In recent years, people have become more cautious when it comes to investing in the markets. The volatile nature, risk towards investments and returns, etc, are some of the factors that have people becoming more aware about how safe they have to be about the markets. However, one financial instrument that puts the controls in your hands when it comes to investing in the market is a ULIP. There are many benefits that you can enjoy by investing in ULIPs. Read on to know more about ULIPs and the various advantages it gives you.
What is ULIP?
A unit linked insurance plan is a type of life insurance policy. Under this policy, you get the dual benefit of investment and insurance. Investment is aimed at helping you grow your wealth for a financially secure future, as well as helping you accomplish life goals. Investments can be done in equity funds, debt funds or both. Insurance is aimed at protecting your loved ones from life risks. This comes handy in the event of your untimely demise.
What are the benefits of ULIPs?
As a potential investor, the following are the ULIP benefits that you can enjoy with the policy:
- Life insurance cover
The second benefit in ULIPs that you can enjoy is the life cover that is provided. If the policyholder passes away due to certain reasons, the family of the policyholder will get the sum assured for the financial stability they need. The life cover helps you in giving peace of mind knowing your loved ones will not have to struggle for money in your absence.
- Market investments
Based on what your risk appetite is and what your life goals are, you have the option of going with equity funds or debt funds. When you opt for equity fund, the risk factor is much higher due to the volatile nature of the equity market. However, the returns you get are also higher. If you want to opt for an investment option with a lower risk factor, you can choose to invest in debt funds. The risk is lower than the equity fund and the returns are also medium.
If you want the benefits of both the funds, you can invest in both equity and debt funds, where in the returns would be low to medium. This happens via a feature known as switching. This allows you to reallocate your investments as per your requirements to maintain returns and reduce risk exposure on your investments.
- Life goal accomplishment
Everyone has different life goals. A life goal could be owning a house in the future, saving for child’s education or marriage, or wanting to take a vacation abroad. Such goals require substantial savings from a very early stage. The pay-out that you would receive once your policy matures is based on how much money you invested in it, when you started investing in it, and what type of funds you invested in. This pay out, i.e, the sum assured, can help you in fulfilling your life goal with ease. Do remember, the sooner you invest in the plan, better will be the pay-out.
- Tax Benefits
Under Section 80C of the Indian Income Tax Act, tax deductions can be availed in ULIPs on the premiums you pay for the policy. Additionally, the maturity benefit under the policy is tax-free under Section 10(10D) of the Income Tax Act. If you make partial withdrawals, they are also eligible for tax deductions under conditions of Section 10(10D).
Why ULIPs are a need of the hour?
There are various factors that have had an impact on the cost of living. This also impacts how much you are able to save for yourself and your loved after the necessary expenses. The rising cost of healthcare can also cause financial burden during a medical emergency. Keeping these factors in mind, if a product such as a unit linked insurance policy helps in growing your wealth and protects your loved can be easily accessed; it is imperative to invest in it.
The above basics of ULIPs and the ULIP benefits should be clear in your mind. If you want to get a basic idea about ULIPs, you can use the ULIP calculator from the website of your insurer.