A financial portfolio is incomplete without the presence of a strong investment plan and a well-designed life insurance policy. What if you could achieve both the targets - investment and insurance coverage - with just one plan? A Unit-Linked Insurance Plan (ULIP) allows you to do just that.
With IndiaFirst Life Term with Unit-Linked Insurance Plan or TULIP, you get the best of both worlds. The life cover aspect of the plan provides financial security to your loved ones. The investment aspect allows you to generate wealth through the fund options of your choice. Read on to learn more about TULIP, how the plan works, and what are the things to consider while buying a TULIP plan.
What is TULIP? How Does It Work?
TULIP is a unit-linked life insurance plan that provides life insurance coverage and the chance to earn investment returns under one plan.
The premium of the TULIP plan is used to support the life cover amount and to invest in the fund option of the policyholder’s choice. One can invest their money in equity, debt, or balanced funds depending on the risk appetite. The returns from the TULIP plan depend on the fund’s performance.
In case of the life insured’s demise, the nominees of the plan receive the life cover amount. This can help them tide over their financial difficulties in the absence of the breadwinner.
Features and Benefits of TULIP
Now that you know how the TULIP plan works, let’s look at the specific features and benefits of the plan to understand it in more detail.
50X Life Cover Amount
With this kind of ULIP plan, you get to enjoy a life cover that is 50X of your yearly investment amount. This ensures a strong financial future for your loved ones.
10 Diverse Fund Options
The TULIP plan provides up to 10 diverse fund options. So, no matter your risk appetite, there’s a fund type for you.
Free Fund Switches
Your risk appetite might change with time. With TULIP, you can align your fund options with your changing risk appetite without incurring any charges.
Multiple Investment Strategies
Just as your risk appetite changes, so will your investment goals. Thanks to the multiple investment strategies available with this ULIP plan, you can shift your funds in a direction that suits your goals.
Return of Charges
With TULIP, you get the mortality charges and fund allocation charges returned to you in the maturity benefit amount.
What to Consider While Buying a TULIP Plan?
To make the most of the ULIP benefits available with this plan, make sure to consider the following during the purchase process:
Your Budget
When purchasing a life insurance policy, opt for a life cover amount that comes within your budget. For optimum planning, use a ULIP calculator.
Risk Appetite
Each fund option comes with a certain level of risk. If you choose an equity fund, the majority of your investment money will be directed to market-linked options. This is ideal for those with a high-risk appetite. Debt funds are suitable for low-risk investors. For those who can tolerate moderate risks, there is the option of balanced funds.
Investment Strategy
It is one of the most important things to consider while buying a TULIP plan. Consider aspects like your desired goals, risk tolerance, expected returns, investment horizon, and so on. This will help you choose the right investment strategy from the various available options.
Duration of Investment
Ask yourself - how long can you invest in a ULIP? The longer you invest, the better. ULIP returns in 10 years or 15 years will be comparatively higher than the returns in a 5-year or 7-year period. However, you should not have to compromise on your goals for the sake of higher returns. Choose a tenure keeping these factors in mind. A ULIP calculator can be a great help at this stage as well.
Flexibility and Liquidity Needs
ULIPs come with a 5-year lock-in period. So, keep in mind that you will not be able to withdraw funds for this while. Once this period is over, you can partially withdraw funds to meet your financial needs.
However, also note that you can make unlimited fund switches with the TULIP plan. This will make your investment journey more flexible.
Taxation
As per recent tax laws, ULIPs, whose annual premiums are over ₹2.5 lakhs or whose premiums exceed 10% of the policy value are considered capital assets. They will be taxed as such. Hence, consider the ULIP taxation rules while finalising the plan.
TULIP is ideal for those who want to secure not only their family’s future but also their own dreams. Adding a TULIP to your safety net can help strengthen your financial portfolio to a great extent. Before you invest, make sure to know how TULIP works, and what things to consider while buying the TULIP plan. This will help you make a well-informed decision and ensure a financially sound future for yourself and your loved ones.
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