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Unit-Linked Insurance Plans vs Equity Investments: What Should You Invest In?

Jul 02, 2018 | 2 years ago | Read Time: 3 minutes | By iKnowledge Team

January to March is peak season for insurance companies as policyholders flock to them to fulfil their tax-saving needs. After Budget 2018, the reintroduction of the long-term capital gains tax has suddenly brought back the spotlight on ULIPs. They may now be considered as an alternative to equity as they help save tax.

ULIPS also offer a long tenure of 10 years and up, and are said to yield better results than traditional products. That’s why, we give you a lowdown on how insurance companies have designed ULIPs to cater to various needs of consumers:

1. New ULIPs

To cater to the growing number of ULIP applicants, insurance companies have launched ULIP plans that help consumers plan long-term wealth or retirement corpus. Various companies are offering ULIPs with several benefits to policyholders. ULIPs come with the double benefit of insurance and investment. Most invest in ULIPs based on their investment objectives such as child’s education, retirement, medical and personal emergencies or fund corpus. It is also used to create wealth, with plans like life stage based or non-life stage based, guarantee or non-guarantee, single premium or regular premium.

2. Types of ULIPs

There are various types of ULIPs flooding the market. For instance, there are ULIPs for retirement, ULIPs for wealth collection, ULIP for children education and ULIPs for health benefits. Some ULIPs invest in equity funds, some in income, fixed interest and bond funds, while others invest in cash or balanced funds.

That’s why, investing in unit-linked insurance plans such as Aegon Life’s iInvest Plan, it will be a holistic approach to your portfolio over equity funds.

3. Benefits of ULIPs

ULIPs have various benefits like transparent structure, features, and charges, flexibility to switch between funds, various premium paying frequencies, rider options etc.

Some of them are:

  • Fund managers help you make the right investments with a team of analysts, economists and other professionals helping them.
  • It is a good combination of two important products that concern your financial future. You are ensured protection and at the same time, you get to plan your finances.
  • It offers you enough flexibility, as it is possible to increase or decrease the insurance cover. This is only in case of plans with tenure more than 4 to 5 years and only some providers offer these plans.
  • You can pick a ULIP based on your risk capacity. They offer funds such as equity that invest in company stocks, balanced funds, cash funds or income funds.
  • You can also switch funds based on your needs and changes in investment goals. You can also withdraw funds partially if faced with an emergency.
  • Any income generated by the ULIPs will be tax-free as it is governed by Section 10D of the Income Tax Act. You will get tax benefits under Section 80C as well as 80D.

4. The LTCG tax

Now that the budget has imposed a 10 % long-term capital gains tax (LTCG) on equity investments, investors are now expected to move to ULIPs. This could be an alternative to investing in equity funds that may no longer seem lucrative after the introduction of LTCG tax.


ULIPs are a good alternative if you are looking for both life cover and wealth creation. Whereas, equity investments are only offer wealth creation. Both equity investments and unit-linked plans have their pros and cons, and depending upon your financial need you should invest in one. For short-term goals, equity investments offer good results, whereas for a long-term goal such a child education, buying a house, or planning a wedding – unit-linked plans will be a better option. Additionally, ULIPs can help you save tax , whereas income received from equity investments will be taxable.

That’s why, understanding which financial goal you wish to fulfill, will help you plan and invest in the right wealth creation tool.

Advt. no.: IA/Jun 2018/4141


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