The family is the most treasured asset for each of us, and we spare no effort to make sure that our loved ones are well protected from any unforeseen circumstances. The best way to prepare for future contingencies is to invest in an instrument to help take care of any unexpected expenses. ULIPs are the easiest to purchase and provide the most comprehensive coverage of all the insurance options available today. However, ULIPs outshine other insurance products in that they offer a combined benefit of life cover and investment returns under one scheme. Moreover, ULIP plans allow you to invest the premium in various market-linked equity and debt instruments, which maximizes the returns.
What is ULIP?
Unit-linked Insurance plans are investment tools that offer significant returns along with insurance cover throughout the policy term. Hence, you can fulfill both wealth creation goals and availing of life cover with one insurance policy. With a lock-in period of five years; therefore, ULIPs work best as long-term investment opportunities.
Moreover, ULIPs are EEE investments where the investment, accrual, and withdrawal are eligible for tax deduction under Section 80C. The premium you pay towards a ULIP has partly invested in equity/debt-based instruments, while the balance provides insurance cover.
Features of ULIPs
1. Life cover
The most important advantage of ULIPs is that they provide life cover. These plans offer security to the investor’s family if any eventuality and protect them throughout the policy period.
2. Investment for wealth creation
ULIPs are suitable for long-term wealth creation to fulfill life goals such as buying a car or purchasing a home. These instruments leverage the power of compounding; therefore, you are likely to receive higher returns than the amount invested after the lock-in period of five years. It is advisable to stretch the investment horizon more than the mandatory lock-in period of five years to get substantial returns from ULIPs.
ULIPs invests in equity, debt, and balanced funds. It allows the investor to switch the invested amount between them by their investment goals and risk appetite. For example, if the goal is wealth creation, the investor can opt for equity funds. On the other hand, if the investor wants steady returns over time, then the investment choice is debt funds. Reputable insurance companies, including Max Life Insurance, allow investors to make multiple free switches in a year.
4. Partial withdrawal
The best feature of ULIPs is that it offers partial withdrawal after the initial lock-in period. In general, insurers have certain conditions that govern partial withdrawals. Therefore, you can withdraw a particular amount from the corpus created at any time as per your financial requirements.
5. Tax Benefits
Investments made into ULIPs are eligible for tax deductions under Section 80C. Therefore, you can save up to Rs. 1.5 lakhs on the premiums paid. The death and maturity benefits are tax exempted under Section 10(10D) of the Income Tax Act. Overall, ULIP plans are most suitable for individuals seeking pension and retirement benefits. When you purchase a ULIP pension plan, you are also entitled to receive a comprehensive life cover.
ULIPs are an excellent choice for investors looking to secure their family’s future while accumulating wealth. Staying invested for more extended periods will help the investor in realizing their life goals. Some of the best ULIP plans available today offer additional benefits such as partial withdrawals, free fund switching, and tax-free maturity payouts, along with mandatory investment returns.