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Can You Invest in Both Term Insurance and ULIP?

If you invest in ULIPs and Term Insurance, you will be eligible for dual tax benefits while earning above-market returns and having a guaranteed sum assured exclusively for your family's well-being.

  • 11,484 Views | Updated on: Jan 10, 2024

The need of the hour is for investment solutions to help you build a big asset portfolio and boost your wealth. The uncertainty that plagued us throughout the COVID-19 pandemic has reasserted the need to protect your loved ones’ future while making wise investment decisions that will support you and your family in times of need with a financial cushion to fall back on.

The unique combination of ULIP and Term Insurance is the way to go if you want to invest in a variety of financial investment products that help you build wealth while also providing a stable financial foundation for your loved ones.

Why invest in ULIP and Term Insurance?

The answer to this question is pretty straightforward! From all angles, this combination ensures excellent returns and financial stability.

If you invest in ULIPs and Term Insurance, you will be eligible for dual tax benefits while earning above-market returns and having a guaranteed sum assured exclusively for your family’s well-being.

  • Unit Linked Insurance Plan (ULIP)

Unit-linked insurance policy combines life insurance and investment products offered by insurance companies. A tiny percentage of the payment goes for insurance, with the rest going into one of many fund alternatives debt, money market, or equity-oriented funds that you choose. The fund’s worth will be used to pay maturity awards. If the insured dies within the policy term, the beneficiary will receive the sum covered or the fund value, whichever one is larger.

  • Term Insurance

Term insurance, which only provides full life insurance, is possibly the most basic and straightforward. Term insurance offers the best protection for the least amount of money. In this case, coverage is provided for a set period. If the insured individual dies within the period, the beneficiary will be paid the sum assured amount but at the end of the policy’s term.

FACTOR

ULIP

TERM INSURANCE

Purpose

ULIPs provide you with the best of both worlds: insurance and market rewards.

Only insurance coverage is provided by term insurance policies.

Returns

ULIPs are a type of stock-market-linked investment. As a result, the sort of funds chosen for investment and market circumstances impact results.

Term insurance contracts mostly only payout in the event of death.

Lock-In

ULIP plans have a mandatory 5-year lock-in period.

Term insurance plans have no lock-in periods.

Tenure

To avail maximum benefits ULIP plans should be held for 10-15 years.

Term plan tenure is decided at the time of policy purchase.

Tax Benefits

ULIP premiums are allowed for an exemption under Section 80C up to a total of ₹1.5 lakh per year. Furthermore, under Section 10 (10D) of the Income Tax Act, the amount you get at maturity is tax-free.

You can claim a tax deduction of up to ₹1.5 lakh per year on premiums paid per Section 80C. The death benefit of your term insurance plan is excluded from income tax per Section 10 (10D).

To sum up, after carefully evaluating all the reasons of investing in ULIP and Term Insurance, we can easily conclude that the combination of ULIP and Term Insurance beautifully complements each other and your financial goals while creating a unique synergy between financial investment tools, making it the go-to choice to invest in ULIP and Term Plan.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

In this policy, the investment risk in the investment portfolio is borne by the policyholder.

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