6 Interesting Benefits Of Investing In ULIPs
The advantages of life insurance and investing are combined in a Unit-Linked Insurance Plan commonly known as ULIP, which is a type of financial instrument. The ULIP investment helps you reach your financial objectives while the death benefit ensures the financial security of your family in your absence.
Based on your risk tolerance, with ULIP you may invest in different funds based on the financial risk you can take. There are high-risk equities fund options that usually give a high return but they have a high risk involved, or there are debt funds that have a low-risk low-return structure, or you can choose a combination of the two. You can also switch your fund allocation to maximize your returns that match your objectives and needs. Due to this, ULIPs are a great investment choice for a variety of objectives, including retirement, home ownership, and funding a child’s higher education.
Here are the top 6 benefits of ULIPs that you should consider before buying:
1. Flexible investment options
ULIPs offer different types of high, medium and low-risk investment opportunities by way of different asset classes that are a part of the same plan. Depending on how comfortable you are at accepting risks, you can choose an acceptable plan.
You also have the freedom to choose the premium and the sum assured as per your requirements. Additionally, they allow your investment to be adapted to a portfolio through top ups to fully utilize ULIP investment opportunities brought on to you by changes to the outside environment or your income flows.
ULIPs can be a transparent financial product since the policyholder is made aware of the fee structure, value of the investment, and the estimated rate of return for the policy tenure. This might help you have a better idea of where you are parking your hard-earned money and what you may expect from it.
Similarly, you will always be informed of the value of your investment portfolio thanks to quarterly investment portfolio reports, daily NAV reporting, and annual account statements.
3. Liquidity as per your needs
ULIPs can also help in the event of unforeseen future circumstances.
4. Double benefits
ULIP is a special financial instrument that combines life cover along with investment opportunities into one plan. If you lose your life during the policy tenure, your loved ones are financially protected by the life cover from a ULIP.
Your ULIP investment returns are paid to you after the policy term, which may enable you to realise your financial goals.
5. Tax advantages
Section 80C of the Income Tax Act of 1961 provides an exemption from taxation for policy premium payments. As per the section, you may deduct up to 1.5 lakhs per year for the premiums you pay for a ULIP. Also, tax reforms are subject to changes, please ensure that you check the current updates while filing taxes. Also, there are two tax regimes in India – new and old. The deductions under Section 80C are available only if you choose the old tax regime. To get the tax benefit you desire, consult an expert and choose the suitable tax regime. During next financial year you can opt for a regime change.
6. Switching funds
This aids in aligning your investments with your financial objectives and level of risk tolerance.
When should I make ULIP investments?
The earliest possible time is optimum to invest in a ULIP. Based on your fund allocation, ULIPs can provide excellent growth potential. Your money has plenty of time to earn returns and increase in value with the power of compounding. Investing for a longer duration may increase the likelihood of growth even more.
It’s crucial to keep in mind that because ULIPs are a type of life insurance plan, purchasing one when you’re young might guarantee you lower premiums. Additionally, having an early start will extend your investing horizon and give your funds adequate time to develop.
Investing in a ULIP (Unit Linked Insurance Plan) can provide several benefits that make it a lucrative option for individuals looking to secure their financial future. The key advantages of ULIPs include life insurance coverage, investment opportunities in different financial instruments, tax benefits, flexibility, transparency, and long-term wealth creation. ULIPs allow investors to enjoy the dual benefits of insurance and investment by combining the features of a life insurance policy and a mutual fund. By investing in ULIPs, individuals can take control of their financial future and ensure that they have a secure financial base to support them in their golden years.