Unit Link Insurance Plan (ULIP) is a plan offered by insurance companies that provides benefits of insurance as well as investment in a single plan. An emergency can occur at any time, and you must always be financially well prepared to face any such situation like the untimely death. In case you are the only earning member in your family, the responsibility of financially securing your family is higher. No matter how big your dream is, you will need substantial corpus to fund your goals. And for that will need a sound investment plan like ULIP, which will help you to save money.
Like any other insurance policy, you need to pay premiums for your ULIP; a part of which will be invested in various funds. If you are ready to bear the risk, you can choose to invest in equity funds. If you are looking for a safe investment opportunity, you can invest in debt funds. Balance fund is another option to enjoy benefits without involving any risk factors. Insurance companies allow you to switch funds based on your changing financial goals.
Here are a few reasons why you should invest in ULIPs for a secured future.
- Lock-in period – ULIPs usually come with a lock-in period of five years, which encourages a habit of disciplined investing. This lock-in period is calculated from the issue date of the policy. Unlike the Equity Linked Savings Scheme (ELSS), ULIP is bought once on which tax benefits can be availed every year until you are paying premiums. ULIP is a long-term insurance contract, and it is one of the best investments to accomplish your long-term financial goals.
- Better returns – ULIPs give better returns as compared to the peers mainly because of the equity advantage. As discussed earlier, ULIPs invest a part of the premium paid by you in various funds. In case of a one-time investment, you need to find a new fund to invest in every year. When it comes to tax-efficiency, the maturity amount of the ULIPs is tax-free in the hands of the policyholder. All these factors make ULIPs a better option when it comes to returns.
- Flexibility – ULIPs give the flexibility to switch your investment as your financial goals and risk-taking capacity change. You can switch your investment in debt funds to equity funds, and vice-versa. Generally, the insurance companies allow four switches per without any charges. Once you select the policy, you can change the fund allocation at any time within the policy duration.
- Tax benefit – Another significant benefit of ULIP plans is that it offers tax-saving. ULIPs provides tax advantage of up to 1.5 lakh under Section 80C of the Income Tax Act, 1961.
- Easy investing option for first-time investors – The guidelines of New Insurance Regulatory and Development Authority of India have made ULIPs more investor-friendly. This has encouraged a lot of FD-oriented investors to invest in a market-linked product like ULIP. A first-time investor with less risk appetite can enter the stock market with ULIPs.
