Well, if you belong to the cult that thinks that 'life is a bed of roses,' then you are still in your mere bubble of deep slumber. Life might be a bed of roses, but those roses come with thorns too.
Life is like a roller coaster ride with its fun and scary highs and lows. Therefore, one must be ready to surpass all those buffers smoothly. Emotionally it doesn't stay strong, but one must be financially backed up enough to fight off the hardships in life such as - death, marriage, taking care of your aged parents, medical emergencies, children, their education, and many more.
It is why one should always have investment options open to earn, save, and invest enough so that their buffer phase at least remains financially secure.
This blog will guide you in understanding,
- What is life insurance and its importance?
- What is a unit-linked insurance plan?
- What is the difference between life insurance and ULIP?
- Best life insurance policy in India to buy in 2022
- Best ULIP plans to consider in 2022
What is Life Insurance?
Life insurance is a safety net that safeguards the life insured and their family when they need economic stability the most. The policyholder first pays premiums to the insurance company (based on the opted plan). Later, if the life insured meets with an untimely demise, the insurance company pays the beneficiary with the death benefit (lump sum).
However, if the life insured sails through the insured, the insurance company shall pay the policyholder with maturity benefit. Life insurance is a vast pool that comes with many life insurance types. All of them cater to the different needs of people from different walks of life.
Different types of life insurances are as follows:
- Term Life Insurance Plans
- Unit linked insurance plan (ULIP)
- Health Insurance
- Group Life Insurance
- Endowment Plan
- Child Plan
- Retirement Plan
- Money-Back Policy
- Whole Life Insurance
The benefits of having life insurance are as follows:
1. The primary motive of buying life insurance is to prepare a monetary haven for your loved ones if you meet with death.
2. Besides availing death benefits, it also helps achieve long-term goals such as paying your child's school expenses and other related expenditures. As life insurance provides full life coverage, as the name suggests, it also acts as a safe economic zone for your post-retirement life.
3. Life insurance also comes with tax benefits. Under this leverage, the policy premium the policyholder pays is entitled to a tax exemption of over 1.5 lakhs under Section 80C of the Income Tax Act (1961). Similarly, as per Section 10(10)D of the Income Tax Act, the death benefits are likewise totally tax-deductible.
What is a Unit Linked Insurance Plan (ULIP)?
Unit linked insurance plan can be considered a best of both world deal as it is a profitable mixture of investment and insurance.
Under this insurance type, the life insured pays a premium to the insurance company where a portion of the payment is utilized as life insurance coverage. In contrast, the other part of the premium is wisely invested in other investment products such as - equity, mutual, and others.
Some of the benefits of owning a ULIP plan are as follows:
1. As ULIP also gives the user an advantage of investment, this insurance type gives the policyholder a chance to earn market-linked profits by investing a percentage of the premium in market-linked assets. Here the life insured can even hit the jackpot if the investment goes right.
2. Depending on your changing requirements, the ULIP plan gives you the freedom to switch between investing funds. The policyholder can also conduct partial withdrawals after the introductory 5-year lock-in time has expired.
3. Like life insurance, the premium paid for ULIP plans is also tax-deductible under Section 80C of the Income Tax Act (the upper limit 1.5 lakh). The maturity/death benefit is also labeled as tax-free under Section 10(10D) of the Income Tax Act (1961).
Difference Between Life Insurance and ULIP
After understanding the definition and benefits of both the policy types, let us get down to understand the differences, and they are as follows:
- Life insurance comes with zero risk as it moves in the exact chronology the insurance company mentions. However, ULIP comes with certain risk possibilities because a part of your premium is invested in the investment products subjected to market risks.
- Under life insurance, the premium is standard, and the individual portfolios' tracking stands no chance. In comparison, most ULIP plans allow users to keep track of their portfolios.
- In life insurance, the life insured cannot take the liberty to swap funds since the insurance company makes the decision. In comparison, the policyholders using ULIP plans can adjust the equity fund.
- If we talk about expenses, regular life insurance has substantial operating costs. Here, IRDA (governing body) does not impose any upper restrictions. The charges included here are - premium allocation cost and mortality charges. Coming to the ULIP plan, because there is no IRDA limit, the costs of managing ULIPs are high. They include mortality charges, insurance premium allocation costs, investment management expenses, and administrative fees.
Best Life Insurance Policy to Buy in India
Aditya Birla Sun Life Insurance Life Shield Plan
This plan by the ABSLI provides the life insured with 8 flexible options that come with various benefits that are all set to cater to multiple needs of the people suiting their pocket and requirement. The alternatives are as follows:
Option 1 - Level Term Assurance
Option 2 - Level Term Assurance with Waiver of Premium (WOP) Benefits
Option 3 - Increasing Term Assurance
Option 4 - Increasing Term Assurance with Waiver of Premium (WOP) Benefits
Option 5 - Decreasing Term Assurance
Option 6 - Decreasing Term Assurance with Waiver of Premium (WOP) Benefits
Option 7 - Return of Premium
Option 8 - Return of Premium with Waiver of Premium (WOP) Benefit
Some of the features of this plan are as follows:
Death Benefit: As per this feature, if the life insured passes away when the policy term is active, the death benefit shall be paid to their selected beneficiary. Then, the plan is declared canceled.
Premium Waiver: Unfortunately, if the life insured suffers from permanent disability or a severe illness, all further premiums are forgiven. Even though the premiums are annulled, the death benefit shall stand unaffected.
Joint Life Protection: Life is filled with additions and subtractions. Therefore, marriage is a beautiful addition, and with the benefit of the kitty, you can create a safe environment for them. You add your wife as secondary life insured and protect under the same plan with this option. Here, the sum assured for your better half will be equivalent to 50% of your sum guaranteed.
You also get customizable benefits that come with some extra cost, and they are as follows:
ABSLI Accidental Death and Disability Rider
ABSLI Critical Illness Rider
ABSLI Surgical Care Rider
ABSLI Hospital Care Rider
ABSLI Accidental Death Benefit Rider Plus
To know more about the offering by this plan, click - ABLSI Life Shield Plan.
Best ULIP Plan to Buy in India
Aditya Birla Sun Life Insurance Smart Growth Plan
This unit-linked insurance plan provides life insurance and the opportunity to select from 16 different fund options and 5 investment methods. But, one should be aware that ULIP is prone to investment risk as per market fluctuations.
The 5 investment options were,
Systematic Transfer Investment Option
Return Optimiser Investment Option
Smart Investment Option
Life Cycle Investment Option
Self-Managed Investment Option
Some of the features of this ABSLI unit-linked insurance plan are as follows:
Death Benefit: Under this feature, the insurance company will pay the death benefit to the beneficiary if the life insured dies (provided all required premiums are paid).
Loyalty Addition: This chunk of benefit is added in the plan in the form of additional units in the segmented fund(s). This perk is computed as a percentage of the fund value. It is applicable only when all the needed premiums are paid.
Wealth Booster: Beginning with the conclusion of the 10th policy year and continuing 5 years afterward, the insurance company shall allot extra units in the segregated fund but on one condition, and that is the payment of all the due premiums.
Return of Mortality Costs: If due payments are settled, the insurance company shall increase the fund value towards the end of the plan by adding back an amount equivalent to the mortality fees subtracted throughout the policy.
Then, there are riders that come with additional fees. One can add it to make the plan more secure. The riders are as follows:
ABSLI Accidental Death Benefit Rider1 Plus
ABSLI Waiver of Premium Rider1
Choose the right and best option when you can avail it from the best insurance providers in the market. Insurance will not act as a shield for you, but it is also a fruitful tool that will guide and guard your family in your painful absence.
Therefore, always research, understand your personal needs and requirements, and then opt for one that will work for your growth and future objectives.