ULIP Plans and It’s Loyalty Benefits for Longer Investments
A Unit-Linked Insurance Plan (ULIP) serves as both life insurance and an investment plan for wealth creation. A part of the premium payment is used to offer life cover, while the remaining amount is invested in a diversified portfolio of equities and debt securities. This allows you to earn returns based on favorable market movements. If you stay invested for a long period, you can access better maturity benefits. Along with that, you can receive loyalty benefits from the insurer. Here’s a look at how these benefits work in a ULIP.
How Do ULIP Loyalty Benefits Work for Long-Term Investments?
Loyalty benefits or additions are also known as premium boosters, extra or additional allocations. An insurance company offers these benefits to encourage you to make regular premium payments and remain invested throughout the policy term. Therefore, loyalty additions are usually available in the latter part of the term.
But the timing of offering, these benefits depends on the chosen insurance provider. You may receive the benefits at the end of the lock-in period, at the beginning of the term, or after maturity. For instance, you can receive additional fund allocations right from the first policy year with the Wealth Secure+ plan from Edelweiss Tokio Life. These benefits help add extra funds to your investment corpus.
In a Unit-l=Linked Insurance Plan, loyalty additions are usually applicable in 2 ways:
- As a percentage of your premium payment
- As a percentage of the fund value
The value of loyalty benefits depends on a range of factors, such as:
- Policy term
- Premium payment term
- Period of guaranteed additions
The loyalty benefits that are paid in the latter part of the investment plan period tend to be relatively higher. This makes it beneficial to stay invested for the long term.
Insurance companies in India usually offer loyalty benefits from the 10th year of the policy term. The insurance provider calculates the loyalty advantages by subtracting the guaranteed returns from the performance of the insurer. These additional benefits keep accumulating over time. Finally, when the plan matures, these benefits are paid. An important thing to note is that you need to hold the investment plan for at least 10 years to qualify for a loyalty reward.
Loyalty benefits are always attractive. However, they are not the sole factor in determining how good a ULIP is. Other significant parameters include the claim procedure, cover cost, cover size, return on investment, fund quality, and other benefits.