8 Best ULIP Plans (2022): Why Should You Invest In ULIP?

Mutual funds

ULIP (Unit-Linked Insurance Plan) is a special plan that provides the combined benefits of an insurance plan and investment. If you want to get insurance cover while investing in a range of assets like stocks, bonds, and mutual funds, these could be an ideal option for you. It also gives you the benefit of saving taxes with the possibility of decent returns. Check this list of the 8 best ULIP plans you can opt for in 2022. Read on!

Best ULIP Plans of 2022

Types of ULIP Plans 

ULIPs can be categorised into different types based on the following factors:

1. Type of Securities they Invest In 

Here are the different types of ULIPs based on the risk profile:

Equity funds – These ULIPs utilise the premium paid to invest in equity and equity-related instruments. The performance of these schemes is impacted by market volatility. Accordingly, these ULIPs are suitable for investors with a high-risk appetite. These mostly invest in equities with the primary goal of capital appreciation. 

Debt funds – Debt funds invest mostly in fixed-income securities or debt instruments, such as debentures, corporate bonds, government securities, etc.

Hybrid or balanced funds – Hybrid or balanced funds invest in a combination of equity and fixed-income instruments to generate returns for investors. Such investments are associated with lower risk in comparison to ULIPs that primarily invest in equity. 

Cash funds – These ULIPs allocate the collected premium to cash deposits, term deposits and money market securities. Accordingly, the risk associated with these plans is the lowest among the different types of ULIPs.  

2. Based on Purpose

ULIPs for wealth creation – Such plans let you accumulate wealth over a period of time and are recommended for young investors. 

ULIPs for children’s future – These ULIPs are set up to provide financial support to your children in different stages of their lives. 

ULIPs for retirement – You can invest in this ULIP plan while working to build a retirement corpus gradually.

3. Based on Death Benefits

Type I ULIPs – Under these plans, the nominee will get the sum assured or fund value as a death benefit, depending on which is higher. 

Type II ULIPs – In these plans, the nominee will get both the sum assured and fund value as a death benefit on the policyholder’s demise. 

Also Read: Types Of Debt Mutual Funds

Benefits of Investing in Best ULIP Plans

Unit-Linked Insurance Plans (ULIPs) are an investment opportunity that can provide you financial support and good returns alongside a life cover altogether. A few of its noteworthy benefits are:

• Choice of Plans
  ULIP comprises various available funds under the same option. They provide a variety of investment plans with the small, medium and high risks involved depending upon your choice. You can select the plan that suits you the best or as per your affordability.

• Flexible investment options
  ULIPs offer a flexible investment plan to choose the assured money or the premium within your means. In addition, they will allow you to enhance your investment portfolio flexibly so that you can stay in the safe zone if there is any problem in your income flow.

• Liquidity
  ULIPs enable you to withdraw some money to overcome the situation during any emergency. Nevertheless, you can withdraw funds at different intervals as you need. However, after the 5 years period, you can withdraw money from ULIPs (Unit Linked Insurance Plans).

• Tax Benefits
  As per the income tax act of 1961, you will get sufficient tax benefits while investing at ULIP. It will save your tax and offer you interest coverage and ideal returns. 

• Double Bonus
  Another unique benefit of ULIP is its double benefit of insurance and life cover. This dual activity is beneficial not only for the policyholder but also for his/her nominee. This is because if the policyholder dies, a particular sum of money is given to the nominee.

Documents Required for Investing in ULIP

• The following documents required at the time of investing in ULIP are:
• ID proof (includes Aadhar Card, PAN Card, and Voter ID Card)
• Address proof (includes Aadhar Card, driving license, passport etc.)
• Income proof (includes salary proof, income tax returns, bank statement)
• Age proof (includes passport, Aadhar Card, Voter ID Card etc.)

Who Can Invest in Best ULIP Plans?

There are some conditions you need to consider before investing in ULIP plans. The eligibility to invest in the best ULIP plans are:

Taxation of ULIPs 

Premium paid towards top ULIP plans is eligible for income tax deductions under Section 80C. Under this, you can claim a maximum tax deduction of Rs. 1.5 lakhs. Additionally, returns from this investment are exempt from income tax under Section 10(10D) of the IT Act.

However, this maturity benefit is available only for policies bought before 1 February 2021. For policies issued after this date, the maturity benefit is taxed as a capital asset if the policy’s annual premium exceeds Rs. 2.5 lakhs. 

Moreover, pay-outs to nominees in case of accidental death of the policyholder are completely tax-free. Similarly, partial withdrawals up to 20% of the fund’s value are also exempt from taxation as per Section 10(10D).

Tips to Choose the Best ULIP Plans for Your Portfolio

• Choose the fund option as per your affordability
• Select the correct amount of life insurance cover
• Remain invested with ULIPs for a long time
• Verify your ULIP charges carefully
• Make a thorough research about the tax benefits
• Figure out the features of ULIPs

Also Read: Easy Ways To Invest In Mutual Funds Online

Things to Consider Before Investing in Best ULIP Plans

1. Financial objectives – You should always check your own financial goals before choosing a ULIP plan. Factors like your age, savings, current financial situation etc., will determine the right plan for your needs.

2. Fund performance – You should check the NAV (Net Asset Value) and performance of the funds under the ULIP plan.  

3. Withdrawal rules – ULIPs come with a lock-in period of five years. In other words, you can’t redeem your units before the completion of five years from the date of purchase. There are also rules about withdrawal limits and partial withdrawal facilities that you need to be aware of. 

4. Different ULIPs available in the market – You may want to compare the features of different ULIPs before buying one. Some of the factors you will want to check are premium rates, returns, benefits, maturity amount etc. 

5. Risk assessment – You should carefully evaluate the risk profile of a ULIP plan and choose the right fund option. If you have the capability to bear high risk, you may choose to consider ULIPs that primarily invest in equity. On the other hand, if you want stable returns, you might want to consider plans that predominately allocate funds to debt instruments or money market instruments. 

6. Investment horizon – ULIP plans work well if you have a long-term investment horizon as they have a lock-in period of five years or more.

Final Word

ULIPs allow investors to financially secure their future with a sound investment plan and that of their loved ones in case of their untimely demise. With the best ULIP plans, you can also create a large corpus to accomplish your life’s goals like children’s education, marriage or retirement planning.

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FAQs on Best ULIP Plans

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Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.

This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.