We all wish to gain the best advantages from a long-term investment that will help anchor our family’s future from uncertain events. This would entail making safe yet profitable investments, the returns of which should be enough to protect and cover all unforeseen future costs. But that brings up the question – is there any financial instrument that serves both purposes? This is where the role of the Unit Linked Insurance Plan (ULIP) comes into play.
ULIPs have gained popularity over recent years due to their various associated benefits, which include investment flexibility and returns with life insurance and tax benefits. Read these ULIP benefits and see why you should invest in a ULIP:
Flexibility in investment: One of the most striking features of ULIPs is that you will have control over the money you have invested. This can be achieved in the following ways:
- Fund switch: A case of balanced fund type where you can invest parts of your investment in equity, debentures, etc., to even out the risk associated with it.
- Partial withdrawal: You as an investor have an option to partially withdraw a part of the money.
- Shifting premiums: You have the option to invest your future premium in a different fund of your choice.
- Top-up: ULIPs allow you to invest extra money into existing savings.
- Savings: ULIPs help you develop the habit of saving, which is an essential requirement when making long-term financial plans.
- Life cover: ULIPs provide you with a protective benefit of life cover or insurance that ensures that your family will be taken care of even in your absence.
- Freedom to choose investment type: There are broadly three types of ULIPs, categorized as equity funds, debt funds, and balanced funds. Equity funds involve buying shares from different companies, whereas debt funds invest in debentures or bonds. A balanced fund, on the other hand, is an investment in both equity and debt instruments in proportion; this is done to even out the risk.
ULIPs do not have any specific criteria with respect to your choice of funds. You have the choice to invest in different funds as per your risk-bearing capacity and investment goals.
Option of withdrawal: ULIPs also come with the option of partial withdrawal, wherein you can withdraw some amount of money from the amount you invested in your policy to fulfill short-term and urgent requirements.
Tax benefits: There are various tax benefits associated with ULIPs, which include premiums that are paid, the ability to withdraw partially without being charged tax, and more. ULIP is the only insurance plan that does not attract tax even after maturity. It is also free from tax liabilities on long-term capital gains. This policy has the added advantage of providing an individual with higher tax savings with insurance coverage. Premiums are based on taxable income as per tax deduction provisions under Section 80C.
Level payments: As per your ULIP plan , all regular premiums payments have a uniform level premium payment structure. Additional payments are single premiums and are used to provide life insurance cover.
Goal-oriented: ULIPs help you create long-term goals such as retirement plans, wealth creation, and saving for your child’s education.
Greater rewards: This is for those investors who plan to stay invested in the ULIP policy. The money invested by you will continue to grow as the insurance company will add to the savings in the form of bonuses or additions in different ways, such as loyalty additions, etc.
Growth potential: The ULIP policy enables you to earn higher returns by the power of equity and debt funds. This will help you fulfil your long-term desires of a dream house or car, retirement plans, or even funding for your kids’ higher education.In conclusion, a ULIP plan has been, for a long time, a policy that has attracted many investors due to its ability to provide various tax benefits for investments, life insurance, as well as the flexibility of investment and returns. There are a few types of ULIP investments that need to be taken into consideration before making any short- or long-term financial plan.
Seek expert advice today to narrow down on the type of ULIP that would be beneficial for you!
