April 18, 2024


Savvy business masters

Features and Benefits of ULIPs You Should Know About

Planning your family’s finance is one of the challenging but most important tasks. Every earning member of a family must ensure that their dependents will have monetary security in their absence. It is also essential to put your money in investment instruments that help create a substantial corpus to accomplish life goals and save on taxes. One product that helps with all these aspects is ULIP investment

What are ULIPs?

Unit-Linked Insurance Plans (ULIPs) are life insurance policies that offer the added benefit of investments. The life cover helps your dependents in case of an unfortunate event. With the investment options, you can create a fortune that will enable you to fulfil objectives like funding your children’s higher education and having a secure life during your retirement.

If you are unsure why you should invest in ULIP now, here is a list of its beneficial features that make it an ideal investment option.

1. Dual benefits

What makes ULIPs a unique investment avenue is its dual advantages. ULIPs work both as a life insurance policy and an instrument of wealth build-up. They provide a life cover during the policy tenure while allowing you to create a substantial corpus through unit-linked fund investments. Moreover, with ULIPs, you can choose whether to invest in an equity fund or a debt fund, depending on your risk-tenacity and long-term financial goals. You also have the choice to diversify your investment into both funds and balance risk with profit. 

2. Tax exemptions

Multiple ULIP tax benefits make it a valuable investment product. As per Section 80C of the Income Tax Act, 1961, you do not have to pay any tax on the ULIP premium. However, the maximum deduction limit here is INR 1.5 lakh per year. According to Section 10 (10D) of the Act, the maturity and death benefits are tax-free. With these ULIP tax benefits, you can save more, ensuring higher profits.

3. Multiple investment options

ULIPs allow you to invest in different equity and debt funds, depending on your monetary goals and risk-taking capability. For example, if you are looking for significant wealth creation and willing to take risks, equity-based ULIP funds will serve you right. However, if you are not comfortable with high-risk, investing through debt funds will prove useful. It lets you divide your investment between both equity and debt funds, where the risk is moderate.

4. Fund-switching

With fund-switching, you can get the best possible returns from your investment. As you already know, ULIPs let you choose among equity, debt, or a combination of funds. The fund- switching facility enables you to shift between the funds as per your needs. For example, suppose you made your initial investment in equity funds but want to take less risk later, transferring your money to debt-based funds will be suitable for you.  

5. Partial withdrawal

ULIPs have a lock-in period of five years. Once this duration is over, you can withdraw a portion of the ULIP funds. This partial withdrawal feature helps you in times of financial emergencies. Before purchasing a policy, find out how much withdrawal your insurance provider permits and if you have to pay any charges for it. 

Now that you know about the promising offerings of ULIP, it is time to find an appropriate policy. Before making a ULIP investment, it is essential that you do adequate research to select the right plan. Depending on your expected returns and budget, you can opt for a ULIP online and purchase it from the insurance company’s website.