ULIP Benefits You Should Know, and How a Monthly Income Scheme Complements It

Planning your money’s future? Want both growth and regular income?

Many people know about ULIP for wealth creation. Some know about monthly income schemes for a steady cash flow. But few understand how using both together creates a complete financial plan.

Let’s explore ULIP benefits and see how pairing it with a monthly income scheme gives you the best of both worlds.

Table of Contents

What is ULIP?

ULIP stands for Unit Linked Insurance Plan. It’s a product that does two things at once.

First benefit – Life protection: If something happens to you, your family gets insurance money, just like regular life insurance.
Second benefit – Investment growth: Part of your premium gets invested in the market. Your money grows over time.

So one product, two purposes. Protection plus growth.

Key ULIP Benefits

Let’s understand what makes ULIP attractive:

Benefit 1: Dual advantage

You don’t need separate insurance and investment. ULIP combines both. One premium payment handles two needs.

For busy people who want simplicity, this matters.

Benefit 2: Flexibility in fund choice

ULIP lets you choose where money goes:

Equity funds for high growth
Debt funds for safety
Balanced funds for the middle path

You can switch between these funds. Market going down? Move to debt. Market looking good? Shift to equity.

Most ULIPs allow 4-5 free switches yearly.

Benefit 3: Tax benefits

Premium paid gets a tax deduction under Section 80C up to 1.5 lakhs yearly.

Returns received are also tax-free under certain conditions.

So you save tax when investing and when receiving money.

Benefit 4: Long-term wealth creation

ULIP works best for 10-15 years or more. Over long periods, the equity portion can grow substantially.

Good for goals like retirement planning or a child’s education fund.

Benefit 5: Partial withdrawals allowed

After a 5-year lock-in, you can take out some money if needed. Not all of it, but a partial amount.

Helps during emergencies without breaking the entire investment.

Benefit 6: Top-up facility

Want to invest extra money some years? Add top-up premiums. This boosts your fund value without buying a new policy.

What is the Monthly Income Scheme?

The monthly income scheme is completely different from ULIP. It focuses on giving regular income, not growth.

How it works:

You invest a lump sum amount. The scheme pays you a fixed amount every month like getting a salary from your investment.

Common types:

Post Office Monthly Income Scheme
Bank monthly income plans
Debt mutual funds with systematic withdrawal
Senior citizen savings scheme

Key features: Safe investments, predictable monthly payouts, lower returns than equity, good for retirees.

Why ULIP and Monthly Income Scheme Work Well Together

Now here’s the interesting part. These two are opposite in nature. And that’s exactly why they complement each other.

ULIP gives you:

Growth over the long term
Lump sum at maturity
Market-linked returns
Wealth accumulation

The monthly income scheme gives you:

Regular cash flow every month
Stability and predictability
Safe returns
Income for expenses

Together, they create a balanced financial life.

Life Stage Planning with Both

How to use ULIP and the monthly income scheme at different ages:

Age 25-40 (Building years):

Focus on ULIP:

Start ULIP for protection and growth
High equity allocation
Build wealth for the future

Monthly income scheme: Not needed yet. You have a salary.

Age 40-55 (Peak earning years):

Continue ULIP:

Keep the existing ULIP running
Maybe start a second ULIP for additional goals

Start thinking about the monthly income scheme:

Begin building a corpus for post-retirement monthly income
Safe investments start making sense

Age 55+ (Retirement years):

ULIP matures:

Receive a lump sum from ULIP
Major financial goal achieved

Use the monthly income scheme:

Invest ULIP maturity amount in monthly income plans
Get regular monthly cash flow
Live comfortably without depending on children

See the flow? ULIP builds wealth. The monthly income scheme converts that wealth into regular income.

Before Choosing ULIP

While ULIP has benefits, remember these points:

Term insurance first:

ULIP gives some life cover, but usually not enough. A 50,000 yearly premium ULIP gives only 5 lakh cover typically.

Your family needs more protection. Get adequate term insurance first – 50 lakhs to 1 crore cover.

Then use ULIP for its investment benefits, not as primary insurance.

Understand charges:

ULIP has various charges that reduce returns:

Premium allocation charge
Fund management charge
Mortality charge
Policy administration charge

These charges are highest in the first 5 years. A calculator helps understand real returns after charges.

Long-term commitment:

5-year lock-in is mandatory. For best results, stay invested 15+ years. Don’t buy a ULIP if you need money soon.

Not for everyone:

If you want pure investment without an insurance component, mutual funds might be better.

If you only want insurance, a term plan offers maximum coverage at the lowest cost.

ULIPs work for those who want a combination.

Making Your Decision

ULIP and the monthly income scheme serve different purposes. One is not better than the other. They’re different tools for different needs.

Young and building a career? ULIP makes sense for protection and growth. Retired or approaching retirement? The monthly income scheme provides stability and a regular income.

Ideally, use both at appropriate life stages. Let ULIP work during earning years. Let the monthly income scheme work during retirement years.