Is It Advisable To Have ULIP Along With A Term Plan?

ULIP Along With A Term Plan

What motivates you to purchase life insurance?

If you were to ask yourself this question, financial stability might be what comes to mind first. A life insurance policy protects against the possibility of an early demise and gives your family financial stability.

What about achieving investment returns correlated to the market?

Consider investing in ULIP plans if you also desire market-linked returns on your investments. In addition to enabling insurance coverage, ULIPs also assist in generating market-linked returns on your investment. As a result, you can benefit from the benefits of both plans if you understand what is ULIP along with term insurance plans. Let’s examine how.

Advantages of term insurance:

The advantages of a term insurance policy are as follows:

1. Extensive coverage at reasonable prices

A term insurance plan is designed to protect your loved ones’ financial future in the event of your untimely passing. It is a protection-focused policy with reasonable premium costs. You can choose a sum assured large enough to cover your family’s financial demands because the premiums are inexpensive.

2. Extensive coverage via riders

Term life insurance plans provide you with the option to select from a number of riders that offer extra coverage benefits for a small additional fee. Many plans include built-in and extra riders that let you protect your finances from a variety of contingencies.

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3. Financial security

You may ensure that your family won’t suffer financially if you purchase term life insurance. The plan’s death benefit would cover your family’s goals and expenses related to a comfortable lifestyle. Additionally, if you have taken out a loan or other obligation, you may utilise the plan’s benefit to pay off your outstanding debts so that your family is not responsible for them.

Benefits of ULIPs

The following benefits are provided by ULIPs:

1. Market-linked returns

Your premium is invested in market-linked securities by ULIPs. Under ULIPs, a variety of funds are accessible. In accordance with your investment philosophy and risk tolerance, you may select the funds. These funds make investments in capital market instruments that may offer rewards at risk as the market develops. An estimate of your market-linked returns can be obtained using a ULIP calculator.

2. Flexibility

Understanding what is ULIP creates an adaptable strategy that gives you a choice to manage your investments. You have a choice over the investment funds and the quantity of premium you wish to make. After the first five policy years, ULIPs permit partial withdrawals if you require money during the policy’s term. You can use the switching function to alter the investment funds if you want to. Through top-up premiums, you can also make additional premium investments.

3. Attainment of certain financial objectives

There are various ULIP options on the market that might assist you in reaching your various financial objectives. Consider ULIP-based child insurance plans if you want to save money for your child’s future. You could choose pension ULIPs when making retirement plans. You can think about investing in the fundamental ULIPs if you wish to build a corpus for other objectives.

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4. Tax benefits

Tax exemption on the death benefit and tax deduction on premium payments are features of pure-term plans. The amount you get at policy maturity if you choose a term plan with a return of premium benefit is tax-free under Section 10(10D) of the Income Tax Act of 1961, provided that the conditions outlined therein are satisfied. ULIPs offer tax-free maturity benefits in addition to a tax deduction of 80C on the premium and a tax-free death benefit. Subject to meeting the requirements outlined in Section 10(10D) of the Income Tax Act of 1961, your maturity benefit is permitted as a tax-free income. The maturity benefit will only be tax-free if your annual aggregate premium is less than or equal to Rs. 2.5 lakhs if you purchased the ULIP on or after February 1, 2021.

Along with the tax benefit associated with the maturity benefit, switching, or changing the investment funds, also results in tax savings. Fund Switching is a tax-free benefit that enables you to switch between funds without having to pay taxes on the change. The tax benefits mentioned in the article may not apply if you opt for the new tax regime since many tax exemptions and deductions have been scrapped within the new regime. They are also subject to any changes in the law.

Benefits of purchasing a ULIP and a term plan:

You can enjoy the aforementioned advantages of both the term and ULIP plans if you purchase them. While the ULIP would assist you in building a corpus through market-linked returns on investments, the term plan would offer comprehensive coverage at affordable prices.

Therefore, think about creating a comprehensive portfolio for yourself that includes both term insurance and ULIPs. The advantages of each plan may be enjoyed separately, which could lead to financial independence.

Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.

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