TULIP:

Not the flower TULIP we are talking about. A Term + ULIP (Unit Linked Insurance Plan) is a combination of two types of life insurance products: a term insurance plan and a ULIP. Here’s a breakdown of each component and how they work together:

Skip the below 2 sections if you are already aware of Term & ULIP plans.

Term Insurance Plan:

• Definition: A term insurance plan provides life coverage for a specific period (the "term"). If the insured person passes away during this term, the nominee receives a death benefit. If the insured survives the term, there is no payout.
• Purpose: The primary purpose is to provide financial protection to the insured's family in case of untimely death.
• Premiums: Typically, term insurance plans have lower premiums compared to other life insurance products because they do not have a savings or investment component. You get very coverage for a Term Plan.

ULIP (Unit Linked Insurance Plan):

• Definition: A ULIP is a life insurance product that combines insurance coverage with investment. A portion of the premium goes towards providing life cover, while the remaining amount is invested in various funds (equity, debt, or a mix).
• Purpose: ULIPs are designed to provide both insurance protection and investment growth. They allow policyholders to choose their investment strategy based on their risk appetite. 
• Flexibility: ULIPs offer flexibility in terms of premium payments, investment choices, and the ability to switch between funds.

Term + ULIP Plan (TULIP) :

• Combination: A Term + ULIP plan combines the benefits of both a term insurance policy and a ULIP. This means that the policyholder gets the high life cover of a term plan along with the investment benefits of a ULIP.

TULIP Benefits:

• High Coverage : Provides a death benefit to the nominee in case of the policyholder's demise during the term. Very much higher Coverage compared to a regular ULIP.
• Investment Growth: Offers the potential for wealth creation through investments in various funds.
• Tax Benefits: Premiums paid may qualify for tax deductions under Section 80C of the Income Tax Act, and the death benefit may be tax-free under Section 10(10D).
• Considerations: While this combination offers the advantages of both products, it’s essential to assess individual financial goals, risk tolerance, and the cost of premiums.

Let's us understand with an example : 

Mr. X is 30 years old, Salaries, Male, & Non-smoker.

A Term plan with yearly premium ~Rs. 50,000 would give him a Life cover of Rs. 4 Cr till 70 years age with no Returns (some plans have a return of premium option, but the time value of the money is very less, but something is better than nothing)

An ULIP with yearly premium of ~Rs.50,000 would give him a Life cover of Rs. 10L & Investment return of 12 - 18% depending on the his risk appetite and the fund he chooses.

A TULIP with yearly premium of ~Rs. 50,000 would give him a Life cover of Rs. 50 Lakhs & Investment return of 8 - 12%. : 

1. Much higher coverage & Lower returns compared to ULIP, Lower returns since mortality charges are higher for high life cover.
2. Much higher returns (compared to zero) & Lower coverage compared to Term Plan. 

Numbers above discussed are for indicative purpose for comparison, the actual returns and life cover depends on the plan one choose.

Conclusion:

A Term + ULIP plan can be an effective financial tool for individuals looking to secure their family's future while also investing for wealth creation. However, it’s crucial to understand the terms, conditions, charges and potential risks associated with such plans before making a decision.

Currently not many TULIPs available in India, Hopefully we will see more in the coming years.

TULIP plans available in India for 2025

• ICICI Prudential Protect n Gain growth
• Axis Max Smart Flexi Protect Solution
• Tata AIA Param Raksha Life Pro+

Please be cautious about the hidden charges the above plans have. please go through the blog : ULIP vs MF for charges in an ULIP. The relevant charges are 

1. Mortality charges (for Life Insurance), 
2. Fund Management charge (for managing your fund, capped at 1.35% by IRDAI)
3. Surrender charges/ Discontinuous charges : Only kicks in when you want to withdraw from the plan before lockin period. Otherwise it wont impact your fund. 

Thanks,

Honvest Team.