Regulators may tweak rules regarding ULIPs

ULIPs are a product offered by insurance companies that provide insurance and investment under a single integrated plan. The rules regarding ULIP plans are set by the Insurance Regulatory Development Authority of India (IRDAI).

According to a recent announcement, IRDAI is all set to revamp rules governing ULIP schemes with an intent to improve the product proposition. Currently, units are deducted from ULIPs if one buys riders with it.  Insurance companies offer various riders with ULIPS such as critical illness. The unit deduction remains optional. However, according to the new rules, insurers can be allowed to charge extra premium for buying riders with ULIPs.

Also, the regulator has proposed to guarantee the surrender value irrespective of the premium paying term if the policyholder has paid a minimum of two premiums. This will make companies responsible for right selling.

It is necessary for people looking forward to investing in ULIPs to make a note of these changes in the rules regarding ULIPs.

Unit-Linked Insurance Plans (ULIPs) have become one of the most popular investment options these days. Below are some of the features that make ULIPs a smart investment option:

Higher returns

ULIPs are long term investment and provide better returns than traditional fixed deposits. Also, the low risk associated with ULIPs make them a preferred investment option in the current volatile market

Encourages goal-based investing

Goal-based investing should be a priority for every individual. Investment plans like ULIPs can help you fulfill your important life goals like buying a home or financing your children’s higher education. Investing in ULIPs can also aid your retirement plan. In addition to your regular pension, you can also rely on your saving from ULIP returns to lead a comfortable life post-retirement. Unit-Linked Insurance Plans will allow you to make a note of your long-term goals and save for them accordingly.

Tax benefits

By investing in unit linked insurance plans, you can avail various ULIP tax benefits. Under section 80(C) of the Income Tax Act, the investments made in ULIPs are eligible for tax deductions. You can also receive a tax-free Maturity Benefit, under Section 10 (10D).

A ULIP plan gives the policyholder the flexibility to invest their money according to their financial requirements and risk-appetite. Since ULIPs also provides a life cover, it gives you the flexibility to choose your sum assured at the beginning of your policy.

Before investing in a ULIP plan, you should calculate the future value of the investment beforehand with the help of an online ULIP calculator. This will give you a better understanding of the amount of cover and corpus you would need. By putting in values like the investment amount, investment frequency, the number of years you wish to make an investment, percentage post-tax annual rate of return earned on investments, etc. in the ULIP calculator, you can get an idea of which investment would suit you the best.

Now that you are well aware of the details of a ULIP plan, ensure that you invest wisely and make the most of it. However, it is recommended to compare various plans offered to you by different insurance providers. This will allow you to find a ULIP plan that best suits your need.