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Tax free benefits make whole life ULIPs the perfect retirement plan


When your clients look for investment returns and insurance coverage, the first product which comes to your mind is a Unit Linked Insurance plan (ULIP). A ULIP is an insurance plan which provides a unique combination of market-linked returns as well as life insurance coverage. Moreover, the new age ULIPs which are now available in the market promise additional benefits, both in terms of coverage as well as benefits offered. Modern-day ULIPs have, in fact, undergone a sea of change compared to traditional ULIPs which were available about a decade or more back. Some of the notable changes include the following –
The charges under new age ULIPs have reduced drastically. While, earlier, the premium allocation charge and other charges associated with the policy rode up to 40% or more, current ULIPs have charges lower than 5%. With the reduced charges the revamped ULIPs offer higher allocated premiums which, in turn, provide better returns to customers
The coverage tenure under many new ULIPs has increased substantially. Nowadays, the whole of life unit-linked plans is being offered by many companies which provide coverage until the insured attains 99 or 100 years of age. As such, customers can now enjoy lifelong coverage which was not available in the earlier variants of the product.
Current ULIPs are also promising loyalty additions, guaranteed additions or wealth boosters which get added to the fund value at a pre-determined rate. These additions are over and above the market-linked growth which the plan promises
The benefit structure has also changed wherein ULIPs are paying monthly benefits after death or maturity so that the plan provides a stream of regular income to the policyholder.
These new features in present-day ULIPs have made these plans quite popular among customers. Moreover, with the lifelong coverage now available and the tax-free returns, ULIPs have also become a preferred investment avenue for retirement planning. If customers choose a whole life ULIP they can create a good retirement corpus and even continue the plan as a source of retirement funding. Let’s understand how –
Lifelong ULIPs continue till 100 years of age
The first feature which makes whole life ULIPs suitable for retirement planning is the whole life coverage provided under the plan. Under whole life ULIPs, the premium payment term is limited. Thus, the policyholder would not have to pay premiums in the older ages when he/she retires and loses the source of income. However, though the premium payment term is limited, the coverage is not. Coverage continues till death or till the insured reaches 100 years of age, whichever is earlier. Since coverage is lifelong customers can enjoy coverage even after they retire, a feature which is usually not available in other types of life insurance plans.
The benefits are tax-free
The best part about ULIPs is that the benefits which the plan pays are completely tax-free. Whether it is partial withdrawals from the fund, a benefit paid on death or the benefit paid on completion of the plan tenure, everything is tax-free in the customer’s hands. Even when the market is volatile and the customer switches his investments to a secured debt fund, the switched amount is also free from the incidence of taxation. The money which is invested in the plan is also tax-free under the provisions of Section 80C up to a maximum of INR 1.5 lakhs. Thus, ULIPs provide an all-round tax-free advantage. The investments, the returns generated and the redemption benefits are all tax-free. These tax-free benefits ensure that the customer’s retirement corpus does not get eroded due to tax.
Systematic partial withdrawals or annuities create regular incomes
To create a stream of income through ULIPs for meeting the expenses post-retirement, policyholders can choose a Systematic Withdrawal option in their whole life ULIP plan. The option would create partial withdrawals from the fund value at regular intervals so that a stream of income would be generated. This income would be tax-free (as stated earlier) and would also help the customer with a regular source of income.
So, utilize the new age whole life ULIPs to your customer’s advantage. Plan their retirement with these unit-linked plans and create a tax-proof retirement fund which also gives them insurance protection.


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