A Unit-Linked Insurance Plan (ULIP) is a financial tool that combines the benefits of life insurance and investment in one product. The life cover* keeps your loved ones financially secured in case of an unfortunate event and the investment helps you achieve your financial goals.
ULIPs` provide you the option to invest in high-risk equity funds that offer higher returns, low-risk debt funds or a mix of both, as per your risk appetite. They also enable you to switch between funds and earn returns that align with your goals and requirements. ULIPs provide you a complete control of your investments. This makes ULIPs an ideal investment option for various goals, such as buying a house, your child’s higher education, retirement, and more.
6 reasons to invest in ULIPs
Here are six reasons why you should invest in ULIPs:
ULIPs are unique financial tools that offer you two major advantages in one plan – life insurance and investment. The life cover* from a ULIP protects your loved ones financially in case of an unfortunate event during the policy term. At the end of the policy term, the returns from your investments are paid back to you which can help you fulfil your financial dreams.
You can claim deduction of up to ₹ 1.5 lakh per annum for the premiums paid towards a ULIP under Section 80C# of the Income Tax Act, 1961. In addition to this, the amount paid to you under the policy is also tax-free# subject to conditions under Section 10(10D)#.
ULIPs offer the flexibility to switch between funds as per your requirements and market conditions. This helps you align your investment as per your goal and risk appetite. If you are open to taking more risk, you can switch to equity funds. However, if you want to lower the risk, you can move to debt funds. All of these can be done any number of times throughout the year, also allowing you the opportunity to tap into changing market scenarios to earn more.
Premium redirection provides you with the option to invest your future premiums in a different fund. All your previous premium payments will stay invested in the fund that you had chosen before. All your future premium payments will be invested in the new fund as per your selection. This helps you change your future investments without affecting the returns from your past investments.
Option to top-up
Your goals and needs may increase as per your changing lifestage. You may want to increase your investment in your plan to help you achieve these goals. ULIPs provide you with the top-up option that allows you to invest more money in your existing plan anytime during the policy tenure.
Lock-in period withdrawal facility
ULIPs have a lock-in period that can last anywhere between 3 and 5 years. An important feature of ULIPs is that, unlike several other investments, ULIPs allow you partial withdrawals even during the lock-in period. This option ensures that you stay financially prepared in case of an emergency.
When should I invest in ULIPs?
It is best to start investing in ULIPs as early as possible. ULIPs can offer great potential for growth, depending on the funds you invest in. Since ULIPs generally have a lock-in period of up to 5 years, your money gets enough time to garner returns and grow in value. Staying invested for longer than five years can further enhance the chance for growth.
It is important to remember that since a ULIP is a life insurance product, investing in it at a young age can ensure you a lower premium. Starting early will also give you a longer investment horizon and provide enough time for your money to grow. So, try not to delay and start investing in a ULIP as soon as possible.
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* Life Cover is the benefit payable on death of the life assured during the policy term.
` Unlike traditional products, Unit linked insurance products are subject to market risk, which affect the Net Asset Values & the customer shall be responsible for his/her decision. The names of the Company, Product names or fund options do not indicate their quality or future guidance on returns. Funds do not offer guaranteed or assured returns.
# Tax benefits under the policy are subject to conditions under Section 80C, 10(10D), 115BAC and other provisions of the Income Tax Act, 1961. Goods and Services Tax and cesses, if any will be charged extra by redemption of units, as per applicable rates. Tax laws are subject to amendments from time to time. Please consult your tax advisor for more details.