A ULIP Policy is the most viable financial product that lets you combine both risk cover and investment in a single policy. A ULIP Policy offers an opportunity for your money to grow fast while at the same time providing risk cover in terms of life and health cover. This blog answers the fundamental question of how ULIP serves as the best of both worlds.
What is ULIP?
A ULIP is an insurance product that offers both insurance and investment facilities. You pay your premiums, some of which are used to provide insurance cover while the remainder is invested in equities/debt instruments (or both). One of the main problems with traditional insurance products is that they force you to lock in your money for a long period. ULIPs allow you to keep your investment liquid, enabling you to make a variety of financial goals.
7 Unparalleled Benefits of ULIP
1. Offers Best of Both Worlds
A ULIP is a financial instrument that combines both insurance and investment aspects. It provides you peace of mind because you are guaranteed protection against life’s worst scenarios. It also allows you to invest your money in different market indexes, thereby giving you good returns on your invested capital.
2. Multiple Choices of Investments
ULIP plan is a good choice for you if you’re seeking higher returns with very minimal risk involved. If you are a low-risk taker, you can choose to invest in bonds. As a high-risk investor, you have the option to choose equity funds instead of balanced funds. As a moderate-risk investor, you should consider both types of funds. When you choose to invest your capital with ULIP, you have multiple investment choices available at your disposal that allow you to diversify your portfolio and mitigate risk as well.
3. Greater Flexibility
One of the major benefits of ULIP is having the option to switch between debt and equity-based products on your terms, based on your risk preference, as well as your knowledge of the market performance. This provides you with greater flexibility and allows you to customize your investments as per your requirements.
4. Facilitate Long Term Goals
ULIP plans are structured to provide you with compound returns on your money. They tend to have slightly higher returns than regular growth plans. They’re great for long-term goals like buying a house or car, as they help you build up your savings. Moreover, the returns on a ULIP are higher than Fixed Deposits. However, this doesn’t mean that it’s right to invest in a ULIP for short-term gains. Instead, you should hold the investment for longer periods to gain maximum returns.
5. Savings on Taxes
A ULIP is a tax-exempt investment, which means you also save a significant amount of money on taxes by investing in these plans. The premiums you pay will be eligible for tax exemption under Section 80C of the Income Tax Act for up to Rs. 1.5 Lakhs. Additionally, even the maturity proceeds are free from taxation as per Section 10(10D) of the Income Tax Act.
6. Coverage Enhancement Options
A ULIP is a comprehensive insurance policy that has many add-ons. Some of these add-ons include accidental death benefits, critical illness covers, and so on. These add-on features help you enhance the regular life insurance plan you have. Most ULIPs also allow you to buy riders that increase your insurance coverage. These add-ons cover things like accidents and permanent disability, along with the standard benefits associated with your plan.
7. Availability of Top-Ups
Many insurance companies also allow you to pay for more than the standard amount of premium by choosing what is called a top-up premium. If your ULIP is performing well, then you can opt for a top-up premium to invest more and get higher returns. Moreover, it is comparatively more cost-effective than purchasing a new standalone policy and allows you to make the most out of your investments.
How ULIP Is Both an Investment and Risk Cover?
When you think of risks, don’t just think of physical risks, but also keep the risks of market volatility and of being financially irresponsible in mind. ULIPs facilitate investment in stocks, which helps manage investment risk. The fund value remains locked during the term of the policy, which facilitates the mitigation of investment risk. Profit booking and fund switching help ensure capital gains from the available profit.
ULIPs allow for flexibility of investment, depending on your needs and goals. You can invest in debt or equity or adjust between the two as needed. There is also a built-in life cover available with ULIPs that keep your family protected in the event of your unfortunate demise. ULIPs also help you stay on the path to financial discipline. You can take out money from your ULIP or add more to it, depending on your needs.
These plans are also flexible enough to allow you to switch from one asset class to another, or withdraw money from your investment as a form of additional income. Additionally, it also allows you to enhance your investments during progressive years to gain higher returns. They are designed to be a long-term investment that simplifies the process of setting up an entire financial plan that includes accumulating savings, making investments, and then withdrawing those funds at a later date.
ULIPs are not only an investment but also a risk cover, which can help you protect your family from unexpected expenses. Keep in mind that while ULIPs give you the freedom to choose your portfolio, there are many options available to you. It’s important to make sure that your insurance policy is right for you and your family before making any decisions. Therefore, if you’re looking to safeguard your family’s future while accumulating funds for your future goals and aspirations, make sure you invest in a ULIP as soon as possible.