What are online ULIPs?
Online ULIP’s are cheaper as there is no involvement of any intermediary and the entire amount of the premium is invested in funds. The charges applicable are policy administration cost, fund management fee and mortality charge. Buying ULIPs online also saves your time. You can buy it anytime and anywhere. You just have to visit the company’s website and provide all your details. Further, you have to scan your documents and submit it through mail or courier them to the provided address.
That being said, it is important and essential to have a sound understanding of the product before you buy it online, for example – What is ULIP. Read all the details provided carefully before selecting the policy.
ULIPs offer the benefits of investment and insurance under a single product. ULIPs not only offer family protection throughout the policy term but also provide returns on investment. Additionally, it helps investors to fulfil their long-term financial goals through their investments.
Triple E (E-E-E) Tax Treatment
Unlike most other financial instruments, ULIP enjoys a distinction of having EEE Tax treatment, which means your money is exempt from tax at the stages of investment, accrual and withdrawal. The premiums are eligible for tax deduction as per Section 80 C of the Income Tax Act, 1961. Section 80C allows a deduction of up to Rs 1,50,000 for various investments and spends. Then as per Section 10 (10D), the gains from the ULIPs at maturity are tax free.
No LTCG Tax
The government introduced long term capital gains tax recently on gains from several financial instruments. However, the ULIPs continue to remain exempt from the applicability of this LTCG tax, making it much more attractive than other financial instruments that invest in the capital markets.
ULIPs offer the selection between different types of funds. Moreover, once invested in a fund, this product allows you to switch to another fund. Switching option allows you to change the funds based on your risk appetite. For instance, you can shift your funds from equity funds to debt funds or vice-versa as per the risk exposure.
In the case of ULIPs, the lock-in period is calculated from the date the policy is issued. ULIP provides a lock-in period of 5 years. The longer lock-in period helps an individual to inculcate a habit of disciplined investing. This can be of immense help to individuals who find it difficult to remember to make their investments from time to time.
ULIPs invest the premium paid by you in various asset classes through different funds. Tax-saving funds have historically given double-digit returns, but you need to look for a new fund every year, in case of a onetime investment.
Many online ULIPs also allow return of mortality charges at the time of maturity of the policy. This could significantly improve the returns that you earn on your investments over the period of investment. Mortality charges are the charges levied by the insurance company for the protection cover offered to nominees in case of death of the policyholder.
Unlike some other investments, you can easily keep a track of your investments in a ULIP. As it is a combination of two benefits of insurance and investment, you can also keep a track of percentage of your premium that is invested, along with with the charges levied.
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Additional coverage in the same product
If you have some surplus at some point after you buy a ULIP, you can use the options to have additional coverage in the same policy, instead of buying a new one. Moreover, ULIP benefits include additional rider options like accidental death rider, critical illness rider and term rider, which can be useful to you and your family in certain emergencies.