Know Why You Should Invest in a ULIP
Many people do not consider a life insurance policy as an essential part of their financial planning. The truth is a life policy is a vital investment option that ensures your future monetary security. You need to purchase the plan that serves you the best. Here, we will discuss Unit-Linked Insurance Plans (ULIPs), and why you should invest in one.
What is a ULIP?
If you are asking yourself, “What is ULIP policy”, you will be happy to know that it is one of those plans that combines life insurance with investment options. You can stay invested in a ULIP by paying regular premiums. The insurance company allocates a portion of the premium in a variety of investment funds, such as debt, equity, or balanced. You can choose the fund depending on your risk appetite.
Why you should invest in a ULIP
The answer to “Why should I invest in ULIP” is simple. It offers a vast range of features, which contribute to your financial well-being. Here are a few prominent plus points of a ULIP:
• Life cover
Like any other life insurance policy, ULIP offers a monetary benefit to your nominees. If you have a dependent family, you must ensure that their financial interests are protected even when you cannot be there for them. This is why a life insurance policy should be a part of your financial portfolio. In case of your absence, the insurer offers financial aid to your loved ones.
• Long-term financial goals
The most significant advantage of a ULIP investment plan is its investment feature. Every family has long-term objectives, and some of them may require comprehensive funding. The returns received from a profitable investment can finance your children’s education and weddings, an expensive family trip, or help you in leading a comfortable retired life. This is where ULIPs have an edge over other life insurance policies. Its investment component enables you to build a fortune over time, ensuring that you never have to compromise financially.
• Investment flexibility
The fund manager invests your premiums in different funds, depending on your risk-taking ability and financial goals. However, those can change with time, as you may develop different targets or become more flexible with risk. To align with that, the ULIP investment plan offers a switching feature, which lets you shift among debt, equity, or balanced funds as per your needs.
• Additional rewards
Some ULIPs offer extra rewards to their loyal customers. If you keep the plan active until maturity, the insurer will increase your corpus, and they may return the mortality charges paid during the policy term.
• Tax benefits
If you are still wondering why you should invest in ULIP now, check out its tax deductions. You get an annual deduction of up to INR 1.5 lakh under Section 80C of the Income Tax Act, 1961, on the premium paid. Even the maturity benefit is tax-free under Section 10 (10D) of the same Act.
Why you should consider ULIP as a long-term option
The Insurance Regulatory and Development Authority of India (IRDAI) mandates a five-year lock-in period for ULIPs. This means you have to remain invested in the plan for at least five years. However, this is not the only reason to choose a ULIP investment plan as a long-term option. Whether you have opted for a fund that offers high returns or low risks, building a substantial corpus takes time. If you have considerably high financial goals, your aim should be to earn huge returns on investment.
With features such as life cover, investment options, flexibility, and tax benefits, ULIPs can make your investment portfolio more profitable. Apart from giving financial protection to your loved ones, a ULIP ensures that you have a prosperous future. All you need is to choose a suitable plan, and you will enjoy lucrative returns in the end.