Since the incidents of mis-selling rules about ULIPs have been modified a lot. In 2015, ULIPs which were weighed down by a plethora of costs, were made more appealing to investors by capping costs. Investors in ULIP had to pay capital gains tax on payouts in 2021. High initial charges, especially in the initial years of the policy, have often been highlighted as a detriment.
As late as 2023, the IRDAI or Insurance Regulatory and Development Authority of India, cut costs further on ULIPs. It slashed premium allocation charges from 15% to 10% to boost the popularity of ULIPs. ULIPs constitute a category of investment products that combine insurance protection and investment – allocating premiums accordingly.
What is ULIP and how it works
ULIPs are financial products that usually combine insurance and investment. Almost all major insurance companies in India including the public sector behemoth LIC offer ULIPs. According to practice, a portion of the premium that the policyholder pays is utilised for life insurance coverage. The remaining portion is invested in equity or debt, or both – as indicated by the policyholder. One advantage of ULIPs is that the investor do not have to keep bothering about the twin necessities – insurance and investments but can achieve both with a single investment. It also offers income tax-saving benefits during the pendency of the policy.
Which is better SIP or ULIP
Many investment strategists think mutual fund SIPs (Systematic Investment Plan) provide superior returns compared to ULIPs. The reason: SIPs will fetch higher returns are since it is delinked from insurance completely and the insurance element does not affect the SIP’s performance. “There is a bewildering variety in the mutual fund industry now – more than ever before. Mutual fund schemes are extremely nuanced now and an investor can easily invest in them without going through an ULIP,” said Nilanjan Dey, director, Wishlist Capital. This way an investor will have a direct an immediate control on his mutual fund investments and there will be no time lag between his choices and investment/redemption for maximising returns, he argued. Why not separately buy a term insurance policy and invest in mutual funds, he asked.
ULIPs, or Unit-linked insurance plans, achieved great popularity in India in the first decade of this century, but a lot of mis-selling was reported. However, in order to boost popularity of ULIPs, a lot of steps were taken by IRDAI in the past few years. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
