Do ULIPs Offer Guaranteed Returns?

Jun 11, 2018 | 1 year ago | Read Time: 2 minutes | By iKnowledge Team

Unit Linked Insurance Plans (ULIPs) are long term investment products that do not provide guaranteed returns.

Unit-linked insurance plans (ULIPs) are insurance products that provide avenues to invest. And, just like some investment options, their returns are not guaranteed.

Understanding ULIPs?

When you invest in ULIPs, a part of your premium goes towards your protection cover and the remaining is invested in the fund-type of your choice. You usually have two funds to choose from: equity-oriented funds and debt-oriented funds.

If you want your investment to get you more returns, you can opt for equity funds. On the other hand, a risk-averse investor can go for debt funds.

While the risk component may vary, there is risk in every market-oriented fund. That’s because these funds’ performance depend on how well the markets are doing.

So, why are ULIPs so popular?

Risk is an integral part of the any investment option. ULIPs too are subject to market risks. They are designed to offer returns in long term. the benefits attached to them make them a desirable investment option.  

Benefits of ULIPs:

  • Dual Benefit

ULIPs offer the benefit of investments and protection. While the investments grow wealth, the protection takes care of life insurance cover.

  • Tax benefits

Section 80C of the Income Tax Act permits you to save tax when you invest in ULIPs. You can claim a deduction of upto Rs 1.5 lakh for the premiums that you pay towards a ULIP. Your maturity proceeds too are tax free, subject to certain conditions.

  • Potential to deliver attractive returns

ULIPs plan can fetch you good returns in the long term as the returns are linked to markets. Long term disciplined investing helps in creating a corpus that can help you achieve your financial goals such as buying a home or a car in the future.

  • Flexibility to invest

ULIPs offer flexible investment options that invest in multiple type of funds. They allow you to choose your fund as per your risk appetite and goals. Moreover, you get an option to switch between funds to tackle market fluctuations. You can also withdraw a part of your investment through the partial withdrawal option. The top-up option allows you to increase your investment component for extra premium.

  • Transparency

The structure of ULIPs is transparent. There is a clear mention of all the associated charges. The insurer also keeps you updated about the fund’s performance through timely reports. This allows you to track your investments. ULIPs also allow you to switch from one fund to another. For instance, Aegon Life’s iMaximize plan gives you the option of choosing from six funds. So, if one particular fund isn’t performing well, you can always divert your money to another fund.

Are they ideal for all investors?

ULIPs are ideal for these investors:

  • Those with a medium- to long-term horizon
  • Those who want the benefits of insurance and investment with a single product
  • Those who can keep a track of how their investment is performing

The bottom line

 ULIPs  allow you to tap the market. In return for a premium, you can secure your life and enjoy investment returns..

To know more about ULIPs : https://www.aegonlife.com/insurance-investment-knowledge/wealth-creation/ulips/

Advt. no.: IA/May 2018/4025


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