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Is it wise to invest in ULIP? Find out!

Insurance plans such as ULIPs, or Unit Linked Protection Plans, attempt to offer the policyholder with the combined benefits of life insurance and wealth growth

Thursday March 3, 2022 2:07 PM, ummid.com News Network

ULIP Advantages

Insurance has evolved into a current necessity. However, most individuals do not purchase insurance because they believe it just offers life insurance and has no investment benefit.

However, insurance plans such as ULIPs, or Unit Linked Protection Plans, attempt to offer the policyholder with the combined benefits of life insurance and wealth growth.

The best ULIP plans provide insurance coverage while also assisting you in achieving your life objectives by using the potential of market-linked returns.

Here's all you need to know about ULIP investment and its advantages:

What is ULIP?

A ULIP investment is a comprehensive insurance policy that combines insurance and investing. You pay regular payments, a portion of which is used to offer insurance coverage, while the remainder is invested in equity and debt instruments, or both, similar to mutual funds.

The investment is in line with your risk tolerance and long-term financial objectives. These objectives might include retirement planning, starting a company, saving for a child's education or marriage, and so on.

How does a ULIP work?

In a ULIP, the insurance company invests a portion of your payments in stocks, bonds, and so on, while directing the remainder of your premiums toward getting a life insurance policy. The best ULIP plans are handled by fund managers, who handle the investment from start to finish and, as a result, charge a modest fee.

The best ULIP plans typically have a five-year lock-in term. You do not get any rewards during this period. Only at the end of the lock-in period are withdrawals authorised. Having said that, ULIP investment plan features allow you to adjust your investment allocation during the policy based on your risk tolerance and financial goals.

What are the benefits of a ULIP plan?

Because of their ULIP features, ULIP investments are becoming one of the most popular insurance products. Some of the most essential advantages of the best ULIP plans are as follows:

1. A dual advantage in a single offering

The best ULIP plans provide the ideal blend of insurance and investing in a single package. It meets two demands at once, allowing you to be more comfortable.

On the one hand, you get low-cost insurance coverage, and on the other, you may invest in funds of your choosing. The best ULIP plans provide assured security for your family, as well as the ULIP investment advantage of market-linked investments.

2. Wider investment choices

Another advantage of the best ULIP plans is that you may tailor your investments to your risk tolerance and financial objectives. Bonds are a good option if you want to save for retirement but don't want to take on too much risk.

Balanced funds are an option if your risk tolerance is modest. If you are a high-risk investor, you may want to invest in equities funds. Having said that, you may also select a suitable ratio of each sort of investment based on your needs.

3. Flexibility

A significant advantage of the best ULIP plans is the ability to swap your portfolio between debt and equity-based on your risk tolerance and market performance.

You can also exercise flexibility if your risk profile shifts. A younger professional, for example, may afford to make a riskier investment than someone nearing retirement and with a greater amount of monetary responsibility.

4. Supports long-term goals

The features of the best ULIP plans are designed to give you compound growth. As a result, it is an excellent alternative if you have difficult long-term goals, such as acquiring a home or a new automobile. Your money is compounded in a ULIP, leading to higher net returns.

A ULIP's returns are also higher than those given by Fixed Deposits or comparable plans. However, the goal is to keep the money in a ULIP investment for a longer period allowing the assets to increase exponentially.

5. Tax benefits

Another advantage of the best ULIP plans is that premiums paid towards them are tax-deductible under Section 80C up to a limit of 1.5 lakhs. Furthermore, the maturity returns are tax-free under Section 10(10D) of the Income Tax Act of 1961.

This means that you may not only acquire insurance and let your money grow, but you can also take advantage of tax breaks. Furthermore, ULIP investment advantages, like those of other investment alternatives, are not impacted by long-term capital gains taxes. Because of these ULIP plan features, the best ULIP plans are tax-efficient investments.

6. Option to enhance coverage

Most ULIP investment plans also allow you to supplement your insurance coverage by purchasing add-on riders. Along with your ordinary life insurance policy, these riders offer you increased protection against uncertainties such as an accident, permanent incapacity, and so on.

7. Top-up facility

Many insurance providers also enable you to invest more than your current premium payment by selecting a top-up premium. This ULIP advantage is most beneficial when your ULIP plan is performing well and you have the option to invest more to earn bigger returns. Furthermore, a top-up facility is more practical, simple, and cost-effective than purchasing a new plan.

8. Liquidity

The best ULIP plans provide liquidity to investors by allowing them to withdraw partial sums in the event of a financial emergency.

It is often possible to be faced with situations when you demand cash immediately, and in such scenarios, having liquid funds that can be taken from your ULIP is always a smart idea. However, you may only make partial withdrawals from your ULIP once the 5-year lock-in period has expired.

Wrapping It Up

The ultimate purpose of every investment, no matter how large or little, is to raise the amount of money invested. This is the fundamental assumption of investment, and the primary aim is to increase your wealth.

Money has always been the deciding factor between disappointment and realising one's ambitions. However, because its worth has increased, it has become much more significant now.

Living expenses and inflation are always rising, and despite your best efforts, you are unable to realise many of your ambitions. Your riches appear to pass through your fingers in the blink of an eye.

In today's world, one cannot rely only on one's salary to cover all costs while still having some savings left over. It has become vital to invest in some type of instrument that allows one to earn a return on the initial investment over time.

The answer lies in investing in the best ULIP plans.


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