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 unforeseen circumstances. Investing in an instrument to help care for unexpected expenses is the best way to prepare for future contingencies. 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 because 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 coverage throughout the policy term. Hence, you can fulfill wealth creation goals and life coverage 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 is partly invested in equity/debt-based instruments, while the balance covers insurance.
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 home. These instruments leverage the power of compounding; therefore, you will likely receive higher returns than the amount invested after the lock-in period of five years. It is advisable to stretch the investment horizon beyond the mandatory lock-in period of five years to get substantial returns from ULIPs.
3. Flexibility
ULIPs invest 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, the investor can opt for equity funds if the goal is wealth creation. 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 yearly.
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 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. ULIP plans are most suitable for individuals seeking pension and retirement benefits. You can receive a comprehensive life cover when you purchase a ULIP pension plan.
ULIPs are an excellent choice for investors looking to secure their family’s future while accumulating wealth. Staying invested for extended periods will help the investor realize their life goals. Some of the best ULIP plans available today offer additional benefits such as partial withdrawals, free fund switching, tax-free maturity payouts, and mandatory investment returns.
