A ULIP is a type of life insurance that also functions as an investing strategy for the long term. A Unit Linked Insurance Plan also distributes an expanded corpus with market- linked returns upon maturity in addition to the death benefit.
Mumbai (Maharashtra) [India], April 19: Unit Linked Insurance Plan, or ULIPs, combine investing and insurance features. This implies that a ULIP policy provides the policyholder with life insurance coverage while simultaneously allowing the investor to make money thanks to the investment component included in this kind of plan.
This policy's premium payment is split between life insurance coverage and investments in the instruments the policyholder chooses. As a result, the policyholder or investor oversees his money. Because the fund can expand, this makes this type of policy desirable.
Nonetheless, it is important to remember that investing in the financial markets entails some market risks. Yet, given that specialists handle and invest the money, there is a certain degree of reduction in the dangers, even if they remain.
Top reasons to invest in ULIP
There are several benefits to considering Unit Linked Insurance Plan as an investment such as:
Dual Benefits in A Single Package
The only financial instrument in India that provides life insurance coverage and investing opportunities in one package is the ULIP. You do not need to purchase separate insurance and investment plans to guarantee your future. This considerably reduces the cost of the corresponding premiums and aids in better money management.
Tax Exemptions
Section 80 C of the Income Tax Act permits tax deductions for investments made in ULIPs. An investor's ULIP investments are eligible for tax benefits of up to 1,50,000 per year. Similarly, Section 10D of the Income Tax Act exempts the returns you get when your ULIP insurance matures from taxation. Moreover, Section 10 (10D) of the Income Tax Act exempts the sum the nominee receives upon the insured's death.
Combines Insurance with Savings
A ULIP is a type of life insurance that also functions as an investing strategy for the long term. A Unit Linked Insurance Plan also distributes an expanded corpus with market-linked returns upon maturity in addition to the death benefit. You do not need to enrol in an individual life insurance plan and mutual fund investments to achieve your financial objectives.
Multiple investment options
ULIPs provide a choice of options, unlike typical investment plans and life insurance policies. A person can select from various Unit Linked Insurance Plan based on investing requirements and risk tolerance. The following categories can roughly be applied to ULIP investments:
·Aggressive ULIPs
·Balanced ULIPs
·Conservative ULIPs
Flexibility
Due to the various investment alternatives, one may now believe that ULIPs are like mutual funds. ULIP allows investors to choose between several types of programs, unlike mutual funds. The easiest method to take advantage of investment opportunities throughout the equities and debt markets is to switch between several plans. For instance, if someone wants a better rate of return, they might go from a cautious to an aggressive strategy.
Enhances Your Life Cover
Since ULIPs are similar to life insurance plans, it always comes with a life cover. Therefore, whenever you invest in ULIPs, you can also improve your financial security for your family.
ULIPs help secure your financial aim in addition to enhancing life coverage. For instance, you can ensure your child receives the funds as intended even if you no longer utilise a Unit Linked Insurance Plan to save for their higher education objective.
The insurer continues to invest as you would have done while paying your family the life insurance benefit. When the insurance reaches its planned maturity date, your kid will receive the value of the collected funds.
Conclusion
Owing to their extended investment horizons, ULIPs may soon get tedious and cause you to make illogical decisions. This only occurs because, when you purchased the ULIP plan, you might not have had a specific objective other than reducing your tax liability. That does not imply, however, that you cannot plan and use an existing Unit Linked Insurance Plan for the same purpose later. Nevertheless, a ULIP plan can encourage you to invest in a disciplined manner. It can keep you insulated from the highs and lows of the fluctuating market.
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