The financial products, ULIPs or Unit Linked Insurance Plans, are blended. With ULIPs, you can simultaneously meet the requirements for a reliable life insurance policy and grow your investment portfolio to cover future expenses such as retirement, children's college tuition, medical bills, and child marriage, among other plans.
UTI first offered ULIPs in 1971 as a valuable financial tool with guaranteed extra coverage. However, due to high upfront fees and additional fees levied by distributors and agents, its acceptance gradually became hollow.
Evolution of ULIPs in India
Over the years, there have been numerous changes to the Indian investment market. Since they were first introduced ten years ago, ULIP plans have changed like any other investment instrument. The ULIP plans have evolved in the modern era and now include many cutting-edge features. Let's talk about the evolution of ULIPs right now.
Before 2010
Due to high front-load costs and other fees, ULIP Investment's popularity declined after it was introduced to the market. The plan was also frequently misrepresented as a three-year savings plan. The customers were given incorrect information about the lock-in period when they were informed that they would have to pay premiums for a maximum of three years. To achieve good ULIP returns, long-term investment in ULIP plans is necessary.
Between 2010-2015
As soon as the Insurance Regulatory and Development Authority of India, or IRDAI, realised that ULIPs were being missold to consumers, they put forth a set of regulations. These rules were implemented to guarantee that investors would receive better returns. As a result, ULIP costs were generally restricted in September 2010, and the lock-in period was extended to five years.
From 2015 Onwards
In 2015, there were some significant changes to the costs related to ULIPs. The morality fees and the costs of managing the funds were now capped. After that, investors found ULIPs to be more alluring and appealing.
Ulips Today
Despite a rocky beginning, ULIP plans are now very well-liked because they provide high returns over the long term. The product is being redesigned to be more efficient. Investors are beginning to invest in ULIPs as they become more aware of the concept and more specific about what it is. The wealth amassed over time with the aid of ULIP can be used for long-term objectives like retirement planning.
Why Choose ULIPS
With the ULIP plan's investment component, you can get insurance and build a sizable fortune. Do you still need to figure out the benefits of a ULIP? These ideas are beneficial.
Flexible Investment Options: You can alternate between investing in stocks, bonds, and balanced funds, depending on your level of risk tolerance. In addition, top-up plans let you increase the amount you contribute to your savings.
Dual-Benefit: India's first financial product to offer investment and life insurance protection through a single investment is a unit-linked insurance product or ULIP. As a result, you can protect your future without buying separate investments and insurance plans.
Tax Benefits: You can deduct taxes from the returns you receive at maturity under Section 80C of the Income Tax Act. An investor may receive up to INR 150,000 annually for their ULIP investments. Similarly, under Section 10D of the Income Tax Act, the returns you receive when your ULIP policy matures are tax-free. Additionally, Section 10 (10D) of the Income Tax Act exempts the sum received by the nominee following the insured's death from taxation.
Bottom Line
Financial planners typically advise keeping investments and insurance separate (ie term plan for insurance coverage and mutual fund for insurance). For most investors, this is the best course of action. For "evolved" investors, who can navigate the confusing array of charges and fees, ULIP is still a good product.
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