5 Changes in ULIP Plans You Should Know

With the rise in the inflation rate, the need of the hour is an investment with good returns. Now you’ll ask in what investment plans you should put your hard-earned money, where you get good returns with some add-on benefits. Many will say mutual funds are the right option, and many say the ULIP plans are.

But with the announcement of LTCG (Long-term capital gains) in 2018, on equity investments, investors are seeking other options that will help them in wealth creation and market-linked returns.

ULIP plans offer many benefits other than investment, such as insurance and flexibility. So, it’s clear that with the declaration of LTCG in 2018, ULIPs are the better investment option for you. To get a better idea of ULIP plans, given below are the changes made in these plans post-LTCG that you should know:

1. Tax Benefits

Even before the introduction of LTCG, ULIPs always had the edge over mutual funds when it comes to tax benefits. Under Section 80C of Income Tax Act, the premium paid towards ULIP plans up to Rs.1,50,000/- is tax-free. Also, both maturity benefit and death benefit are tax-exempt under Section 10 (10D).

However, in case of mutual funds, if you’ll withdraw any money before one year, it will be subject to short-term capital gains tax at 15%, and after one year, the tax deduction will happen with the newly introduced LTCG at 10%.the  While ULIPs plans are tax-free even after the introduction of LTCG tax.

2. Cost And Charges

High ULIPs charges were brought down significantly in 2010. However, ULIP plans continued to be more expensive. But the cost structure of new ULIP plans are so economical that they compete with the low-cost direct plans. These plans have low or zero policy administration charges and fund allocation charges. It would help if you did not consider the mortality charge imposed by ULIPs, as these plans offer you with life cover.

3. Returns

History works in favor of mutual funds as they have been in the market long before ULIPs. Investors can look into the history of the returns offered by mutual funds. But if you are looking for more prolonged investment options, then ULIP plans are for you. Also, the introduction of LTCG has narrowed down the difference in returns between the two investment options. ULIPplans offer moderate to high returns depending on the market’s performance.

4. Lock-In-Period

Lock-in period is the most crucial aspect that you should look for before you opt for any of the investment options. ULIP plans have a lock-in period of 5 years, which helps you create a wealth that you desire. According to financial analysts, ULIP plans will most probably start delivering higher returns than mutual funds after at least 10 years of investment. So, if you are thinking about long-term investments that ULIP plans are for you.

5. Flexibility

With the rise in market volatilities, as an investor, your priority will be to invest in a flexible option. ULIP plans help to switch funds from debt to equity or vice-versa. ULIP plans also allow you to change the ratio of your invested amount, without any additional expense.

ULIPs- The Investment For Better Tomorrow

What to do? ULIP plans have evolved over the years and become better with each revision. Mutual funds are a pure form of investments that offers short-term to long-term with better liquidity. ULIPs, on the other hand, has emerged as an attractive option for someone who wants to fulfill both his insurance and investment needs via the same product.

ULIP plans from reputable insurance companies such as Max Life Insurance provide you with an investment as well as an insurance option. Where the part of the premium paid is invested in equity and debts depending on your risk appetite, while the remaining portion is deducted in the form of mortality charge that provides life cover, this upgraded version of ULIP plans deserves your attention.