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India Insurance - Unit Linked Insurance Plan ULIP In India Unit Linked Insurance Policies ULIPs are insurance policies that combine risk coverage with investing in the stock/debt markets. In effect they are designed to behave as normal insurance policies plus mutual funds. An investors contribution to ULIPs gets invested in specific types of portfolios that he/she chooses. The policy typically pays back based on market returns on investments at the end of the insured period. Therefore it forms an interesting savings instrument that can get good risk cover. Features of ULIPs include: 1. Units allotted under ULIP schemes have Net Asset Values NAV declared regularly like a mutual fund 2. Investors can invest across types of portfolios similar to mutual funds - growth equity balanced debt funds etc. Investors can move across portfolios typically at nominal costs 3. Investors can invest as a lump sum single premium or make premium payments on an annual half-yearly quarterly or monthly basis. Premium amounts can be changed over the course of ULIPs life 4. Investments qualify under Section 80C of the Income Tax Act. Maturity proceeds from ULIPs are tax free. There are no long term capital gains tax and 10 short term capital gains tax on equity portfolios within ULIP.For debt funds long term capital gains tax is 10 while short term is at the investors marginal tax rate.

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5. However charges charged by insurance companies can be quite confusing - therefore investors should compare them with similar mutual funds to see if charges quoted are reasonable. Despite their interesting structure and potential benefits investors are better off clearly understanding portfolio types offered performance of fund managers and expenses/fees before investing in ULIPs. The way to go about investing your hard earned money If your past experience with ULIPs has not been pleasant it is wise that you rather not be biased. You can hope for good investment returns from your unit linked saving plan by being disciplined and prudent. 1 Allow your money to remain invested for a longer term - In case the markets fall do not panic to liquidate. Rather continue with your premium payment and be assured of decent return rates. 2 Plan your premium payment as a systematic investment plan - Rather than paying your premium in one shot opt for the systematic investment option under which you can stagger the payment of the premium over a 12 month period. A few ULIP also offer the investor an option of switching between investment plans. Currently if you have invested in a 100 percent equity saving plan and you have a sense that the equity market will be underperforming during the year you can switch your investment into a saving plan that primarily comprises debt. A unit linked investment plan will allow you a free number of switches every year. These days some insurance companies are offering new versions of these investment options for money back policy in order to get back customers Buy a ULIP online It is preferred that you buy ULIP online as it can save you the cost of agent commissions. In fact some insurance companies in India are offering these saving plan only as an online offering in an attempt to save on the distribution cost and pass on the benefit to the Policy holder in terms of lower policy charges. Moreover when you buy a policy online you also get the facility to compare various plans whilst sitting in the comfort of your home so that you may buy a policy that fits your needs as well as your pocket. Source: https://www.bajajallianzlife.com/ulip/ulip.jsp