What is ULIP?
Unit Linked Insurance Plan (ULIP) is an investment product that offers the security of insurance along with benefits of investment under a single plan. In this plan, the premium you pay is divided into two parts. One part of it goes to provide your insurance cover while the other part is utilized by investing in equity, balanced or growth schemes as per your choice.
Why should you invest in ULIPs for long term?
Income tax is one of the major concerns for many of us as it not only takes a huge part of our salary but also affects our return on investments. It is crucial to plan your investments wisely so that it can hike your income and help you achieve your financial targets. In case you have a habit of planning taxes at last minute, you need to link your tax-saving investments to long term goals.
Benefits of the tax-saving option you select depend on factors like maturity period, lock-in period and rate of return. When it comes to making financial investments, there are various options like mutual funds, fixed deposits, insurance plans, and more. Reliability is an important factor while choosing an investment instrument and that is where ULIPs come to the picture. As ULIPs come with the dual benefit of investment and insurance, it is considered to be one of the most dependable options. Here are some reasons why you should consider investing in ULIPs for a long term.
- Maximize returns – ULIPs come with an option that lets investors invest in debt funds, equity funds or hybrid funds. They can invest a part of premiums in these investment options depending on their risk appetite. If the investor is willing to take high risks, then they can go for equity funds, whereas people who have a moderate risk appetite can select hybrid funds to invest. To avoid risks, you can select debt funds. It allows you to get the best returns on your investment.
- The benefit of long-term growth – ULIPs come with a lock-in period, thus making you pay premiums for a farther time horizon. It lets you enjoy the benefits of long-term investment growth. You can use the accumulated amount to meet your financial goals like supporting your child’s educational expenses, planning retirement corpus, down payment for a home loan, etc.
- Enjoy tax benefits – Investing in an investment vehicle that helps to reduce your tax liability is definitely a good choice. Premiums paid towards ULIPs come with tax benefits under Section 80C of the Income Tax Act 1961. Thus, it offers a complete tax-free death benefit payment.
- Enjoy life cover – As we discussed earlier, ULIP is an investment plan with a combination of insurance. In case of death of the policyholder, it covers the family of the deceased against the financial difficulties. The sum assured amount is utilised to meet the financial needs of the beneficiaries like daily expenses, repayment of loans, etc.
- A better option for first-time investors – First-time investors who are willing to take less risk by investing in the stock market can choose from the different avenues offered by ULIPs depending on their risk appetite. Also, New Insurance Regulatory and Development Authority of India guidelines have made the Unit Linked Insurance Plans easier to invest in than before.
The above-mentioned points offered by the dual-benefit plan makes ULIP a must-have in your investment portfolio for a long time investment.