Unit-linked insurance plan is a market-linked insurance plan which aggregates best insurance and investment. This type of plan is linked to the capital market and offers flexibility to invest in equity as per risk appetite. Premiums in a ULIP can be chosen and the sum assured gets calculated accordingly. This is different from any traditional life insurance plan, where the sum assured needs to be chosen and given your age, the premium is calculated accordingly.
The premium for ULIP is divided into multiple categories. The subcategories for the charges are Premium Allocation charges, Policy administrative charges, Fund management charges, etc. Mortality is charged for the sum assured chosen and the rest of the amount is invested according to the option selected by the policyholder.
There are some other charges like surrender charges, switching charges, discontinuance charges, etc. which is applicable only if the option is executed and not otherwise.
Some ULIPs and their premiums
There are many good plans out there for ULIP with different premiums.
- Aegon Life I maximize secure plan – The minimum entry age is 7 to 55 years and the minimum premium charged for this plan is from INR 24,000 to INR 36,000. The admin charges will be INR 100. The policyholder can switch 4 times in any year free of cost.
- Bajaj Allianz Future gain – Minimum age of entry is 1 to 60 years. Minimum premium charges are INR 25,000. Policy admin charges are as low as INR 33.33. The policyholder will get to switch between policies as many times as they want.
- PNB MetLife smart Platinum – Minimum premium payment for this policy is INR 30,000 to INR 60,000. Maximum admin fee you will be charged is only INR 40. Free switches are only 4 times a year.
- Max Life Fast track growth Fund – The minimum premium paid for this policy is INR 25,000 to INR One Lakh. The maximum admin fee charged to the policyholders are INR 1,500 every year.
- SBI Life Wealth Assure – The minimum premium payment is INR 50,000. You will be charged an administration fee of INR 45 every year.
- ICICI Prudential wealth builder 2 – The premium payment varies from INR 24,000 through INR 48,000. For this policy, the policyholder will be charged INR 500 every month.
Tax Saving in ULIPs
Smart tax planning is the first step for sensible financial planning. Spending on ULIP products is considered one of the most reliable tax saving options in India. Along with the money creation benefits it offers in the long term, ULIP offers you to save some tax on your income every year.
Under the Government of India’s income tax act, under the section 80C, policyholders of ULIP can save up to 1.5 lakhs for the premium payment every year. Even the maturity benefit is tax free for all insurance plan U/S 10(10D). The only condition to keep in mind for the tax saving is that the premium payment should be only 10% of the sum assured …