4G ULIP Plans: Meaning and Benefits

In this policy, the investment risks in the investment portfolio is borne by the policyholder

Most Indians today know about Unit-Linked Insurance Plans (ULIPs). These unique plans allow individuals to invest for the future while enjoying life coverage in the present. The dual benefits ULIPs offer make them a popular investment option for many. Recently, 4G ULIPs have taken the market by storm. These evolved plans provide even more benefits. Let's learn more.

What Is a 4G ULIP?

4G ULIPs, or Fourth Generation Unit-Linked Insurance Plans, are a new type of ULIP that offer additional features and benefits compared to traditional ULIPs. They offer investors greater flexibility, tax benefits, life cover, transparency, wealth creation, risk mitigation, long-term savings, and liquidity.

Understanding 4G ULIPs: Features and Benefits

Flexibility

4G ULIPs offer greater flexibility in investment options and policy management. Investors can choose from various investment options, such as equity funds, debt funds, or a mix of both. They can also switch between funds based on market conditions or personal preferences. Additionally, investors can choose the premium payment frequency, policy term, and sum assured to meet their financial goals and requirements.

Tax Benefits

Like traditional ULIPs, 4G ULIPs also offer tax benefits. 4G ULIPs fall under the EEE or exempt-exempt-exempt category, subject to the provisions of the Income Tax Law, making them an attractive investment option for investors looking to save on taxes. Premiums paid towards the policy are eligible for tax deductions under Section 80C^# of the Income Tax Act, 1961.

Proceeds received on surrender/partial withdrawal/maturity of ULIP plan are exempt from tax subject to provisions mentioned in Section 10(10D)^# i.e if the premium payable for any of the years during the policy term does not exceeds 10% of the death sum assured.

In addition to the above, for policies issued after 1st Feb 2021 tax exemption on maturity proceeds will be available if premium paid in any of the years towards such matured polices does not exceed Rs.2,50,000. Out of the total matured policies in a financial year, exemption u/s 10(10D) will be available only towards those polices who’s aggregate premium in any years does not exceed Rs. 2,50,000/.

Income from rest of the policies exceeding the mentioned limit will be chargeable as capital gains.

Death proceeds are also exempt from tax for all ULIP plans.

Life Cover

4G ULIPs provide investors with life cover in addition to investment benefits. In the event of the policyholder's untimely demise, the policy offers a death benefit to the nominee. The death benefit can be a lump sum or a combination of a lump sum and regular payouts, depending on the policy terms. The life cover provides financial security to the policyholder's family in case of any unfortunate event.

Transparency

4G ULIPs offer greater transparency compared to traditional ULIPs. Insurance companies must disclose all charges upfront, and investors can make informed decisions based on the same. Additionally, the policy document clearly outlines the terms so investors know what they are signing up for. This transparency helps build trust between the policyholder and the insurance company.

Wealth Creation

4G ULIPs offer the potential for wealth creation in the long run. Investors can benefit from market fluctuations by investing in equities and debt instruments and earn higher returns than traditional investment options. Additionally, investors can benefit from compounding, which helps their investments grow over time. 4G ULIPs are an ideal investment option for investors looking for long-term wealth creation opportunities.

Risk Mitigation

4G ULIPs offer investors the option to invest in a mix of equity and debt instruments, which helps mitigate risks. By diversifying their investment portfolio, investors can reduce their exposure to market risks and volatility. Additionally, the insurance component of the policy provides financial protection in case of any unforeseen circumstances. The combination of investment and insurance helps mitigate risks and provides investors with complete peace of mind.

Long-term Savings

4G ULIPs are an ideal investment option for investors looking to save for long-term financial goals such as retirement, children's education, or buying a house. 4G ULIP investments benefit from compounding and earn higher returns than traditional investment options. Additionally, the insurance component of the policy provides financial security in case of any unfortunate event, ensuring that the policyholder's financial goals stay on track.

Liquidity

4G ULIPs offer investors the option to partially withdraw their investments, subject to policy terms and conditions. The withdrawals provide liquidity in financial emergencies, helping investors deal with unexpected expenses. These partial withdrawals allow investors to withdraw funds from the accumulated corpus without surrendering the policy.

Who Should Opt for 4G ULIPs?

4G ULIPs are an ideal investment option for individuals who want insurance and investment benefits. It is a suitable investment option for individuals with long-term financial goals such as retirement planning or children's education. These plans are ideal for individuals comfortable with market risks and volatility. They work well for investors looking for long-term wealth-creation opportunities.

4G ULIPs offer investors flexibility, tax benefits, life cover, transparency, wealth creation, risk mitigation, long-term savings, and liquidity. Before investing, check all your options and read the policy terms carefully. The returns depend on market fluctuations, so select your funds based on your financial goals and risk appetite.

Related Articles:

• 4 Reasons to Invest In ULIP Plans Today Itself
• ULIP and Traditional Plans - Detailed Comparison
• What is ULIP Plan?

ARN - MC/06/23/2405