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In this policy, the investment risk in the investment portfolio is borne by the policyholder.
Kotak e-Invest
Features
Ref. No. KLI/22-23/E-BB/492
Unit Linked Insurance Plans (ULIPs) offer a unique combination of life insurance protection and market-linked investment growth, making them a powerful financial tool. With features like flexibility in fund selection, transparency in charges, tax benefits, and the ability to build long-term wealth, ULIPs cater to diverse financial goals. Whether you are looking to secure your family’s future, save for major milestones, or grow your wealth systematically, ULIPs provide a disciplined approach to financial planning. Let’s explore how this dual-purpose investment can help you achieve financial security and prosperity!
Unit Linked Insurance Plans, commonly known as ULIPs, are a combination of life insurance and investment. In this, a part of the ULIP premium paid goes towards providing insurance coverage, and the remaining amount is invested in various market-linked funds.
ULIPs are more than just your usual investment plans. They have gained popularity in recent years due to their unique features and advantages. Below are the top 10 ULIP benefits that will help you understand their significance further:
One of the standout benefits of ULIP is its flexibility in investment options. ULIPs let you choose from a diverse range of investment funds, including equity funds, debt funds, and balanced funds, based on your risk appetite and financial goals. This flexibility allows you to tailor your investment strategy according to changing market dynamics and personal preferences.
For example, imagine you are a young professional keen on higher returns. You can choose equity-heavy funds. On the other hand, someone nearing retirement can switch to debt funds for stability. Also, ULIPs allow you to switch between funds or allocation strategies and realign your portfolio in response to market trends or life stage requirements.
Transparency is important in financial planning, and ULIPs excel in this aspect. Unlike traditional insurance products, where the allocation of premiums may not be clearly outlined, ULIPs provide you with comprehensive information, be it ULIP renewal charges, premium allocation fees, or fund management fees. Regular statements and updates are provided, giving you full visibility into the status of your investments and the underlying assets.
For instance, if you pay a ₹50,000 annual premium, you will know exactly how much goes toward investment, insurance, and administrative costs. This makes it extremely easy to track where your money is going!
ULIPs come with attractive tax benefits of ULIPs, making them a tax-efficient investment option. The premiums paid towards ULIPs are eligible for tax deduction under Section 80C of the Income Tax Act up to a specified limit. Additionally, the maturity proceeds or death benefits of ULIPs are generally tax-free under Section 10(10D) of the Income Tax Act, subject to certain conditions.
These ULIP tax benefits not only help reduce tax liability but also enhance the overall returns generated from ULIPs, making them an appealing choice for tax-conscious investors.
You may, at some point, need to access your funds urgently due to unforeseen expenses. A ULIP plan allows you to withdraw a portion of your accumulated fund value after a 5-year lock-in period in case of financial emergencies. This feature provides a safety net and ensures that you have access to your funds when needed without having to surrender the entire policy.
However, it is important to note that partial withdrawals may be subject to certain terms and conditions, including a minimum lock-in period and applicable charges in ULIP.
One of the fundamental benefits of ULIPs is the provision of a death benefit. ULIPs ensure that your family is financially secure, even in your absence. The death benefit paid to your loved ones is usually the higher of:
For instance, if your policy has a sum assured of ₹10 lakh and the fund value is ₹12 lakh, your family will receive ₹12 lakh in case of your untimely demise. This dual-purpose feature ensures that your loved ones are financially protected and can maintain their standard of living even when you are gone.
ULIPs encourage disciplined and regular savings by requiring you to pay premiums at predefined intervals. This disciplined approach to saving instills a sense of financial responsibility and helps you inculcate a habit of regular savings, which is crucial for achieving long-term financial goals.
For example, instead of spending ₹5,000 monthly on impulsive buys, you can invest that amount in a ULIP. Over 10-15 years, this disciplined saving can translate into a significant corpus for your future needs.
ULIPs offer the benefit of risk diversification by investing in a diversified portfolio of assets such as equities, debt instruments, and other market-linked securities. By spreading investments across various asset classes, ULIPs help you mitigate the risk associated with individual securities and market volatility.
For example, if the stock market dips, the debt fund portion in your ULIP acts as a cushion, minimizing potential losses. This risk diversification feature makes ULIPs a smart choice for investors with varying financial goals.
Whether you are planning for your child’s education, purchasing a house, or building a retirement corpus, ULIPs offer customized solutions to meet various financial goals. You can choose investment strategies and fund options based on your specific financial objectives, risk tolerance, and investment horizon, thereby aligning your ULIP investments with your long-term financial aspirations.
ULIPs are an excellent tool for long-term wealth creation, combining disciplined investing with market-linked growth. By leveraging the power of compounding, investors can significantly grow their wealth over time, as reinvested returns generate further gains. The longer you stay invested, the greater the potential for capital appreciation. Additionally, ULIPs offer the flexibility to switch between equity, debt, and balanced funds, allowing you to optimize your portfolio based on market trends and risk appetite. Unlike traditional savings plans, ULIPs provide transparency in fund performance, ensuring you have full control over your wealth-building journey.
For instance, an annual investment of ₹1 lakh in a ULIP over 15 years, assuming a moderate market return, could grow substantially—helping you achieve major financial goals like buying a house, funding your child’s education, or planning for retirement. Staying committed to a ULIP plan not only helps in wealth accumulation but also secures financial stability for the future.
Why buy separate insurance and investment products when ULIPs give you both? One of the unique features of ULIPs is their ability to provide dual benefits of ULIPs, including insurance coverage and investment growth within a single integrated plan. A portion of the premium paid towards ULIPs goes towards providing life cover, ensuring financial protection for your family, while the remaining amount is invested in market-linked funds, offering the potential for wealth creation over the long term.
Who Should Invest in ULIPs?
Young professionals in their 20s and 30s looking for high-growth investment options can benefit from ULIPs. With a long investment horizon, they can take advantage of market-linked returns while also securing life insurance coverage.
Parents who want a financial plan that ensures both wealth accumulation and protection can consider ULIPs. They can use ULIPs to save for their child’s education or future needs while ensuring financial security through life cover.
Individuals in their 40s who want a balance between wealth creation and stability can opt for ULIPs. They can gradually shift their investments from equity to debt as they get closer to their financial goals, such as retirement or a child’s higher education.
Retirees who prefer stable and low-risk investment avenues can use ULIPs to park their savings in debt funds. The flexibility of partial withdrawals ensures they have financial support for emergencies while still enjoying tax benefits.
ULIPs bring together the best of both worlds by offering a unique mix of insurance and investment. With key ULIP benefits like flexibility, transparency, tax savings, and long-term wealth creation, they are a versatile financial tool. However, it is essential to understand the charges, fees, and risks before investing. Also, it is crucial to tailor your portfolio to align with your financial goals and risk tolerance.
If you are seeking a plan that combines protection with growth, a unit linked health insurance plan could be the perfect solution for your financial aspirations.
1
ULIPs offer dual benefits of insurance and investment in a single plan. They provide financial protection through life cover and potential wealth creation through investment in market-linked funds.
2
ULIPs offer life insurance coverage along with investment opportunities, while mutual funds solely focus on investment. Tax ULIP benefits exist under certain conditions, which may not be available with mutual funds.
3
ULIPs offer flexibility in choosing investment options and adjusting fund allocations according to changing market conditions. They provide tax advantages of ULIP plans on premiums paid and maturity proceeds, making them a tax-efficient investment avenue.
4
ULIPs allow you to choose from various fund options, including equity, debt, or balanced funds, based on your risk appetite and investment goals. You can also switch between different fund options or allocation strategies based on your changing financial needs and market outlook.
5
Premiums paid towards ULIPs are eligible for tax deduction under Section 80C of the Income Tax Act, subject to specified limits. Maturity proceeds or death benefits received from ULIPs are generally tax-free under Section 10(10D) of the Income Tax Act, subject to certain conditions.
6
Yes, ULIPs are ideal for long-term financial goals as they provide a combination of insurance coverage and investment growth. You can customize your ULIP investments to align with specific financial objectives, such as retirement planning or education funding, and benefit from the potential wealth accumulation over time.
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.
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.
Kotak e-Invest
Features
Ref. No. KLI/22-23/E-BB/521
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
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