Have you heard about ULIP?
Living expenses and inflation are constantly rising, and despite your best efforts, your riches appear to pass through your fingers in the blink of an eye.
In today’s world, one cannot rely only on one’s salary to cover expenses while still having some savings. It has become vital to invest in an instrument that allows one to earn a return on the investment.
The solution is to invest in a ULIP.
What is ULIP?
The ULIP is a good example of an investment that enables you to safeguard your future but before investing in it, one should be aware about what is ULIP?
ULIP is a type of insurance that provides insurance protection while simultaneously delivering money appreciation over time.
Benefits of ULIPs
The primary goal of investing money is to obtain a decent return. There are several investment options available to help your money grow. However, a ULIP provides both strong returns and life insurance. So, what makes Unit Linked Investment Plans (ULIPs) unique?
ULIPs allow for premium payment flexibility. You can switch your money between equity and debt funds. ULIPs allow you to withdraw a portion of your money as needed. You may also pick where to invest based on your risk tolerance.
In addition to these advantages, ULIPs provide tax advantages on premiums paid and returns earned after the policy.
Double advantage
ULIPs have a highly unique place in the spectrum of investment possibilities. This is because ULIPs combine investing and insurance advantages into a single package. In other words, it is a type of investment instrument made available by life insurance providers.
Depending on your preferences, the fund manager invests a portion of the funds in various routes such as equities or bonds. The remainder is invested in a life insurance policy. If the policyholder dies suddenly, the nominee is entitled to the sum assured.
Tax benefits
If you’re seeking a tax-advantaged investment opportunity, you’ve come to the perfect spot. Section 80C of the Income Tax Act allows for up to Rs 1.5 lakh tax deductions on premiums paid for ULIP investments. Furthermore, all earnings on your ULIP investments are tax-free.
Flexibility
ULIPs provide you with the flexibility to choose where you want to invest your money. Based on your investing goals and market conditions, you may adjust your assets between stock, debt, and balanced fund alternatives.
For example, if the stock market is highly volatile, you have the option of shifting your investments to debt. You can actively monitor your assets and maximize your earnings this way.
Partial withdrawals
In the event of an emergency, you may choose to remove a part of your money. ULIPs, on the other hand, unlike many other investment alternatives, allow you to withdraw a portion of your money after a defined lock-in period.
Ensure you understand how much you are permitted to withdraw because the actual quantity differs across firms. The best aspect is that these withdrawals are tax-free.
Long-term investment
If you want to build long-term wealth as an investor, ULIPs are the way to go. This is because the returns on ULIPs are connected to the stock market. As a result, the stock market’s volatility and swings may result in poor short-term profits.
On the other hand, long-term investing allows you to absorb market risks while earning significantly greater rates of return. So, if you have long-term investing goals, such as supporting your child’s school or placing a down payment on a home, ULIPs are a fantastic way to finance these objectives.
Transparency
Before you purchase a product, you will be informed of the fee structure, the value of an investment, and the predicted rate of return for the whole duration of the policy. Its usually a good idea to comprehend the product you’re putting your money into.
Similarly, the yearly account statement, quarterly investment portfolio, and daily NAV reporting will keep you up to date on the health of your investment portfolio at all times.
Most life insurance policies, including ULIPs, have a 30-day money-back guarantee. This is usually a 15-day period during which you can cancel your insurance if you are unhappy with it. After subtracting the appropriate expenses specified in the policy, you will be reimbursed for the full payment.
Goal-Based Savings
You must save to achieve significant life objectives like purchasing a home, funding your children’s further education, or guaranteeing a pleasant retirement. One of the most practical methods to begin long-term systematic investing alternatives is through ULIPs.
ULIPs, which are designed to target specific financial goals, assist you in investing your money in a disciplined manner. Without such a strategy, your long-term goals may be jeopardised to meet short-term requirements.
Important Feature Documents
When your policy is issued, you will be sent a key feature paper that summarises the essential characteristics of the plan. This, together with the product material, ensures that you completely understand the plan you’ve purchased.
Wrapping It Up
You must save to fulfil primary life objectives such as owning a home, paying for your children’s college tuition, or ensuring a comfortable retirement. ULIPs, which are long-term systematic investing options, is one of the most practical ways to do so.
Unit Linked Insurance Policies, or ULIPs, are insurance policies that provide the possibility for wealth building while also offering the security of a life insurance policy. In ULIPs, a portion of your premium is committed to your Life Coverage, while the remainder is assigned to a shared pool of money known as a fund, which invests in equities, debt, or a mix of the two. The returns on your investments are determined by the fund’s success you choose.
