Are you wondering why to invest in ULIP? This article can tell you everything you need to know. But before we get into that, let’s answer the question, what is ULIP plan, and how does it work?
A Unit-Linked Insurance Plan, or ULIP, can give you both insurance and a way to invest your money. In other words, the premium you pay for a ULIP can be split into two parts. One part may go toward life insurance and the other toward money market instruments. With the investment part of a ULIP plan, you can build up wealth by putting funds into either equity or debt funds to make money. There are at least types of ULIP plans commonly available. You can choose the one that fits your needs.
If you’re still wondering why you should invest in ULIP, here are 7 ULIP benefits:
7 reasons you should invest in a ULIP right now:
1. Dual Benefits in A Single Package:
ULIP is one of the few financial tools in India that lets you invest and get life insurance coverage simultaneously with a single payment. So, to protect your future, you don’t have to buy separate insurance and investment plans. This saves a lot on the respective premium amounts and can help you manage your finances better.
2. Tax Exemptions:
Under Section 80C of the Income Tax Act, you can get a tax break for the money you put into ULIPs. A person who invests in ULIPs can get up to 1,50,000 back every year. Section 10D of the Income Tax Act says that you do not have to pay tax on the returns you get when your ULIP policy matures. Additionally, Section 10 (10D) of the Income Tax Act also says that the amount given to the nominee when the policyholder passes away is not taxed.
3. Flexible Investment Options:
The investment aspect of ULIP offers a certain degree of flexibility. This flexibility comes from the following:
A. Fund Switch: Depending on the amount of risk that you are ready to take, you may move your money between various funds, such as equity, debt, or balanced funds. If you have a high risk appetite with your investments, you can put more money into equity funds. But if you want to keep your risk level to a minimum, you can switch your investments to debt funds or balanced funds.
B. Top-Up Options: You can add more money to your savings with “top-up” options.
C. Premium redirection: You can put your future premium payments into different funds with premium redirection.
4. Sum Assured:
When you buy a ULIP, the insurance coverage guarantees a set amount to the nominee if the policyholder passes away unexpectedly during the insurance term. This fixed amount, called the “sum assured,” is not taxed.
5. Lock-In Period Withdrawal Facility:
When you invest, you usually can’t take out part of your money during the “lock-in” period. However, ULIP benefits may enable you to withdraw during the lock-in period. However, when you take money out during the lock-in period, certain fees and deductions could be taken out of the amount.
6. Possibility of Higher Returns:
ULIP returns may have a higher chance of giving you good returns compared to other ways to invest. The flexibility that comes with equity and debt funds may make it possible to get these high results. In the same way, if you “stay invested” in ULIPs, you can get certain rewards and bonuses. Bonuses from insurance companies come in the form of extra money or points for being a loyal customer.
7. Benefits of Growth in the Long Run:
You can pay your ULIP premiums for a long time and get benefits that last a long time. If you do this, your money may be in the market for a long time, giving you a higher return on your investment. You can plan to use the money you get from ULIP’s long-term benefits for things like your children’s education, a down payment on a home loan, etc.
So, whether you want to buy a retirement plan, a plan for your child, or create an corpus for yourself, you can invest in any of the various types of ULIP products. Since these have tax benefits, it is assumed to be a lucrative investment. Although there are tax benefits that come with these plans, know that they are only applicable under the old tax regime. Whatever your goals, a ULIP plan calculator can help you determine a plan suited to fit your needs.