What is the ideal mode of safe keeping your hard-earned money? Maybe a locker in your house? Nah… The money doesn’t grow and can easily be stolen. A savings bank account? Nope… The money is safe but ten years down the lane its real value would have degraded to far less than today. O Yes… What about fixed deposits! They offer protection and growth too…Indeed! But you can do better than that. Behold ULIP.

What are ULIPs?

ULIP or Unit Linked Insurance Plan is basically a marker linked insurance product. ULIP benefits include life risk cover along with investment option for the money you invest. Investments are made in qualified instruments such as bonds, mutual funds or stocks. Say what? You actually get to choose from a number of different options based on your need and risk appetite. Typical choices include deciding the mix of investment in comparatively risky equities and relatively safe government bonds among others.

How do ULIPs work?

Basically, the premium you pay for the policy is divided into parts. A portion of it is used to provide you insurance coverage and the remaining is invested in equity and debt instruments. So in case you don’t make it till the end of your term period your nominee gets the Sum Assured and/or the Fund Value depending upon the type of ULIP you choose to buy. In case you live to see the world at the end of your policy term there’s no need to hold up the celebrations. Because, guess what, you get a great return on your investment. The actual amount you make depends on various factors which include market conditions.

These days one of the ULIP benefits is that you can select the mix of equities and debt instruments. For example, if you are young and can take high risk, for you the best ULIP plan could be an equity plan. However, those who cannot take much risk, the best ULIP plan can be the one which has a mix of equity as well as debt. Therefore, the best ULIP plan can be the one which suits your risk taking ability and the investment objective. The more financially informed ones can choose to change the ratio online by gauging the market conditions themselves and the others can leave this to the safe hands of the insurance companies.

Are ULIPs for you?

Still wondering if ULIP is cut out for you? Well…Here are a few ULIP benefits to convince you further.

  • Over the years, the interest rates paid on Fixed Deposits have been decreasing. You might not know in what ways it would help the economy but you can very well figure out that it decreases your returns on investment. ULIPs provide a greater rate of return than the conventional Fixed Deposits.


  • You get life insurance cover too. The sum assured in case of an unfortunate event is typically ten times the annual premium you provide. Thus it’s a one stop solution to both your saving and insurance needs.


  • Among many ULIP benefits, you also get tax benefits on the premiums you pay. It is exempted under Section 80C of Income Tax Act of 1961. Of course, there is a cap 1.50 lakh on the same per year. The returns are also exempted under 10(10D) of the same Act. Thus you get a lump sum amount without worrying that you have to pay a hefty income tax on the same.


  • You have control on your investment throughout. If at any point of time you feel that you have chosen a wrong mix of investments, you can change it on the go by switching from one fund to the other. And if you don’t know much about it then no worries. Your insurance company hires highly paid and capable people to take care of your money and you may look forward to them for their advice.


  • It is always a good idea to diversify your finance portfolio. You can invest a good part of your savings into ULIP as it provides both – wealth creation and life insurance.

So what are you waiting for? Hurry up and buy your best ULIP plan now. This is your safest and best way to ensure you invest your money well and ensure it grows for the times you will need it.

By Guest

This is a contribution by a guest author. These guest posts are protected by Creative Commons unported license 4.0. Viewpoints are that of the author only. For posting articles as a guest author, please send your proposals to editor@business-fundas.com

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