What is a ULIP (Unit Linked Insurance Plan)

Buying a ULIP online is as safe as buying a mobile phone or any other household stuff. Safety and transparency is at the core of Max Life Insurance online solutions. It can be broken into 3 parts:

• While reading through the product details – All the charges and the terms and conditions of the product are displayed on the company website. You can read the IRDA approved product brochures to get a sense of what product has to offer and how will the company invest your money
• While filling the application form: The personal details that you share while filling the application form are kept completely confidential in the system. The details like your phone number and/or email id are used only to communicate important policy information to you only if you allow company to. You have an option to opt out of the communication
• While making the payment: Your payments are processed through very secure payment networks. These are very robust systems that do not allow any kind of data leakage or frauds.
• During customer services: There are auto-servicing options available to you. You can log on to our website to avail services like downloading premium statements, making renewal premium payments, changing your personal details and a host of other online services. These are completely free of cost. Aside, you may also call us our 24X7 services dial-in numbers to avail any services.
  

Save tax under Sections 80C & 80CCC

A ULIP product comes with a lock-in period of five years. This product also comes under the exempt-exempt-exempt (EEE) category for the income tax.

You can get the tax benefit while investing which means the earnings from the fund are not taxable and the maturity is also not taxable under section 10D of income tax.

This follows from the income tax provision that 'any sum paid to keep in force' a life insurance policy can be claimed as a deduction. This includes the extra components like GST etc. that have been paid to the insurer.

The two key provisions of the Indian IT Act that are applicable for ULIP plan are:

·         Section 80C (life insurance premium is exempt from tax)

·         Section 80CCC (amount paid towards pension plans is tax exempt)

·         Section 10D

According to these provisions, an exemption of up to Rs. 1,50,000* is allowed under section 80C and section 80CCC in a financial year. This means that while you can certainly invest a higher amount, the total available deduction is capped at Rs. 1,50,000* per annum.

The important condition to keep in mind is that the yearly premium should be less than 10% of the sum assured offered by the ULIP. Hence, if the sum assured is Rs. 15 lacs and the yearly premium is less than Rs. 1.5 lacs, the entire amount is available for deduction. However, if the premium is higher, say Rs. 3 lacs for the same sum assured of Rs. 15 lacs, the available deduction is still Rs. 1.5 lacs - i.e. (10% of Rs. 15 lacs).

In addition, to claim the deductions, the ULIP must remain active for at least two years. Also, if you stop the ULIP during the second year, the benefits availed in the first year are also withdrawn. So ensure that you have a long-term investment horizon and continue to pay the premiums for the entire paying term.

The sum assured that is paid out for the life insurance cover is also tax exempt under Section 10D. Along with this the fund corpus that you will get under the plan benefits as the Maturity amount will also be tax exempt.

* Tax benefits are subject to the changes in tax laws. All the tax benefits are subject to the tax laws prevailing at the time of payment of premiums.

Few insurers may offer discounts due to reduced distribution costs. However, you get the benefit of minimal charges in online products. For example, in the online savings plan, there are no policy administration charges and no policy admin charges.

The company is offering two variants of the product - Wealth and Child and aims at achieving maximum return for its customers.

These variants of the online ULIP product from Max Life Insurance have several unique propositions that give the customers freedom to choose any combination of the premium payment term and the policy maturity term (minimum 5 years to maximum 30 years) and decide the sum assured in the Wealth Solution. The Child Solution variant offers inbuilt benefits for the child in case of the death of the insurer.

Wealth Variant – Maximizes long term wealth creation while offering tax exemption on premiums paid and maturity proceeds (under applicable income tax laws). This variant offers a unique flexibility to choose a higher life insurance cover.  

Child Variant – In addition to creating long term corpus this variant offers a triple protection benefit to ensure that the financial future of the child is secure even in case of death of the parent insured.

Child variant offers:-

i) Lumpsum payout of Sum Assured in case of death of the parent insured: To take care of immediate short term needs

ii)  Monthly Family Income Benefit of 1% of Sum Assured: To take care of recurring expenses like school fees etc.(Refer detailed brochure for detailed benefit)

All future premiums will be funded by Max Life Insurance: To ensure that policy continues even after the death of the parent Insured so that the corpus planned for child’s future continues to grow.  

ULIP is a relatively complex life insurance plan wherein each variant has its own set of features & benefits, and charge structure. While the benefits a manifold, the complexity of understanding the details can’t be undermined. To make this process easier and simple, keep the following checklist in mind:

-       Do you research and read extensively about ULIP plans, understand as much as you can

-       While you leave a lead with any insurer, make sure to interact with their sales call centre to clarify all your doubts about ULIP charges & payout structure for the fund value as well as cover amount

-       Understand the charge structure that applies at the time of purchase as well as throughout the life of the ULIP plan

-       Don’t make a decision based on just the features rather identify a plan and fund that best suits your financial risk appetite and life stage. If you have a high risk appetite, invest in a high-risk, high-return equity fund.

You should always check how a fund has performed over the last 3-5 years before you invest your hard-earned money

With a Unit Linked investment plan, you get an opportunity to invest your hard-earned money in equity & debt funds. This market-linked insurance plan gives you an opportunity to earn returns for your investments based on markets. While you set out with a goal in mind, it is important to spread your risk across different asset classes. This will help you to get balanced returns, i.e. if a loss happens on a particular asset class, it can be offset by profit made on another. This will help to reduce the overall risk of your investments.

At the same time, ULIPs give you the flexibility of free switches between funds. This will enable you to make the most of changing economic scenarios, as well as utilize your increased income pool in the future.

1.      Understand your life stage needs

On the financial risk profile scale, you may range from a conservative investor to a risk taker. While this will help you to decide between the fund choices, be judicious & switch from riskier equity funds to less risky debt funds as you get older, and are nearer to your goal realization time period.

2.     Balance your debts and equities

Selecting between the debt and equity ratio depends on your life stage needs. As a thumb rule, if 100 is the total investment you must deduct your age from this and invest the remainder into equity. For example, if you are 30 years of age, then you should invest (100-30) 70% in equities and 30% in debt.

3.     Utilize the power of fund switching options

Once you understand fund value movement and how it interplays with the equity market, you can try using switching option available with ULIPs. This option is available free of cost with Max [SK(H-L1] Life Online Savings Plan[RD(H-DC2] [a3]  & can be used any number of times in a year.

4.     Marry changing economic scenarios to your fund choices

When market sentiments suggest that equity markets are overvalued and expensive to enter, you may switch from equity funds to conservative debt funds. And it may be a good strategy to switch back only when equity markets have corrected. It is always a good idea to stay up-to-date with market trends, as your have invested your hard-earned money and this will help you to make more money with your money.