“ULIP Plans for Working Women & Homemakers: What You Should Know”

If you are looking for a combination of life insurance & a market-linked plan, ULIP will certainly serve the purpose. ULIP is a financial tool that offers the combined benefit of life insurance coverage & investment by allocating funds under a single plan. A portion of the premium amount is allocated towards life insurance, & the rest towards debt, equity, or balanced funds. 

This plan also offers an option to switch between the funds & your changing requirements. The funds invested generally cannot be withdrawn in the lock-in period, i.e. 5 years, & a surrender fee is charged in case funds are partially withdrawn before 4 years. If the insured dies suddenly, his nominees will receive the death benefit or the fund value, whichever is higher. In case the insured survives the policy, he will receive the fund value that would have been accumulated depending on the fund’s performance.

How does ULIP work?

After understanding what is ULIP, now let us know how it works:

ULIPs are financial products that combine insurance factors with investment. So, a part of the premium amount paid is diverted towards insurance, & the other one is towards investments in debt, equity, or hybrid funds. Fund managers are appointed to assist professionally in managing funds to help them grow over a period of time. Also, it offers an option to switch between the funds according to the market conditions. At the time of maturity, you will get the total investment value, which will further give security & wealth creation.

Let us now understand & how ULIP works with the help of an example:

Ms Rita buys a ULIP at 30 years of age, having a 30-year policy tenure. The premium amount is partially allocated towards her life insurance, amounting to INR 1 crore, & the remaining is invested towards equity. There exist two cases, as mentioned under:

Case 1: In case Ms Rita dies at the age of 45 years due to an accident:

In this case, her family members will receive the higher of the two, i.e., a death benefit of INR 1 crore or the fund value at the time of her demise, ensuring the beneficiaries get the maximum benefit possible.

Case 2: In case Ms Rita survives the 30-year policy tenure:

In this case, Rita will receive the fund value that would have been accumulated depending on the fund’s performance, which will further help you achieve financial objectives.

Factors to be considered while choosing a ULIP Policy for Women

Provided are the factors to be considered while choosing the best ULIP plan in India:

• Financial Objectives

Evaluate your financial objectives to choose a ULIP that best aligns with your investment horizon as a woman.

• Risk Tolerance Level

Always choose a plan that best suits your risk tolerance level. This means that risk-averse individuals may choose debt funds, while those willing to take risks may opt for equity.

• Affordable Premiums

Opt for an affordable premium amount that best suits your budget & will help maintain consistency in making its payment throughout the policy tenure.

• Policy Charges

Review the associated charges with the plan to analyse the additional costs, such as administration charges, fund management fees, allocation charges, etc.

Benefits of ULIP

Provided are the benefits of ULIP:

• Protection towards Life

Where women are the sole breadwinners in the family, ULIPs help in securing the financial future in case of their sudden demise. The family members can use the life insurance proceeds, i.e. death benefits, to secure their future & meet routine expenses.

• Control Over Investment

It offers control over the investment made in terms of the amount of premium to be paid, allocation of funds, policy tenure, additional riders, etc. 

• Flexibility

1. They offer the ability to switch between the funds according to market fluctuations.
2. They offer top-up plans whenever there is a need to increase the initial investment amount.
3. Once the lock-in period is met, it allows you to make partial withdrawals in times of financial emergencies.
4. It allows the premium redirection facility, which means that it can change the allocation of funds if required. It can be availed at certain miscellaneous charges & should be taken before the payment date of the premium.
5. If you require the death benefits in instalments, the same option can be availed through the settlement process.

• Taxation Benefits

1. The premium amount paid can be availed as a deduction of tax u/s 80C, maximum for up to INR 1.5 lakhs. The deduction allowed on the premium amount can be equal to 10% in case of policies issued on or after 1^st April 2012, & a maximum of up to 20% of the sum assured as of 31^st March 2012.
2. The death benefits received are totally exempt from tax.
3. The maturity benefits received are also exempt from tax. u/s 10(10D) if the policy has been issued before 1^st Feb 2021.
4. If the policy has been issued on or after 1^st Feb 2021, the maturity benefits are exempt from tax for a maximum of the premium amount of up to INR 2.5 lakhs.

• Plan for Financial Objectives

They help build a cash value over a period of time, as these plans have an investment component as well. The premium amount gets invested in marketable securities, & the return is earned. Over a period of time, it becomes a large corpus that will help achieve goals. It allows an investor to choose the plan out of the variety of plans available, which best serves their financial objectives. This means the options available are ULIPs for a child, pension plans, endowment plans, etc. Hence, while choosing the best ULIP plan in India, one should have clear financial objectives in mind.

• Suits all Strategies

ULIPs offer different ULIP plans for different women as per their risk tolerance levels. If you have a high risk tolerance level, opt for equity funds to get higher returns, & if you have a low risk tolerance level, opt for debt funds.

Conclusion

In earlier times, women did not make investments or buy insurance for themselves due to their being housewives or not being allowed to work. But nowadays, as they are entering the workforce, restrictions have also loosened. ULIPs help them to gain financial independence & security, along with taxation benefits, market-linked returns, & flexibility in allocating funds. Seeking professional advice helps in making informed decisions, thus helping to achieve women’s financial objectives.