Life insurance is a crucial part of comprehensive financial security. It offers protection to your loved ones, which offers you peace of mind. However, many people believe life insurance plans to be unnecessary. This is usually because some life plans do not offer any maturity or survival benefits. If you have been looking for a life plan that offers more than the death benefit, such as growth opportunities, ULIPs may be an option for you.

How do ULIPs Work?

ULIPs, or Unit-linked Insurance Policies, are life insurance plans that offer a wealth creation benefit alongside. These are market-linked plans, i.e., your wealth building is prone to market fluctuations.

The policyholder’s premium is usually divided into two parts. Of these, one is directed towards the life cover, and the other towards wealth creation. Thus, the life cover is not affected by the market performance. However, survival benefits depend on the fund types chosen by the policyholder.

ULIP Benefits

These plans are relatively popular today, especially among buyers who seek one plan to address most of their needs. Let’s take a look at ULIP benefits and what you may expect from the plan.

• Life Cover

An obvious benefit afforded by ULIPs is life insurance, i.e., a life cover. For many people, this is the primary reason to consider any such plan. Having life insurance lets you pursue your dreams without worrying about the future of your family and loved ones. Depending on the value of the sum assured chosen, your nominee may be free from financial stress, even when you are not around.

• Liquidity

After the lock-in period, most ULIP policies allow the policyholder to make partial withdrawals. If you face any emergencies during the policy duration or need funds, you can turn to your policy. There may be limits on the amount you can draw from your plan, and also on how often you may make partial withdrawals. These may vary across plans and policy providers.

• Tax Benefits

ULIPs can also act as tax-saving instruments. The premium paid into your plan as well as the benefits received may be eligible for tax exemptions. Your financial advisor or tax consultant may be able to guide you better about what specific tax benefits you may expect from your policy.

• Long-term growth

Plans like ULIPs are known to yield better results over longer periods of time. This is commonly attributed to the ‘power of compounding’. Thus, a policyholder can use such plans as a part of their long-term financial goals. A ULIP calculator may help you get a better idea of how the duration of your plan may affect your returns.

• Flexibility

A single ULIP plan can offer you a range of fund options to choose from. Depending on your goals, you may choose the right funds for yourself. Since your goals may change or grow over the years, you may also like your plan details to change. ULIPs offer you this flexibility. Policyholders can switch funds as per their requirements. However, you are allowed to switch funds only a finite number of times each year. Fund switching beyond this may attract charges.

These are some of the most popular ULIP benefits that may make the plan more appealing to you. Remember, the details of a policy may differ across plans and insurance providers. Ensure that you have a thorough understanding of a policy before you make a purchase.