What are 4G ULIPs and their benefits?


A Unit Linked Insurance Plan (ULIP) has been in the market amongst other traditional and non-traditional products since 1971. But what is ULIP? A ULIP plan is a dual-benefit product, which can combine investment and insurance under a single integrated plan. Although A ULIP plan has been in the market for a long time, many of you might have been unaware of its existence. After its introduction, it was criticized severely due to high costs and unsatisfactory returns. Therefore, the sales and reputation of a ULIP plan were at risk after the launch of the product.

Years later, a ULIP plan was reintroduced in the market, keeping your needs and preferences in mind. Ever since the re-emergence of the ULIP policy in the market, it has undergone drastic changes. However, a ULIP plan has been known in the market based on its various changes. Therefore, let’s understand each stage of a ULIP plan in detail:

  1. Before 2010

A ULIP plan, which was launched in the year 1971 was a costly investment affair initially. Since a major proportion of the premiums paid towards a ULIP plan were directed towards the commission of the third party, it charged high prices. Due to the involvement of an agent or a third-party, a ULIP plan failed miserably to become a transparent investment product.

  1. From 2010-2015

Due to the negative impact of a ULIP policy, the Insurance Regulatory and Development Authority (IRDA) announced new rules and guidelines. The primary aim of the new regulations was to educate you about a ULIP investment. Moreover, the IRDA not only extended the ULIP lock-in period to five years but also capped the annual ULIP charges to 2.25% for the initial 10 years of holding a ULIP plan.

  1. From 2015-2017

The drastic changes in a ULIP plan took place from 2015, which gave rise to 3G ULIPs. During this period, the problems with ULIP charges and transparency had been addressed. With the beginning of 2015, a ULIP plan was known for its low-costs as well as maximum transparency. To eradicate the concerns of transparency, your insurance companies had introduced a ULIP plan on their respective online platforms. An online ULIP investment can be convenient, time-saving as well as affordable.

Under 3G ULIPs, the most common charges were as follows:

  • Policy administration charge
  • Fund management charge
  • Mortality charge
  • Premium allocation charge

  1. 2017 onwards

A ULIP plan has experienced many ups and downs, twists and turns. In the current era, it is known as the 4G ULIPs, which can be free of miss-selling, high prices, and so forth. Although a ULIP plan is a market-linked product, you don’t have to worry about investing in equity markets. Under 4G ULIPs, you can ensure flexibility, affordability, and tax-efficiency.

The 4G ULIPs have changed the game for a ULIP policy. With the introduction of 4G ULIPs, you can expect more at a low price. It not only allows you to grow your money but also receive relatively better returns as compared to other investment products. In addition to this, you can receive many benefits for your betterment in the future. Therefore, let’s go through the following benefits of 4G ULIPs in detail before you park your money into the policy:

  1. Flexible

Under 4G ULIPs, you can ensure flexibility in the following:

  1. Funds

You can pick between equity funds and debt funds based on your risk appetite and investment goals.

  1. Switching

You can use the switching feature to secure your invested capital from the market volatility. For instance, you can choose debt funds when the market is low and go back to equity funds when the market is high.

  1. Premium

You can choose to pay the premium towards your ULIP policy based on your convenience and financial condition. Usually, you can decide to pay the premium quarterly, monthly, half-yearly,  and annually.

  1. Tax-efficient

A 4G ULIP policy falls under Section 80C and Section 10(10D) of the Income Tax Act, 1961. Hence, it can offer dual tax benefits on the following:

  • Premium

You can be able to claim a tax deduction up to Rs. 1,50,000 on your taxable income as stated under Section 80C.

  • Maturity

In accordance with Section 10(10D), you can receive a ULIP tax benefit on the maturity payout.

To sum up, a ULIP investment can be an excellent solution to your investment problems. Due to a few major changes in the past, a ULIP investment has become an affordable, transparent, and convenient option of investment. However, you should invest in 4G ULIPs early to be able to build a substantial corpus for your future. Since you have more time in your hand, you can start by investing a small amount regularly for fulling your life goals in the future.


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