Can ULIP investment plans really give good returns

Unit Linked Insurance Plan (ULIP) gives us dual benefits – the advantage of life coverage as well as investment returns. This means you can build your wealth over time through market-linked returns and enjoy the benefits of life insurance coverage alongside.

But can ULIPs really give good returns?

To understand this, let us take a close look at the benefits of ULIPs –

ULIPs are safe and flexible: For a secure and flexible investment option, ULIP is a wise choice. Before you choose a ULIP, understand your financial objectives. Once you know your financial goals, choosing the right ULIP becomes easier. Also, ULIP allows you to invest in funds of your choice. You also have the liberty to safely switch between equity and debt funds, depending on the market performance of the funds.
Save as per your financial goals: ULIP investments are quite disciplined and organised investment instruments. They allow you to invest in funds of your choice while also allowing you to manage them whenever needed. Since you have the flexibility to switch funds based on the market performance, you can make the necessary changes to accomplish your financial objectives.
Tax benefits: Another advantage of investing in this plan is the tax benefits it offers. The ULIP tax benefits are as follows –
1. All the premiums paid towards the policy are exempted from tax under Section 80C of the Income Tax Act, 1961. The maximum deduction on the premium amount that can be availed is INR 1.5 lakhs. Also, the deduction can be availed only if the premium amount is less than or equal to 10% of the sum assured amount.
2. The maturity benefits earned on ULIPs are also tax-free under Section 10(10D) of the Income Tax Act, 1961.

ULIP riders: For nominal charges, you can buy riders on the existing ULIP investments. Riders may include death benefits, critical illness coverage, disability benefits, and more. The only benefit of ULIP riders is that in case of an unfortunate event, the future premiums are waived off. This ensures that you and your loved ones are under no financial burden.
Increase fund value with top-ups: With this option, you can choose to increase the life coverage amount to enhance the protection to your loved ones. All you have to do is pay a little over and above the existing premium amount.

According to the new guidelines introduced by the Insurance Regulatory and Development Authority of India (IRDAI), ULIPs are investor-friendly. In other words, they provide good returns with minimal charges. The ULIP charges are pre-determined, and nothing over and above the stated cost will be deducted from your premiums. Some of these charges that you need to know include –

Premium allocation charges
Administration charges
Fund management charges
Surrender charges

Overall, ULIPs allow you to build your wealth in case you are planning for long-term investments. The policy is quite ideal for investors who have just started investing in market returns and want to seek equity advantage.