The traditional investment modes such as fixed deposits and savings accounts are safe but don’t offer adequate returns to beat the rate of inflation. Alternatively, investing in high return investment instruments like share markets is infused with significant levels of risk.
To enjoy a hybrid between these two types of investments, ULIP Investment is surely the perfect match. These are ideal investment schemes that allow you to enjoy market-linked returns without having to take heavy risks, and it even offers insurance protection. In addition to this combined benefit, several other reasons make ULIPs a must-have investment option for everyone.
What is a Unit Linked Insurance Plan?
A ULIP is a low-cost, equity-linked investment plan and an alternative to traditional life insurance plans. It offers diversified investments in equity, debt, and money markets spread across the country. A ULIP investment gives you the flexibility that benefits both you and your policy.
The policyholder can choose the investment portfolio that suits his/her needs. It offers plenty of investment options through a systematic withdrawal plan (SWP) at predefined intervals during the lifetime of the policy, which means more choices for you.
6 Amazing Benefits of ULIP
ULIP is the only financial instrument in India that provides you combined benefits of insurance and investments. This eradicates the need for you to purchase a standalone life insurance policy and helps you secure the future of your loved ones without any additional costs. This not only results in savings on premiums but also allows you to manage your finances with ease.
ULIP investments are also eligible for tax deductions as per section 80C of the Income Tax Act of India. You can claim a rebate of Rs. 1,50,000 every year with the help of ULIPs. The returns as well as the death benefit to be received by your nominee are also free from taxes as per the section 10D and section 10(10D) of the Income Tax Act, which makes ULIPs highly lucrative tax-saving option in the market.
Among the various investment schemes available in India, ULIPs are considered one of the most flexible ones. It allows you to switch between multiple fund options, from equity to debt based on your risk appetite and investment preferences. Additionally, ULIPs also feature a top-up facility that allows you to grow your existing savings corpus. You can even redirect your future premiums to different funds as per your preferences.
Unit Linked Insurance Plans offer a guaranteed amount of money to your preferred nominee in case you die unfortunately during the policy tenure. The fixed amount offered is known as the ‘Assured Sum’ of the policy, which is also free from any kind of taxation. Additionally, the assured sum is based on your financial requirements and is determined at the time of purchasing the policy. This financial corpus can be of great help to your family, especially when you’re no longer alive to take care of your loved ones.
With traditional investment options, you can never withdraw your money when the investment is in its lock-in phase. However, when you invest in ULIPs, you can make withdrawals anytime, regardless of whether the policy is in its lock-in period or not. However, keep in mind that there are certain types of deductions or charges associated with these withdrawals, depending on the insurance company you choose.
As compared to other investment schemes available in India, the potential gains that you can receive through ULIPs are much higher. Moreover, you can grow your returns even higher by harnessing the flexibility of shifting between multiple funds. Additionally, there are certain kinds of rewards and bonuses associated with these plans that act as wealth boosters and grow your accumulated fund even more.
How To Manage ULIPs Properly?
Determine Your Life Goals
Before you begin investing in a ULIP, you should consider keeping your financial goals in mind like purchasing a house, paying for your child’s education, going on a vacation, or anything else. Without having a vision of your targeted goals, you can never be able to manage your investments.
Once you’ve assessed your financial goals, you have to make sure that your fund allocations are aligned with them. As the fund allocations are more equity-oriented when you start, you can shift to a rather safer investment when you’re on the verge of accomplishing your goal.
Know Your Risk Appetite
While taking a higher risk can also ensure greater returns, they’re not always a better option for everyone. It’s good to determine how much risk you can take without having to undergo any financial burden.
If you want to increase your income progressively over years, you should consider allocating your funds in equity. On the other hand, if you’re looking for a safer and steady flow of income, you may consider investing in balanced funds instead.
Optimize Your Allocations
Allocating assets simply means diversifying your investments across multiple asset classes. The best thing about ULIPs is that it allows you to spread your investments across multiple funds that help in mitigating risk and minimize losses.
The standard allocation for equity funds in ULIPs is generally 40%, but you can always go for a high-risk and high-return fund in case your risk appetite permits. Therefore, consider determining your risk-return capability and optimize your allocations accordingly to gain higher returns from your investment.
A ULIP investment is a sort of a packaged insurance scheme that is designed to provide investment and insurance protection to the policyholder. The two salient features of the policy are that it gives you the option of taking a loan and the benefit of lock-in. The lock-in period varies from 1-5 years. Therefore, if you’re looking for a reliable way to grow your funds, you should consider investing in the best ULIP plans as pe