are the only equity-linked investment tool which continue to be tax-free, thus further enhancing the returns on your investment and helping you move closer to your life goals.

So, why wait….go ahead and invest in a ULIP plan best suited to help you achieve your life goal.

Here’s why ULIPs are a must-have in your investment portfolio:

Realise life goals with ULIPs

ULIPs are one of the preferred plan for long-term wealth creation. Be it purchasing your dream home, plan to start your venture or saving for the higher education for your child, ULIP plan empowers you to save in a systematic and disciplined way. The five-year lock-in feature further helps you to save with a long-term view on your investments.

Secure the dreams of your loved ones

A ULIP plan comes with the dual benefit of wealth creation along with life cover. While the investment takes you closer to your life goals, the life cover in a ULIP plan ensures that your family members continue their journey towards their dreams and aspirations in case something happens to you.

Benefit of market linked returns

ULIPs give you an option to invest in funds which are market linked. You get a choice of different funds like equity, debt, balanced etc under one ULIP policy. In this way, you can diversify your investment to ensure maximum returns. You can also check the past fund performance of all the funds on the company’s website which will further help you make informed investment decisions.

Flexibility to switch funds under the same policy

Through a ULIP plan you can invest in equity, debt or balanced funds depending on your risk appetite and life goals. That’s not all. You can leverage the Switching option in ULIPs to modify the asset allocation in keeping with your changing life situations and financial requirements. You can also avail the top-up opportunity to increase your ULIP premium amount to help you reach your life goals faster.

Enjoy tax benefits

With ULIP policies you get tax benefit under Section 80C of the Income Tax Act, 1961 on the premiums paid by you. What's more the maturity benefit under a ULIP plan is also exempt from taxation under Section 10 (10D) of the Income Tax Act, 1961. Additionally, ULIPs continue to be exempt from Long Term Capital Gain (LTCG) tax, while other equity instruments came into the ambit of LTCG as part of Union Budget 2018

Rewards for staying invested

Who doesn’t like some extra benefits? Some ULIP plans have added features like Loyalty Additions and Fund Boosters if you remain invested for a longer period. This enhances the customer’s corpus on maturity. Further there are some new-age ULIPs that are returning the mortality charges deducted during the policy term to the customers on maturity. This is yet another feature that rewards customers for staying invested till the policy tenure and enhance their maturity corpus.

The Income Tax Advantages of Unit Linked Insurance Plans (ULIPs)

  • ULIPs offer tax benefit at multiple levels. Under Section 80C of the Income Tax Act, 1961, you can avail deductions up to `1.5 lakhs against your taxable income for the premiums paid towards your ULIP policy.
  • The maturity benefit and death benefit amount is also exempted from Income Tax under Section 10(10D) of the Income Tax Act, 1961 subject to fulfilment of specified conditions.
  • Further, according to the 2018 Union budget, ULIPs are the only equity-linked investment product exempted from Long-Term Capital Gain (LTCG) Tax.
  • It also offers you hassle free and tax efficient switching from equity to debt and vice-versa. So, with Unit Linked Insurance Plans you can achieve your goals and save tax at the same time.
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Why Do I Need ULIP In My Investment Portfolio?

  • ULIPs can be aligned with your life goals
    ULIPs are one of the preferred investment tool to help you meet your long-term dreams and aspirations. You can opt for a ULIP plan based on your risk appetite, life circumstances, life goal and the time frame in which you want to achieve them.
  • Dual benefit of investment and protection
    A ULIP plan provides the winning combination of wealth creation and protection. Life cover means that your family is able to pursue their life goals even in your absence. On the other hand your investment portfolio ensures that you are able to accumulate the required corpus for achieving your life goals.
  • Flexibility to meet your unique requirements
    In a ULIP plan, you can choose between equity, debt or balanced funds or a combination of them depending on your risk appetite and the timeline of your life goals.
  • Switch funds as per your requirement
    You have the freedom to switch between equity or debt funds available under the ULIP plan opted by you, based on market performance, your risk appetite and your financial goals to optimize your return.
  • Lesser charges involved
    Charges in new-age ULIPs are spread over the tenure of the policy. Fund Management Charge (FMC) in ULIPs is capped at 1.35%, by the IRDA. Other charges like policy administration charge and premium allocation charge have reduced significantly over the years.
  • Tax savings
    You can avail deductions up to `.1.5 lakhs against your taxable income for the premiums paid towards a ULIP plan, under Section 80C of the Income Tax Act, 1961. The maturity benefit and death benefit amount is also exempted from Income Tax under Section 10(10D) of the Income Tax Act, 1961, subject to fulfilment of specified conditions. Further, ULIPs are the only equity-linked investment product exempted from Long-Term Capital Gain Tax (LTCG). It also offers you hassle free and tax efficient switching from equity to debt and vice-versa.

Here is how to choose the preferred ULIP

A key advantage of choosing a ULIP is that you can customize it as per your unique financial goals. The following factors will help you zero in on the preferred ULIP:

  • Go for a plan basis the past fund performance
    The primary reason for investment is to get the best possible return so that you can achieve your life goals and meet your financial commitments. So, before choosing a ULIP plan analyse its past fund performance. The past fund performance will give you an indication of the kind of returns you can expect from your investment, even though past performance is not indicative of future performance
  • Opt for more fund options for better asset allocation
    Opt for a ULIP plan which offers a wide range of funds for asset allocation. A diverse portfolio of funds helps you in better allocation of your assets and also brings down your risk. 
  • Less Charges = More Gain
    The new-age ULIPs with minimal charges will invest the maximum part of your assets, thus enhancing returns and helping you attain your financial goals.
  • More premium payment options for convenience
    A ULIP plan usually comes as a single premium plan, limited premium plan or a regular premium plan. You can opt for one that suits your requirement and financial situation.  
  • Opt for a plan with maximum free switches
    One of the significant benefits of a ULIP plan is the option of moving between debt or equity funds. Fund switching feature enables you to take advantage of market volatility by switching from one type of fund to another as per your needs and risk appetite. Go for a plan which allows a maximum number of free switches.

What is ULIP NAV?

NAV or Net Asset Value of a ULIP is the value of each unit of the fund on any given day.
The formula used to calculate the NAV is as follows:
NAV = (Value of Current Assets + Market Value of Investments Held) – (Value of Current Liabilities & Provisions) / Total number of outstanding units on date


You can visit the website of your insurance provider and use NAV to determine the history of the fund performance and also to compare it with other funds.

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