There are plenty of investment plans available in the market. When people buy insurance, some people want to enjoy the offered insurance benefits while some want to enjoy insurance as well as Investment benefits. Over a period of time, investment options such as ULIP Plans have come a long way. When Unit Linked Insurance Products were launched, it built a bad reputation for being an expensive investment option.
If you look at the journey of ULIPs, sure it has been full of ups and downs. The best thing about ULIPs journey is its evolution. ULIPs have evolved to be the best investment option. In its nascent stage ULIPs might not have been a sought-after investment option, but now they are.
With investment options, investors have also evolved. Despite its re-design, ULIPs’ awareness among the investors is not up to the mark. A few investors are willing to give ULIPs a much-needed chance. It is because ULIPs have been revamped by the Insurance Regulatory and Development Authority of India. The new age ULIP plans are the outcome of various regulatory changes.
If you are considering NULIPs i.e. new age ULIP plans, then this article is for you. Here is Everything You Need to Know about New Age ULIPs
Much Needed Ease of Access and Flexibility
Have a look at the stand out features offered by the new age ULIP plans.
1: Premium Redirection- NULIPs come with a facility to select the allocation of funds for renewal premium.
2: Partial Withdrawal- NULIPs come with a facility redeem funds partially in case an investor face a financial crunch. Most insurers offer the facility of withdrawing up to 95 percent of the value of the fund.
3: Switch- NULIPs come with a facility to switch money from one fund to the other. Typically, insurance providers offer 4 free switches per policy year, after which, switching charges are levied.
4: Settlement Option- NULIPs come with a facility to receive the maturity benefit of up to five years in pre-stipulated installments.
5: Flexibility- Various NULIPs offer the facility of decreasing or increasing the policy tenure, as well as the premium payment term. After paying premiums for five years, the policyholder can retain/ reduce the original assured sum.
The aforementioned features have been modified over a period of time. These features have their own terms and conditions.
A majority of insurance companies have are available online. Accessing the flexibilities is easy and convenient. Be it submission of partial withdrawal requests, switching funds, making fund allocations, tracking the performance of the fund, all the services can be availed online in a matter of a few clicks.
Typically, ULIPs attracts various charges such as:
1: Policy Administration Charges- It is deducted on a monthly basis as fixed Rupees or as a value a percentage of premiums.
2: Premium Allocation Charges- At the time of premium payment, it is deducted as a percentage of premiums.
3: Fund Management Charges- It is deducted as a percentage fund value.
4: Mortality Charge- It is deducted on the basis of investors risk appetite and age.
Gone are the days when ULIPs used to come with high charges. In New age ULIPs, apart from risk cover charges; the charges over the investment horizon of 10 years can’t be higher than 3 percent. For 15 years the charges can’t be higher than 2.25 percent in the annualized returns at the rate of 8 percent per annum.
The FMCs i.e. fund management charges for new age ULIPs are fixed at 1.35 percent p.a. of the value of the fund value.
As for the mortality charges, the improving medical facilities and data available with the insurance providers, the charges have been drastically reduced. As savings-oriented investors get old, they tend to invest in a ULIP along with a younger member of the family. It’s because it helps to reduce the mortality charges.
There are some new age ULIP plans that refund mortality charges when the plan matures.
This makes new age ULIPs one of the best investment options that provide access to various asset classes. Additionally, it offers life cover at a competitive premium.
Tax benefits and No LTCG
As per Section 10(10D) of the IT Act, 1961, new age ULIPs having an assured sum that is 10 times more than the annualized premium are tax-free. It means that LTCG tax i.e. long-term capital gains tax isn’t applicable for such ULIPs.
Additionally, the investors can move their money between cash funds, debt funds, and equity funds without attracting any tax liability.
In a Nutshell
The benefits offered by new age ULIPs make them the best placed ULIPs ever. It makes it preferred investment avenue different investors having long-term investment timelines. The investors having investment timeline below 5 years should give NULIPs a miss. New age ULIP plans come with a lock-in period of 5 years.
It is time long-term oriented and systematic investors give NULIPs a much-need chance. The latest version of ULIPs offers best of both worlds i.e. savings benefits as well as protection benefit.