1. ULIP is a unique IRDA-regulated insurance-cum-investment product, while ELSS is a SEBI-regulated equity fund investment product, but both enjoy Sec 80C tax benefits on the annually invested amount.
2. However, ULIP also enjoys Sec 10 (10D) tax benefits on its returns (if mortality cover is minimum 10 times the annual premium), while ELSS returns get taxed at 10% after aggregate exemption of 1 lakh LTCG.
3. Both ULIP and ELSS are high risk, non-guaranteed market return products, with lock-in periods of 5 and 3 years resp.
4. From a purely investment viewpoint, ULIP's return potential is hampered due to numerous charges and high agency commission (IRDA has capped them of late), and underperforms ELSS by 5-7% annually in the long-term.
5. From a purely life insurance viewpoint too, ULIP is significantly inferior to a Term Plan, both in terms of cover and premium, hence young earners, who are equity savvy, buy a Term Plan for securing their dependents, and simultaneously invest in ELSS, through SIP or lumpsum, thus availing annual Sec 80C tax benefits on Term Plan and ELSS both, as well as Sec 80D tax benefits on any health insurance riders opted in the former.
6. Nevertheless, if any case could be made out for buying a ULIP, it is its Hybrid funds option for employees and retirees who are not eligible for an EPF membership.
7. They can avail its debt-equity flexibility, Sec 80C tax benefits, and also its tax-free income being an insurance product, as it allows some annual free switches from equity to debt, or vice versa, without any tax implications.
8. It can, therefore, be a convenient tool to rebalance asset allocation annually, while also being handy in investing more in its debt portion, as short-term gains in ULIP are tax-free, being an insurance product.
9. In fact, the liquid fund of a ULIP can be used for investing very short-term money too, for similar reasons.
10. New ULIPs of insurance companies are now becoming more transparent, offering tenure and debt-equity allocation flexibility, and with capped lesser charges than earlier, while their returns are still better than PPF or 5-year FD.
2. However, ULIP also enjoys Sec 10 (10D) tax benefits on its returns (if mortality cover is minimum 10 times the annual premium), while ELSS returns get taxed at 10% after aggregate exemption of 1 lakh LTCG.
3. Both ULIP and ELSS are high risk, non-guaranteed market return products, with lock-in periods of 5 and 3 years resp.
4. From a purely investment viewpoint, ULIP's return potential is hampered due to numerous charges and high agency commission (IRDA has capped them of late), and underperforms ELSS by 5-7% annually in the long-term.
5. From a purely life insurance viewpoint too, ULIP is significantly inferior to a Term Plan, both in terms of cover and premium, hence young earners, who are equity savvy, buy a Term Plan for securing their dependents, and simultaneously invest in ELSS, through SIP or lumpsum, thus availing annual Sec 80C tax benefits on Term Plan and ELSS both, as well as Sec 80D tax benefits on any health insurance riders opted in the former.
6. Nevertheless, if any case could be made out for buying a ULIP, it is its Hybrid funds option for employees and retirees who are not eligible for an EPF membership.
7. They can avail its debt-equity flexibility, Sec 80C tax benefits, and also its tax-free income being an insurance product, as it allows some annual free switches from equity to debt, or vice versa, without any tax implications.
8. It can, therefore, be a convenient tool to rebalance asset allocation annually, while also being handy in investing more in its debt portion, as short-term gains in ULIP are tax-free, being an insurance product.
9. In fact, the liquid fund of a ULIP can be used for investing very short-term money too, for similar reasons.
10. New ULIPs of insurance companies are now becoming more transparent, offering tenure and debt-equity allocation flexibility, and with capped lesser charges than earlier, while their returns are still better than PPF or 5-year FD.