3 Things You Must Know About Single Premium Ulips

Single premium Ulips are often recommended by some financial advisors when it comes to investing lump sums, be it early retirement and VRS proceeds, windfalls and even parts of inheritance. 3 things you must know before buying one.

Hello and welcome to FundooMoney, your 24X7 buddy for all your money matters. People who receive windfalls like inheritance, arrears, refunds and those with lump sums from voluntary retirement scheme (VRS), early retirement money and severance pay, often wonder about the right investments to invest their money. Many financial advisors suggest to them single premium unit linked insurance plan (Ulip) offered by life insurance companies. What are the most important things people need to know about single premium Ulips before they buy them? The answer is coming up in just a while. So, stay tuned.

Here are some important things that you need to know about single premium Ulip before you them.

Lower charges than regular Ulips
In comparison to regular Ulips or other life insurance policies, a single premium Ulips typically has lower charges. This means that a higher portion of your premium is invested in the funds of your choice. Lower recurring charges on the other hand, ensure that higher portion of the return is retained by your fund and money benefits from higher growth.

Limited insurance cover
In comparison to regular Ulips, where you can take a life insurance coverage or sum assured of up to 40 times of annual premium. For single premium Ulip, the sum assured offered is typically 1.1 to 5 times of single premium. Clearly, single premium Ulip is more of an investment product which provides some level of life insurance.

Limited tax benefits
You can get tax benefit under Section 80C for premium payment that is up to 10% of the policy’s sum assured. The death benefit amount received as lump sum in the hand of the beneficiary remains tax free under Section 10 (10)D. However, you don’t get the two tax benefits for single or regular premium Ulips if the criteria of premium remaining less than 10% of the sum assured, throughout the tenure of the policy, is not met.

We hope you found this useful. What are the other things people need to keep in mind while buying single premium Ulips? Do share with us and other on this channel your tips by writing in the comments section. For more such actionable personal finance information and regular uploads, subscribe to our channel. Also, visit our website, download our mobile app and stay connected with us on Instagram, Pinterest and Slideshare.