Today, young investors have a plethora of investment options in the market. With traditional investment instruments such as mutual funds and SIPs, people are also exploring other options such as ULIPs. Unit Linked Insurance Plans have been available in the market for over a decade.
While ULIPs are relatively popular among young investors, there are people who are reluctant to invest in it. As we all know, ULIPs offer dual benefits of life insurance coverage and wealth creation under a single policy. Despite the dual benefits, many investors still do not consider ULIPs to be a worthy investment option.
Before you make your decision on whether to invest in ULIPs or not, let us explain to you the benefits of the policy. This will surely help you see what you are missing if you are not investing in a ULIP investment plan.
Benefits of ULIPs
The following pointers explain why should you invest in ULIP –
- Life Insurance Cover
Unit Linked Insurance Plans are primarily an insurance instrument. A part of the premiums paid towards the policy is used for life insurance cover. It ensures that your loved ones are financially protected, even in your absence.
- Tax Benefits
ULIPs are said to be one of the most efficient tax-saving instruments available in the market. With ULIPs, the premium amount paid can be claimed for tax deductions under Section 80C of the Income Tax Act, 1961. Also, the death and maturity benefits received are tax-free under Section 10(10D).
- Lock-in Period
The policy comes with a five-year lock-in period. During this time, you (the policyholder) cannot make any withdrawals. It ensures that you are invested in the policy for a long time as it produces reasonable returns in the long run.
However, if you do terminate the plan before the completion of the lock-in period, know that you will not receive the payout. The final payout will be made only after the end of the lock-in period. Hence, it is wise to invest in long-term ULIPs.
- Helps achieve long-term financial goals
ULIPs happen to be goal-based investment products. So, if you have any future financial goals, investing toward it with appropriate ULIP is a sound financial decision. Any long-term financial goal, such as your child’s education, child’s marriage, buying a new house/car, or retirement, ULIPs will have you covered.
- Add-on Benefits
To enhance the coverage of the ULIP investment, insurers also offer add-on covers. By paying additional premiums, you can enjoy the advantage of extended protection under the policy.
- Fund Switching Facility
The ULIP returns are based on the performance of the funds you have chosen to invest. So, if you are not satisfied with the investment strategy, you can make changes to it. ULIP offers a fund switching facility with which you can switch between funds depending on the market performance. You can switch from equity to debt funds and vice versa.
- Partial Withdrawal
After the five-year lock-in period is over, you are allowed to make partial withdrawals from your ULIPs. It is advisable to make these withdrawals only when necessary. This is because the objective of investing in ULIPs is to achieve future financial goals. Making unnecessary withdrawals will disrupt these goals and might put you and your loved ones in a financial turmoil.
In The End
For those looking for a long-term investment to achieve their future financial goals, ULIPs is the right choice for you. It helps you build your wealth over time and offers life insurance protection as well. Just ensure that your goals are aligned with the investments. Happy investing!