How to Compare Unit Linked Insurance Plans In India

Unit linked insurance plans (ULIP) are a combination of insurance policies that provide the benefits of life cover and investment returns. A portion of the invested sum is used towards offering life coverage to the insured, while the remainder is invested in debt, equity, or both, to build wealth over a period of time.

Types of ULIPs

Based on the purpose of these plans, they can be classified as:

·      Retirement plans, where the premium is paid during your employment period. The accumulated corpus is repaid as annuities post-retirement.

·      Wealth creation plans, with the primary goal being multiplication of your money over a period. These are recommended for people in their 20s and 30s to meet their future financial goals.

·      Children education policies that offer returns at specific periods during the span of your child’s educational life, to ensure unforeseen circumstances do not affect their prospects.

·      Health benefits plans that offer financial assistance to meet any unexpected medical needs.

Benefits

·      Transparency in charges, features, and structure

·      Flexibility, allowing switching between different funds

·      In-cover option

·      Premium can be paid at different intervals, based on the convenience of buyers

·      Different fund options to suit the various needs of both risk-takers and safe investors

·      Additional coverage available through riders

·      Tax benefits under section 80C, 80D, and 10 (10D) of the Income Tax act

Individuals must analyze and compare ULIP plans offered by various insurers to maximize their benefits. Some factors that must be considered while comparing different product offerings include:

·      Premium paying frequency – monthly, quarterly, bi-annual, or annual

·      Entry age – Minimum entry age can be from 0 years to 18 years; similarly, maximum entry age is generally 69 years

·      Premium paying option – Some insurers offer single premium ULIPs, where a lump sum is paid at once and returns are based on this amount, while other companies provide regular premium policies; for a ULIP comparison, determine your current and future financial status and needs to make an accurate choice

·      Maturity age – The minimum maturity age for most ULIPs is 18 years, with the maximum ranging between 65 years and 80 years

·      Sum assured – This varies from one insurance provider to another and individuals must do a detailed ULIP plan comparison to make the right decision, keeping in mind that this amount will also depend on your financial situation and premium paying capability

·      Policy terms – Reading the policy document to understand benefits, eligibility, features, surrender value, switching between funds, and other terms and conditions to avoid any surprises in the future

·      Minimum annualized premium – Certain policies allow buyers to not pay the premium at the end of a specified number of years and individuals should check this before availing the policy

ULIPs offer consumers the opportunity to obtain both coverage and returns, but you need to choose a policy carefully, not neglecting or focusing overwhelmingly on just one aspect of the policy.