In ULIP, the investment risk in the investment portfolio is borne by the policyholder
Unit-Linked Insurance Plans (ULIP)
Unit-Linked Insurance Plan (ULIPs) are a type of life insurance plan that offers you the chance to grow your money. Unit Linked Insurance Plan provide long-term financial protection to your family with the coverage of life. As a matter of fact, these plans are extremely popular among individuals because they help in securing you financial future as well as long-term capital growth....ULIPs provide a medium for the creation of funds and a tax benefit to the owner of the policy. They also create a wide, yet customizing road to financial planning and protection.Read more
Amit Rajeis 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 Pimplehas 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
Last updated onOct 22, 2024
What is ULIP (Unit Linked Insurance Plan)?
ULIP is the short form for Unit Linked Insurance Plan. It is a kind of insurance product providing a cover for one's life along with offering an investment opportunity under one single plan. Unlike traditional insurance plans based upon providing a cover for life, ULIP plans pool some amount of the premium towards insurance and invest the rest in market-linked funds.
Why do you Need ULIP Plans?
If you are one of those who are seeking some insurance and investment benefits in tandem, you can take benefit from the ULIP plans. It gives the advantages of insurance coupled with investment growth. These plans operate such that they invest a percentage of your premium in wealth-generating market-linked tools and the remaining premium amount is used to create the mode of insurance. Let's take a glance at other benefits of these plans.
Dual Benefit of Insurance and Investment
ULIP Plan offer the benefits of insurance protection along with growth in investment under one scheme. As mentioned above a part of the premium paid on unit-linked insurance plans is used to provide life cover, thus ensuring that the family members are taken care of in case of some unfortunate incident. Apart from this, the rest of the amount is put into equity, debt, or a mix of both, through which money will grow over a period of time.
Flexibility in Investment Options
The flexibility the unit-linked insurance plans offer lies in their investment options. You can choose from various fund options where you select the magnitude of risk with potential returns based on your risk tolerance level. Whether you like the stability of debt funds or equity funds for growth, ULIPs allow you to change your investment strategy according to your choice of investment.
Transparency and Control
Unlike traditional plans, where there is no investment component explicitly explained, unit-linked insurance plans are transparent about where your money gets invested. You can keep an eye on how investments have been performing and can alter your composition of funds to your requirements. This allows you to control your returns to your best advantage and to manage risks effectively.
Tax Benefits
There are several tax benefits that ULIP plans provide and are thereby tax-efficient investment instruments. The premium paid to this investment is allowed tax deduction under Section 80C of the Income Tax Act up to certain limits. In addition, the maturity proceeds and death benefits received from ULIP schemes are considered non-taxable under Section 10(10D) of the Income Tax Act subject to certain conditions. For example, an annual investment in ULIP Plans of ₹1.2 lakh can provide you with a tax deduction of up to ₹1.2 lakh under Section 80C of the Income Tax Act. Consider your taxable income to be ₹10 lakh, investments like this can bring the taxable income down to ₹8.8 lakh. In addition, if the ULIP matures after 10 years with a sum assured of ₹15 lakh, and your annual premium is lesser than 10% of the amount, then the maturity proceeds are absolutely tax-free under Section 10(10D). This means both your investment and the returns are shielded from taxes, providing dual benefits.
Long-term Wealth Creation
Unit-linked insurance plans are the best method to save for long-term wealth creation. In fact, these plans encourage disciplined investment over a very long time. In case you invest here for a pretty long period of time, you can find how amazing the power of compounding is. It can be so applied to yield high returns over the period. Be it saving for a child's education, your retirement, or any other financial goal, ULIPs represent a systematic way towards wealth accumulation.
Cost-effective Investment Option
As digitization and online platforms have increased, the cost of ULIP schemes has reduced. As an investment, they can be called a cost-effective alternative to traditional insurance plans. Administrative and distribution charges are much higher in traditional insurance plans, but in case of unit-linked insurance plans, competitive charges are offered, and returns on your investment get maximized. They also allow switching between funds without extra charges as well as flexibility at minimal costs.
ULIP Plans from Kotak Life Insurance
Kotak Life offers several ULIP plans that best meet your requirements. You can understand the benefits, features, and investment strategies associated with these ULIP plans. The following are our top recommendations.
- Return of Mortality Charges
- Enhanced Protection with riders
- Multiple Plan Options
- Zero Premium Allocation Charges
- Tax Savings
- High Sum assured multiple for higher life cover
- 2X return of premium allocation charges
- 3X return of mortality charges
- Loyalty additions
- Flexibility to choose a short or long premium payment term
- Multiple investment strategies
- Kotak Invest Maxima
- Kotak Single Invest Advantage Plan
- Kotak Platinum
- Kotak Wealth Optima Plan
- Zero premium allocation charges
- Choice of portfolio strategies and fund types
- A variety of policy term and premium payment terms are available.
- Partial withdrawals
- Rewards on long-term investment
- One-time investment
- Choice of 3 investment strategies
- Loyalty Additions to give a boost to your wealth
- Choice of Three fund-management strategies
- Survival units to enhance your fund value
- Limited premium payment term
- Choice of two investment strategies
- Enhances fund growth through Yearly Additions post Lock-in period
- Options to be covered till 99 years
- Boosts long term savings through Wealth Boosters
What are some key features of ULIPs?
Unit Linked Insurance Plans are an alternative to traditional insurance policies, wherein premiums of a policyholder are invested in a fund of the investor's choice, that could be equity, debt, or a mix of both.
Allocation of Premium
ULIP plans enables you to choose investment channels according to your risk capacity. You may go aggressive with equities, cautious with the debt funds, or balanced funds for getting the best of both worlds. Your premiums can also be allocated towards funds of your preference, depending on your risk appetite.
Switching of Funds
You can move or switch from one fund to another if the performance of your chosen funds does not go according to expectations or market conditions have changed. And thus, you can be sure that your returns are well-balanced and can beat the volitality of the market. Assume that you invested ₹5 lakh in your ULIP more focused towards equity funds in the hope of higher returns. Now your equity fund begins to perform poorly due to volatility in the market. You may shift your money from an equity fund to a debt fund, which may minimize further loss that may happen during volatile equity markets. Thus, you would be protected from the risks arising from the volatility of the equity market but still be invested with your capital intact. You may later choose to then switch back to equity at a later stage when the market stabilizes in order to become consistent with your goals while allowing your returns to balance out.
Withdrawal Options
You are eligible to withdraw a part of the amount from your policy after the five years lock-in period, as required. The insurance company decides how much amount you can withdraw and also the number of withdrawals you can make.
Additional Top-ups
You can pay some extra money over and above your existing premium based on Top-Up Premiums that will give you an additional Top-Up Sum Assured.
Tax Savings
ULIP differs from all otherlife insuranceinstruments since it enables you to invest and also protect the financial future of your loved ones all with one single plan. As being a product of life insurance, you get the benefit of tax as well.
Diversify your
investment portfolio with
Kotak e-Invest.
Importance of ULIP in Personal Finance
ULIP is a versatile tool to secure your financial future that has the benefits of both insurance and investment. Let's understand the importance of ULIP Plans in personal finance.
Dual Benefit of Insurance and Investment
One of the mainadvantages of ULIPschemes is that they add insurance coverage to an investment in a very different way compared to all traditional insurance products. They not only provide protection and life cover but also grow your investments simultaneously.
Flexibility and Control
The best ULIP plans give you an extremely high degree of flexibility and control in your investments. ULIP plans are ideal when you have financial goals and risk appetite determined. It allows you to switch between various investments in case of market fluctuations or if your preferences change.
Long-Term Wealth Creation
ULIP plans are the best products suited for long-term investment horizons. As much as they allow you to stay invested for a long period of time, you can take advantage of compound interest to grow your wealth at a considerable rate. They can be very helpful in meeting long-term life goals such as buying a house, funding education, or retirement plans.
Tax Efficiency
Premiums paid for ULIP plans are tax deductible, as under Section 80C of the Income Tax Act, 1961, up to certain limits. Further, the maturity proceeds and the death benefit received from ULIP plans fall in the category of income that is generally exempt underSection 10(10D), subject to certain new tax rules.
Customization and Riders
ULIP plans allow customization according to specific needs. For example, you can opt for additional riders such as permanent disability benefit and accidental death benefits. This would increase the protection offered by the ULIP Plan. The riders provide an added layer of security and can be customized according to the specific risk and concern.
Enjoy safe, market-linked returns with Kotak e-Invest!
Enhance Your Personal FinanceWhat is a ULIP Calculator?
A ULIP calculator is an online tool provided by insurance companies. Through these calculators, one can get an idea of the returns and premiums these ULIP plans offer for various investment scenarios. The best ULIP plans give an array of options with various features and benefits attached to each. It can become very tough to pick just one. A ULIP calculator really helps in such scenarios.
Investment Amount(Monthly)
Investment Tenure(Years)
Interest Rate(P.A.)
Sensex has given 10% return from 2010 - 2020
Existing Investment(optional)
Periodic Investment(optional)
Calculating ULIP Returns Using the Power of Compounding
Let us now see the power of compounding in different case scenarios:
- Monthly Contribution
- ₹2,40,000
- ₹1,25,000
- ₹82,000
- ₹67,000
- ₹42,000
- ₹30,000
- ₹15,000
- Investment Period
- 10 Years
- 10 Years
- 15 Years
- 20 Years
- 15 Years
- 20 Years
- 30 Years
- Estimated Returns at 4%
- ₹3,53,39,953
- ₹1,84,06,226
- ₹2,01,79,420
- ₹2,45,73,900
- ₹1,03,35,801
- ₹1,10,03,239
- ₹1,04,10,741
- Estimated Returns at 8%
- ₹4,39,07,048
- ₹2,28,68,254
- ₹2,83,75,134
- ₹3,94,64,368
- ₹1,45,33,605
- ₹1,76,70,612
- ₹2,23,55,392
How Does a ULIP Work?
ULIP operates at the crossroads of insurance and investment, allowing policyholders to navigate the dual objectives of securing their future and optimizing their financial growth.
Choose the level of life insurance, premium payment option, premium amount, and policy duration to match your financial security and savings goals.
Your nominee will receive the sum assured in the event of an unfortunate event during the policy term to realize their ambitions.
Depending on your selections, the remainder of your premium is invested in the stock market using equity, debt, or hybrid funds.
Equity invests your funds in stocks. Debt funds invest your money in safer instruments like bonds.
Your choice of an upfront, lump sum payment or recurring payments on an annual, half-yearly, quarterly or monthly basis.
Your life insurance is paid for in part with your premium.
Do not wait; start growing your wealth with Kotak e-Invest.
Take the first stepWhat are the Benefits of ULIPs?
Building a corpus that can help ensure a safe and secure future for your loved ones and you is an important aspect, and the Unit Linked Insurance Plans can surely enable you to do that. They have several advantages, as you will learn from the following:
Flexibility to Choose a Cover Amount
Unit Linked Insurance Policies permit you to choose whatever amount of Life Cover you want. In most ULIP schemes, a minimum life cover has to be provided equal to 7 times your yearly premium. However, depending on the plan you choose you can opt to buy a life cover to the extent of up to 25 times of your yearly premium. For example, if you are investing ₹1 lakh every year in a ULIP, you can avail yourself of the choice of life cover from ₹7 lakh (7 times your premium) to as high as ₹25 lakh (25 times your premium), based on your plan. Consider you opt for a life cover of ₹15 lakh (15 times your premium). Then, if in case an untimely death occurs during the insured term of the policy, your family will receive ₹15 lakh. This flexibility allows you to adjust the life cover based on your financial protection needs and future goals.
Flexibility to Choose the Type of Investment
One of the most convincing features of a ULIP is that you are free to choose the type of investment you desire. This flexibility allows investors to tailor their ULIP plans according to their individual needs.
Financial goal plans
ULIP plans are specially designed to help you meet your financial objectives whether it's increasing your wealth,planning for your retirement, or preparing for your child's future education plans.
Maturity Benefit
When your policy matures, you receive the fund value that has accumulated, which is the result of your paid premiums and market-linked returns.
Death Benefit
ULIP plans offer a comprehensive death benefit that guarantees your family's financial well-being in the event of your untimely demise. Your nominees will receive the proceeds basis the terms and conditions of your ULIP policy.
Loyalty Additions
Loyalty additions in ULIP plans are some extra units added on towards your policy at specific intervals and rewards you for staying invested over the years. This not only enhances the growth potential of your investment but also shows how committed an insurer is toward your financial success.
Wealth Boosters
As you continue along on the ULIP journey, you will then come across the wealth boosters. These are additional units allocated to your policy once you have reached some specific milestones such as completion of five years or more of the policy term.
Dynamic Fund Allocation
ULIP plans have dynamic fund allocation and hence switching to any fund that is offered by the insurer, such as equity, debt, or balanced funds is quite easy. This flexibility to switch funds helps maximize returns while simultaneously managing risk with changing market dynamics.
Tax Advantages
At different stages of your life insurance policy, you may be eligible for tax benefits as per the Income Tax Act of 1961.
- Advantage of Entry:Under Section 80C, you gain tax savings on your premium payments.
- Advantage of Exit:You can also get a tax-exempt Maturity Benefit if you meet the Section 10 (10D) requirements.
Invest in your dreams with Kotak Life Insurance ULIP plans.
Buy NowWhich Investor Class Are ULIPs Most Suited for?
Unit Linked Insurance Plans are the most popular investment among people looking to grow their wealth and also get insurance benefits is ULIP. As investors, people have different tolerances for the risks faced in investments. ULIP plans thus offer something for every class of investors. Here are some popular investor classes that can benefit from ULPs:
Individuals Who Want to Track their Investments Closely
ULIP plans have options for every individual irrespective of whatever the risk tolerance is for an individual. It offers stable returns by investing in different options. It also offers various options to adjust your investment amount if you think you're ready to invest in high-risk investments. ULIP plans have ended up becoming a favorite investment tool for many individuals due to this feature.
Individuals with a Medium to Long Term Investment Horizon
As all know, styling invested for a more considerable period of time will get maximum benefits out of any investment. From this angle, ULIP schemes are designed as long-term investments and therefore yield good returns. If you stay long enough in your ULIP investments, you can take advantage of compounding and maximize your returns.
Individuals with Varying Risk Profiles
ULIP has variations that will suit every risk-taker. While it allows you to have stable returns through a reliable stake, it also has variations in adjusting your investment if you feel ready for investing your money with plans having higher risk. This is the reason why ULIP plans are popularly chosen as an investment among people.
Investors Across All Stages of Life
There is no right age to invest in ULIP plans. ULIP is appropriate for those investors who are near retirement as well as for young investors. It benefits first-time investors by offering long-term investing opportunities for wealth accumulation purposes. For people looking for retirement solutions, the lock-in period offered by ULIP helps save money for a period of five years and reaps rewarding returns after the lock-in period is over. They can even stretch the investment period if their budget and time permits.
Types of ULIP Charges
Any financial product involves some charges that the policyholder should be well aware of. Let us look at some of the charges related to ULIP plans:
Policy Administration Charges
Policy administration charges are charges for cost recovery incidental to the administration of the ULIP. The charge will, therefore, reflect, as made on issuance, servicing, and maintenance of policy records. These charges are deducted on a periodic basis, such as monthly, and may vary across different ULIP products and insurers.
Fund Management Charges
You have to pay fund management charges for investing in ULIP. The fund manager collects charges because he manages your portfolio which includes researching and analyzing your portfolio for making the right changes to get maximum benefit.
Switching Funds Charges
The investment funds in ULIP are switchable. However, after some specified free switching chances, the switching service is chargeable. Charges differ from insurer to insurer. The flexibility, in any case, keeps the costs in favor of the investors and thus adds more value to the investment, if invested through ULIP.
Surrender Charges
If he or she decides to cancel the ULIP policy before it matures or the completion of the lock-in period, they will have to pay a certain amount to the insurer. Like in the case of switching charges, these charges also change with different insurers and depend on how long the policy has been in operation.
Mortality Charges
The insurance company deducts mortality charges so that the risk of having to pay out the death benefit in case you die during the policy term is covered. These charges will depend on the sum assured, gender, age, and health status. The higher sum assured amount you choose will correspondingly increase your mortality charge.
Premium Allocation Charges
The insurer charges premium allocation charges for allocating to the chosen investment funds. These cover the costs of sales and distribution expenses, agent commission, and underwriting costs. Such charges get deducted from your premium amount and hence reduce the allocated premium.
Partial Withdrawal Charges
Charges on partial withdrawal are meant for investors who withdraw from their ULIP policy before the end of the lock-in period. In cases of partial withdrawal exceeding the free withdrawal standard in a ULIP policy, the company may charge some fee. The costs for partial withdrawals differ amongst ULIP products and insurers.
Lock-in Period of ULIP
The lock-in period in a ULIP refers to the minimum time period for which the policyholder is required to keep invested in the ULIP before he can partially withdraw or fully surrender his policy. During this lock-in period, a policyholder is not allowed to withdraw his invested funds, and the insurer may levy penalties or other charges for premature withdrawal or surrender of the policy.
Duration of the Lock-in Period
The Insurance Regulatory and Development Authority of India (IRDAI) requires a minimum lock-in period of five years for ULIP plans in India. No complete or partial withdrawal of funds invested is allowed during the first five years from the date of commencement of your policy. After the lock-in period of five years, partial withdrawals are allowed in some ULIP plans. These withdrawals too might have conditions attached, such as minimum withdrawal limits or charges.
Who Should Invest in ULIPs?
As investors, you would like to get the best possible benefit from your ULIP plans. Let us look at the type of investors that can take full advantage of the benefits of ULIP plans:
Long-term Investors
Individuals willing to invest for longer periods of time would be able to get maximum benefits. Longer investment periods allow enough time for one's investments to be able to achieve excellent returns because of the power of compounding.
Those Seeking Insurance and Investment Combined
The main feature of ULIP plans is that a single policy offers you the benefits of investment and insurance. It can prove to be the best solution for those who do not want to purchase separate policies but want the benefits of both.
Goal-oriented Investors
People who have clear goals can maximize their returns with ULIP plans through planned investments. ULIP plans can also be customized according to specific requirements. They are quite flexible with investment options and fund switching.
Those Willing to Bear Market Risk
ULIP, being a market-oriented investment tool are subject to market risks. Such tools can give excellent returns if a person is willing to take risks.
Tax-savvy Investors
If you are looking for tax savings and investments, ULIPs are for you. As per the Income Tax Act, the premiums paid are subject to tax deductions up to ₹1.5 lakh under Section 80C, and the maturity proceeds are tax-free under Section 10(10D).
How to Maximize ULIP Returns?
ULIPs are preferred because of their flexible investment option. They integrate insurance coverage with investment options, thus offering excellent long-term returns, and this calls for strategic advantages. Here are five key strategies to make the most of your investments in ULIPs.
Start Early
There are several ways to maximize the returns from ULIP, but starting as early as possible is one of the best techniques to accelerate the returns. Time works very significantly in ULIP returns. Your investment generates return in the form of interest on the original amount and also on the accrued gains over time. When you invest early, you provide sufficient growth period for your investments, which helps build the overall returns. Even minute contributions made early on can add up to increase the ULIP amount in the long term.
Regular Investment is a Must
One of the most critical factors in investing in ULIP is regularity. To get the maximum benefit from your plan, investing in it regularly is very important. Invest in a systematic manner and stick to it. You must invest in the plan irrespective of the fluctuations in the market. If you do so you would be able to benefit from the concept of rupee-cost averaging and, thus, enjoy better returns from the ULIP.
Use Various Fund Options to Your Advantage
The investor should maximize his returns by diversifying his investment with various options of fund choice according to his risk tolerance. Equities have higher growth potential while at the same time debts are generally rated for stability and income generation. You could invest as per your needs in such options. By spreading your investment, you can generally reduce risk according to the terms of the marketplace.
Review and Analyze Portfolio Regularly
Regular reviewing and analysis of the portfolio is very necessary to make the most of your investment in ULIP. It is important to keep monitoring the performance of chosen funds. They should also be aligned with the objectives of investments that you want to achieve as well as your risk profile. It is also necessary to be updated with market trends and other economic indicators so as to make appropriate changes if necessary to obtain the best returns.
Avail Tax Benefits
ULIPs provide attractive tax benefits to the policy owners. As per section 80C of the Income Tax Act 1961, a taxpayer can claim the premium paid towards ULIP as a tax deduction. In addition, under Section 10(10D), the maturity proceeds and death benefits received from ULIPs are exempted from tax. With these tax benefits, one can reduce his tax liability and increase his returns on ULIPs.
Why Choose Kotak Life ULIP Policy?
The Kotak Life ULIP Policy offers a compelling plan to all those seeking the total life cover solution, thereby providing a gateway for wealth creation. With so many diversified avenues for investment, higher transparency, and the liberty of flexibility coupled with the benefits of life insurance cover and also savings in terms of tax, Kotak Life is now the preferred investor's choice.
Customized Investment Options
With Kotak e-Invest, you can opt for one of the wide variety of funds depending on your risk appetite and financial objectives. It offers something for everyone, be it a conservative or a more aggressive approach. It also provides you with the facility to undertake different fund options like equity funds, debt funds, and balanced funds thereby ensuring that investment stays always aligned with your goals.
Transparency and Flexibility
It is necessary to keep an eye on your investments. Through Kotak e-Invest, you are persistently updated about the investment performance. It also enables you to change your funds as market conditions and choices of investment keep changing. This is what makes Kotak e-Invest unique, unlike other conventional insurances. It allows you to monitor your investments actively.
Life Insurance Coverage
Besides the investment aspect, Kotak e-Invest also provides comprehensive life insurance coverage. On the untimely death of the policyholder, the sum assured shall be paid to the nominated beneficiaries as provided in the policy. Therefore, Kotak e-Invest in no way compromises the financial security of the beneficiary.
Wealth Creation Potential
By staying invested for a very long time, you can enjoy the gains of compounding to help you reach yourfinancial goals, whether it is to fund your child's education, buy your dream house, or retire safely and comfortably. Kotak e-Invest helps you achieve all your financial goals.
Tax Benefits
Kotak e-Invest makes your overall returns on investment richer by availing tax benefits. The premiums paid towards the policy are eligible for tax deductions under the Income Tax Act Section 80C. Maturity and death benefits received by the policyholder or nominee would also be exempt from tax under Section 10(10D).
Enjoy the dual benefits of protection and growth with Kotak e-Invest plan.
Invest todayWhat Type of Funds Do ULIP Plans Include?
Whether you are an experienced investor or just someone who is interested in ULIP funds for the first time, learning about various ULIP fund options can help you make a better choice and optimize your investment strategy.
Equity Funds
Equity fundsare for investors with a higher risk appetite and a long-term investment horizon, say 5-10 years or more. Its performance reflects the highs and lows of markets. You can consider equity funds if you have a good risk appetite and want to create some wealth in the long term.
Debt Funds
Debt funds are appropriate for conservative investors who anticipate steady returns with relatively low risk. They invest in government securities, corporate bonds, and other debt instruments. These devices carry low to moderate risk as they are safer.
Cash Funds
Funds that invest in money market funds that are owned by banks are known as cash funds. The risk profile of these instruments is extremely low. Therefore, of all the categories of ULIPs, they offer the lowest returns. Cash funds are available as an option for risk-averse investors.
Balanced Funds
ULIPs provide an opportunity to invest both in equities and debt instruments for balancing risk and return. They suit those looking for a balance between risk and return. Examples of balanced funds would be equity-oriented hybrid funds.
Money Market Funds
Money market funds invest in short-term fixed-income instruments. They emphasize capital preservation and liquidity. Money market funds within ULIPs are excellent for investors with a very low-risk appetite or seeking parking of funds for a short term.
Sector-Specific Funds
Some ULIPs offer sector-specific funds. Investments in such funds are focused on specific sectors or sectors of industries, like technology healthcare, or energy. This fund suits investors who have very strong conviction about the specific growth prospects of a particular sector or industry.
Retirement ULIPs
ULIP plans for retirement are essentially designed to help a person create his or her retirement fund. As this is a combination of both insurance and investment, such plans help a policyholder secure his or her retirement and, simultaneously, may earn returns from it. Compared with other plans, these have a longer lock-in period; if desired, systematic withdrawals or annuity payments can be available after maturity.
Child ULIPs
Child ULIPs are created keeping in mind the various financial needs of your child, such as education expenses or marriage. These plans offer a life cover to the parent along with investment options that are in harmony with your goals for your child. Most such plans have a built-in feature whereby future premiums get waived in case of a policyholder's death, thus not interfering with the financial goals of the child.
How to Manage ULIP Funds?
Investing is not considered as a one-time job. You have to review the funds, continually adjust according to the market changes, and then you can expect excellent returns from it. However, if you find it hard to manage ULIPs, the following are some important considerations with regard to the management of ULIP funds:
- Several ULIPs allow routine fund transfers from debt to equity ULIPs. So, you have to pay an annual premium and you can begin investing in a debt fund. You can also gradually shift over to an equity fund if you so desire. This is something known as Systematic Transfer Plans, which are quite popular among investors.
- ULIPs have a lock-in period of five years, so you must be prepared to keep your money invested for the long term. You can only withdraw after the completion of the lock-in period. There is scope for partial withdrawal before maturity but it does come with specific conditions.
- ULIP funds are to be checked periodically in terms of performance and prospects. One can shift to other funds if an asset is not doing well. For example, shifting from an equity ULIP fund to a debt ULIP fund. There would be some charge but there are also a certain number of free switches every year.
- Many ULIPs are age-sensitive, and their strategy is based on your age as an investor. This type of method keeps on automatically dividing their fund between debt and equity for maximum returns. With such an option available, you can readily opt for this method in case you decide to invest in ULIPs for your retirement.
If you are waiting for the perfect moment to buy ULIP, there is no perfect time than now. The more you start early, the higher your chances of achieving your goals in Unit linked insurance plans.
Testaments
When I was planning for my child's future, my friends recommended me about investing in ULIP. The benefits that ULIP offer were very well aligned with my requirements. This is why I started researching and came to know about Kotak e-Invest plan. I went through their online portal and got to know the premiums, returns and everything. I realized that Kotak ULIP plans was the best plan for me, and I bought it.
-Mr. Ambadas Sulakhe
ULIPs are new-age investment instruments that offer tax benefits and market-linked returns. I read about it online and started to think about my investments. I thought this could be a good addition to my financial portfolio. They offer market-linked returns with no Capital gain taxes. And I could easily optimize my returns by choosing the funds wisely. So, I decided to start my Kotak ULIP plan.
- Mr. Darpan V Mehta
Investments have always helped me achieve my difficult life goals. So, I make sure that every month I invest in the right instruments. Just when I was looking for a new investment option, I came across Kotak ULIP plan. They have various plan options; premium payment mode is flexible which is perfect for me. The plan aligned with my requirements and offered excellent returns which makes this one a best ULIP plan for me.
- Ms Munera Janvekar
Kotak ULIP plan is one of the best investment instruments I decided to invest my hard-earned money in. It gives me various fund options that help me manage my portfolio and make sure that my investment is optimized all the time. This way, I can gain returns when the market is high and go for debt funds when the markets go down. A win-win. If you are looking for such a plan, I recommend you to invest in Kotak ULIP plan.
- Mr Sujitbhai Ashokbhai Kanjariya
I was looking for investing a sum of amount that can give me good returns over the long term. I came across Kotak ULIP plan and decided to give it a try. I logged in to understand the plan and their call center executive helped me understand everything about the plan. I went ahead with the plan and the plan is giving me good returns and I can monitor them year on year. If you are looking for a long term investment with solid returns, I recommend you to invest in Kotak ULIP plan.
- Ms Neeti Garg
My friends recommended me to invest in an ULIP plan when they came to know that I am planning to buy a house in the future. I went online, spoke to my friends and came across Kotak ULIP plan. I registered on their portal where they showed me all plans, premiums and returns upfront. I completed the application process upload documents and made my payment. I was happy to make this decision as I can now monitor my returns and make a fund switching decision when required.
- Mr Santosh Kumar
How to Find the Best ULIP Plans?
Well, with so many options available in the market, finding the best ULIP plan is no easy job. Here are some essential factors to look for in the best ULIP plans:
Understand the Features and Benefits
Features and perks that various different plans may be offering, may be different from one another. You must have a clear understanding of the features and benefits provided by the options that are accessible in the market. This would enable you to achieve your financial goals.
Identify the Objectives
No plan is going to work if the objective is not clear. The same is with ULIPs; you should know what you are aiming for while investing. This aim could be either buying a house, funding your child's education, or having a comfortable life after retirement.
Claim Settlement Ratio
While searching for the best ULIP plan, one of the most important factors comes into the picture is the claim settlement ratio. It is measured by the number of claims received by the insurers that were resolved by them. In other words, higher claim settlement ratio means insurers can be trusted.
Why Should You Invest in ULIPs?
ULIP insurance plans offer good returns across multiple asset classes as compared to most other insurance products. The policyholder can shift from debt to equity funds or vice versa to ensure that returns are value-added.
The ULIP provides ten times the life cover of the annual premium you pay. This premium makes the insured of this product insusceptible to market volatility. Liquidity benefits, transparency, returns, etc., work in the favor of the policy owners, making ULIP a smart investment decision!
Which ULIP Funds are Best Suited for You?
The best ULIP funds can be chosen according to various factors, like risk tolerance, investment horizon, and financial goals. Here are a few categories of ULIP funds along with their suitability:
Equity
Equity funds are for Investors with a high-risk appetite and a long-term investment perspective of at least five to ten years or more. The ups and downs of the market will reflect their performance. You can opt for equity funds if you have a good risk appetite and want to create some wealth in the long term.
Debt
Debt funds well suited for conservative investors who want steady returns with lower risk. These invest in government securities, corporate bonds, and other debt instruments. These plan are safer because they offer low to moderate risk levels.
Cash funds
Cash funds are those funds that invest in bank-owned money market funds. They carry a very low-risk profile. As a result, of all the categories of ULIPs, they offer the lowest returns. Risk-averse investors have the option of choosing cash funds ULIPs.
Balanced funds
ULIPs also allow investment in equities and debt instruments to ensure a proper mix of risk and return. These are most suitable for investors, who want a good balance between risk and return. Examples of balanced funds could be equity-oriented hybrid funds.
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Invest todaySteps to Buy ULIP Online
To purchase unit-linked insurance plans online, follow these simple steps:
Visit insurance comparison websites or the official websites of insurance providers.
Select a ULIP plan that aligns with your financial goals, risk tolerance, and investment horizon.
Use the online premium calculator available on the insurer's website to determine the premium amount based on your chosen sum assured and investment preferences.
Complete the online application form with personal details, contact information, and nominee details.
Choose the funds you want to invest in (equity, debt, balanced) based on your risk appetite.
Upload required documents such as identity proof, address proof, and age proof and pay the premium amount online using available payment methods.
Complete the online verification process (if required by insurer), which may include a video KYC (Know Your Customer) procedure.
After verification and approval, the policy document will be issued and sent to your registered email address.
What are the Documents Required to Buy ULIPs?
If you Are considering purchasing a ULIP, it Is essential to understand the documentation required to initiate the process. Here is a list of the commonly required documents:
1. Identity Proof
- Aadhaar Card
- PAN Card
- Passport
- Voter ID Card
- Driving License
2. Address Proof
- Aadhaar Card
- Passport
- Utility Bills (electricity, water, gas) not older than 3 months
- Bank Statement with a valid address not older than 3 months
- Voter ID Card
- Driving License
- Ration Card
3. Age Proof
- Birth Certificate
- School or College Leaving Certificate
- PAN Card
- Passport
- Aadhaar Card
- Voter ID Card
- Driving License
4. Income Proof (For Higher Sum Assured Plans)
- Salary Slips (last 3-6 months)
- Income Tax Returns (ITR) for the past 2-3 years
- Bank Statements (last 6 months)
- Form 16 (for salaried individuals)
5. Photographs
- Recent passport-sized photographs as specified by the insurer.
6. Bank Account Proof
- Canceled cheque with your name printed on it
- Bank passbook or statement showing the account holder's name, account number, and bank details
ULIP vs Mutual Funds(MF) vs Fixed Deposits(FD)
The popular choices often compared are Unit Linked Insurance Plans (ULIPs) and other traditional investment instruments. Let’s compare the features and benefits of ULIPs compared to mutual funds & fixed deposits.
- Aspects
- Returns
- Risk Profile
- Tax Benefits
- Maturity Benefit
- Lock-in Period
- Ideal For
- ULIP
- Market-linked
- Moderate to High
- EEE (Exempt-Exempt-Exempt) status
- Sum assured + Fund value
- 5 years
- Long-term financial goals
- Mutual Funds
- Market-linked
- Moderate to High
- Tax-efficient
- NA
- Varies
- Long-term goals
- Fixed Deposits
- Fixed
- Low to Moderate
- TDS on interest
- Principal + Interest
- Varies
- Short-term goals
ULIP for Wealth Creation
When an individual invests in a ULIP, the insurance provider allocates units based on the prevailing Net Asset Value (NAV) of the fund. The NAV changes with the performance of the underlying assets, reflecting the fund's growth.
Benefits of ULIP for wealth creation
Diversification
ULIP insurance plans provide access to various asset classes, including equities, bonds, and money market instruments. This diversification reduces the risk associated with investing in a single asset class and enhances the potential for higher returns.
Flexibility
ULIPs allow flexibility regarding switching between funds if the market conditions and the financial goals change. For instance, if markets are volatile, an individual can switch their funds from equity to debt during instances of volatility to protect their gains.
Tax Benefits
ULIPs provide tax benefits under Section 80C of the Income Tax Act, where, on the amount paid towards premium, one can claim a deduction up to a certain limit. The maturity proceeds received on the policy are tax-free under Section 10(10D) of the Income Tax Act.
Long-Term Wealth Accumulation
Thelock-in period of ULIPsplans encourages long-term investing, which is very important to build substantial wealth. Staying invested for long periods of time enables compounding to work its magic and generate significant returns.
Life Insurance Coverage
While ULIPs are an investment product, they also offer the policyholder with life insurance coverage and ensure his family is taken care of in case of any untoward eventuality.
How to Claim Tax Benefits on ULIP plans?
Unit linked insurance plans offer a chance to grow your wealth while simultaneously providing cover against financial shocks. Of course, one of the major attractions for joining any ULIP scheme is the tax benefits they provide.
Deduction Under Section 80C
Premium paid for ULIP plans are eligible for deduction underSection 80Cof the Income Tax Act, 1961. According to the latest tax regulations, the amount that can be deducted under this section of tax during a financial year is ₹1.5 lakh. However, this amount is deductible for only the premium paid and not for the total investment into the ULIP.
Tax-Exempt Maturity
Most importantly, under Section 10(10D) of the Income Tax Act, proceeds at maturity, including investment income, are tax-free but subject to certain conditions. To avail this benefit the annual premium should not exceed 10% of the sum assured.
Switching of Funds
This switching flexibility in ULIP schemes also allows an investor to switch between two or more funds depending upon the market situations or investment preferences. The best part, of course, is that such switches are tax-free. You can optimize your investment by taking benefits of market movements without incurring any tax consequences.
Partial Withdrawals
The policyholder, under ULIP policy, is permitted to withdraw a part of the investment at specific terms and conditions. The amount withdrawn is tax-free, providing it does not exceed 20% of the fund value. Amount withdrawn beyond this percentage may result in tax liabilities.
Continuity of Tax Benefits
It is very important to maintain the policy for a minimum period to avail of the tax benefits. Tax benefits availed during the policy period will be added back to taxable income if the policy is discontinued within five years from the date of commencement.
Myths About Investing in ULIPs
ULIPs have long been a topic of debate in the world of investments. While some investors hail them as a flexible and efficient investment avenue, others harbor skepticism and believe in several myths associated with ULIPs.
Myth 1: ULIPs are Expensive
One of the most common misconceptions that revolves around ULIP plans is that they are very costly. ULIP plans do carry certain charges associated with them. Many investment options also have charges, for example, mutual funds orportfolio managementservices.
Myth 2: ULIPs Have Poor Returns
Another commonly believed myth relating to ULIP plans is that they bring about poor returns compared to other investment options, including mutual funds or direct equity. The returns from a ULIP depend on various factors - your investment horizon, the chosen fund options, and the insurer's track record.
Myth 3: ULIPs Lack Transparency
With some investors too counting the lack of transparency as one reason to hesitate while actually making investments, ULIP plans are regulated by the IRDAI, ensuring that the insurance company discloses all necessary information relevant to the plan.
Myth 4: ULIPs Have a Long Lock-in Period
Although the minimum lock-in period for ULIP plans under IRDAI regulations is five years, it also gives investors an opportunity to receive compounding powers that work long-term.
Myth 5: ULIPs are Only for Life Insurance
ULIP plans indeed provide life insurance, but they are also an investment product. They provide a dual advantage of insurance protection and another of potential wealth creation through market-linked returns.
Myth 6:ULIPs are Risky
One of the most widespread myths associated with ULIP plans is that these are fundamentally risky investment products. It is worth noting here that ULIP plans do carry investment risk related to market fluctuations, and the quantum of this risk depends on the fund option elected by the investor. ULIP plans, being purely equity-based investments, may reflect more volatility but, on the other hand, promise returns far superior over long-term periods. On the other hand, debt-based ULIP plans provide stability and capital preservation, which are suitable for conservative investors. If he or she diversifies across various fund options and stays invested long-term, the investor will manage risk and potentially realize the best returns from the ULIP.
FAQs
Which is the best ULIP?
Finding the best ULIP depends on investment objectives, risk appetite, and current financial requirements. You should look out for factors that differentiate one ULIP offering from the other such as fund performance, charges, flexibility, and customer service.
Is ULIP better than Mutual Funds?
ULIP schemes offer both insurance coverage and investment components, while mutual funds are an investment product alone. In this respect, the charges would be relatively high in ULIP plans. Mutual Fund is a pure investment product and thus the cost would typically be less.
Are Unit linked insurance plans a good investment?
ULIP plans will appeal to anyone who seeks a holistic package of risk coverage with growth potential. ULIP plans offer the scope to participate in the market while at the same time providing life insurance protection. The very reason for going in for a unit-linked insurance plan is that they offer the flexibility to choose investment funds based on risk appetite and investment goals.
Are ULIPs suitable for the long term?
ULIP plans are primarily for long-term investments. It usually comes with a lock-in period of five years, so it is recommended that you don't withdraw the money in between, but instead let it stay invested for as much time as possible so you can reap maximum returns. Along with that, you also get to enjoy the compounding effect of the returns, thus you can see your investments grow.
Can I cancel/surrender my ULIP plan?
Yes, you can cancel or surrender a ULIP during the lock-in period. Surrendering a ULIP before the end of the lock-in period will attract charges along with penalties that will impact the surrender value very severely. You can surrender a ULIP after the completion of the lock-in period without paying any charges.
When can I withdraw ULIP?
ULIP plans allow taking back any amount from the plan after it has completed its lock-in period, which, in most cases, is for five years subsequent to the date of purchase. Once the lock-in period is over, you may partially withdraw or surrender the ULIP in full without any charges or penalties being levied on you.
What is the expiry date of the lock-in period?
Normally, ULIP plans come with a lock-in period of five years from the purchase date. Once the lock-in period expires, you are free to withdraw the amount partially or fully without any charges or penalty.
What are the charges in ULIP?
ULIPs have various charges associated with them. Some common charges include:
- Premium allocation charges
- Policy administration charges
- Mortality charges
- Fund management charges
- Surrender charges
It is important to carefully review the policy documents to understand the specific charges applicable to your ULIP plan, as they can vary between insurance providers and policies.
How is the fund value calculated in ULIP?
The NAV is calculated by dividing the total net assets of the fund by the number of units outstanding. The fund value of your ULIP plan is determined by multiplying the number of units held in each fund with the respective NAV of those units.
What is ULIP interest rate?
ULIP is the short form for Unit Linked Insurance Plan. ULIP plans are insurance products that have features of life cover with the ability to invest. However, unlike a conventional savings account or fixed deposit, ULIP plans do not offer a fixed rate of interest. Instead, the returns on any ULIP are directly dependent on the investment funds' performance, and that periodically changes according to the market conditions.
What is the advantage of ULIP?
ULIPs offer several advantages that make them a popular choice for individuals seeking both insurance coverage and investment opportunities:
- Dual Benefit
- Flexibility
- Tax Benefits
- Long-Term Wealth Creation
- SPartial Withdrawals
- Transparency
How Can I Reduce Risk on my ULIP Investment?
You can reduce risk on your ULIP investment by considering the following strategies:
- Diversify your funds
- Regularly review and rebalance your portfolio
- Opt for a balanced or conservative investment strategy
- Stay invested for the long term
- Seek advice from a financial advisor
How is ULIP different from Traditional Plans?
A: ULIPs (Unit Linked Insurance Plans) and Traditional Plans differ in various aspects:
- Insurance and investment components
- Transparency and flexibility
- Market-linked returns
- Charges and fees
It is important to evaluate your financial goals, risk tolerance, and preferences before deciding between ULIPs and Traditional Plans.
Is interest in ULIP taxable?
The tax treatment of ULIP plans (Unit Linked Insurance Plans) depends on various factors that are eligible under the income tax laws. A tax deduction may also be claimed in respect of premiums payable towards a ULIP on specific sections of the Income Tax Act.
What is the minimum premium amount for ULIP?
The minimum premium payable for various ULIP plans differs according to the insurance companies and the particular ULIP product provided. Different ULIP plans have different premium payment options.
Can I switch between different funds in ULIPs?
Yes, under the facility of switching offered by most of the ULIP plans, you can switch between different funds based on specific investment goals and risk capacity. For most ULIP plans, the policyholder can switch their investments between various available funds offered by the insurance company
Can I take a loan against my ULIP policy?
Yes, a few ULIP plans allow the facility to take up a loan against the policy. However, such an option is subject to the discretion of the insurance companies and ULIP products. Normally, such loans can be available as a percentage of the ULIP fund value.
is a ULIP taxable at maturity?
The ULIP plans proceeds received at maturity along with extra benefits is exempt from tax under Section 10(10D) of the Income Tax Act, subject to certain conditions. Consult a tax consultant who will provide you with taxation details based on your case.
What is the difference between a ULIP & SIP?
ULIP plans are a financial product wherein an investor gets benefits from insurance and also the option to invest in several funds. SIP is that investment plan wherein a fixed amount is invested in mutual funds regularly for a period. This investment avenue helps yield the true benefit of rupee cost averaging and compounding. ULIP plans provide insurance coverage along with other investment options, whereas SIPs are purely investment-oriented and do not offer any insurance protection.
How Does ULIP Work?
ULIP works by pooling the premiums paid by policyholders into a common fund, which is then invested in equity, debt, or a combination of both based on the chosen fund option. The returns generated from these investments are reflected in the policyholder's fund value, which fluctuates with market performance.
You may avail of tax benefits under Section 80C and Section 10(10D) of Income Tax Act, 1961 subject to conditions as specified in those sections. Tax benefits are subject to change as per tax laws. Customer is advised to take an independent view from tax consultant.
The calculation is generated on the basis of information provided and does not constitute an offer or solicitation for the purpose of purchase or sale of any product. Further customer is the advised to go through the sales brochure before conducting any sale.
Partial Withdrawals
Some ULIP instruments offer you an option of partial withdrawals. There are various conditions under which this can be done, but it varies from product to product.
Rider Details
Applicable Rider Charges will be deducted from the Fund value if the Riders are chosen. There are different rider options that can enhance your protection and it is recommended that you check them out.
There are a few charges which can be deducted before the refund-
Goods and Services Tax and Cess
The premium figures are net of Goods and Services Tax and Cess, as applicable. Goods and Services Tax and Cess rates are subject to change from time to time as per the prevailing tax laws and/or any other laws.
Tax Benefit
Tax benefits are subject to conditions specified under the Income-tax Act, 1961. Tax laws are subject to amendments from time to time. Customer is advised to take an independent view from tax consultant.
Risk Factors:
The Unit Linked Insurance Products do not offer any liquidity during the first five years of the contract. The policyholder will not be able to surrender /withdraw the monies invested in Unit Linked Insurance Products completely or partially till the end of the fifth year from inception.Unit Linked Life Insurance products are different from the traditional insurance products and are subject to the risk factors. Please know the associated risks and the applicable charges (along with the possibility of increase in charges), from your Insurance agent / Corporate Agent / Insurance Broker / Intermediary or policy document of the insurer. The premium paid in Unit Linked Life Insurance policies are subject to investment risks associated with capital markets and the NAVs of the units may go up or down based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions. All benefits payable under the Policy are subject to the Tax Laws and other financial enactments, as they exist from time to time.
This website content is not a brochure and only gives the salient features of the plan.
Kotak e-InvestUIN – 107L121V02, This is a non-participating unit-linked life insurance individual savings product. Unit Linked Life Insurance products are different from the traditional insurance products and are subject to the risk factors. For more details on risk factors, terms and conditions please read the sales brochure carefully before concluding a sale.
Kotak T.U.L.I.PUIN: 107L131V02. This is a non-participating unit linked Life Insurance Individual Savings Product. This product is available for sale through online mode. For more details on risk factors, terms and conditions please read sales brochure carefully before concluding a sale. For more details on riders please read the Rider Brochure.
Kotak Invest MaximaUIN: 107L073V05. Unit Linked Life Insurance products are different from the traditional insurance products and are subject to the risk factors. For more details on risk factors, terms and conditions please read the sales brochure carefully before concluding a sale.
Kotak Single Invest AdvantageUIN: 107L065V05, This is a Non-Participating Unit-Linked Life Insurance Individual Savings Product. Unit Linked Life Insurance products are different from the traditional insurance products and are subject to the risk factors. For more details on risk factors, terms and conditions please read the sales brochure carefully before concluding a sale.
Kotak PlatinumUIN No.: 107L067V07. This is A Non-Participating Unit-Linked Life Insurance Individual Savings Product. For more details on risk factors, terms and conditions, please read sales brochure carefully before concluding a sale. For more details on risk factors, terms and conditions please read the sales brochure carefully before concluding a sale.
Kotak Wealth Optima PlanUIN: 107L118V03 This is a non-participating unit-linked life insurance individual savings product. For more details on risk factors, terms and conditions, please read sales brochure carefully before concluding a sale. For more details on risk factors, terms and conditions please read the sales brochure carefully before concluding a sale.
The assumed non-guaranteed rates of return chosen in the illustration are 4% p.a. and 8% p.a. These assumed rates of return are not guaranteed and they are not the upper or lower limits of what you might get back as the value of your policy is dependent on a number of factors including future investment performance. The actual experience may be different from the illustrated. Please note that Bonuses are NOT guaranteed and may be as declared by the Company from time to time.
Section 41-
Extract of Section 41 of the Insurance Act, 1938 as amended from time to time states: (1) No person shall allow or offer to allow, either directly or indirectly, as an inducement to any person to take or renew or continue an insurance in respect of any kind of risk relating to lives or property in India, any rebate of the whole or part of the commission payable or any rebate of the premium shown on the policy, nor shall any person taking out or renewing or continuing a policy accept any rebate, except such rebate as may be allowed in accordance with the published prospectuses or tables of the insurer. (2) Any person making default in complying with the provisions of this section shall be liable for a penalty which may extend to ten lakhs rupees.
Section 45-
Fraud and Misstatement would be dealt with in accordance with provisions of Section 45 of the Insurance Act, 1938 as amended from time to time. Please visit our website for more details:Read more about section38_39_45_of_insurance_act_1938
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IRDAI is not involved in activities like selling insurance policies, announcing bonus or investment of premiums. Public receiving such phone calls are requested to lodge a police complaint.
Regd. Office: Kotak Mahindra Life Insurance Company Ltd. Reg No. 107; CIN : U66030MH2000PLC128503; Regd. Office: 8th Floor, Plot # C- 12, G- Block, BKC, Bandra (E), Mumbai – 400051 | Website: www.kotaklife.com | WhatsApp: 9321003007 | Toll Free: 1800 209 8800 | ARN No. KLI/24-25/E-WEB/652
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