Why Should You Purchase A Unit-Linked Insurance Plan? (ULIP
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A Unit Linked Insurance Plan or ULIP offers the dual benefits of insurance and investment. In other words, the premium paid towards a ULIP gets divided into two parts, one towards life coverage and the other one towards investment in money market instruments. With the help of a ULIP plan, you can amass considerable wealth with the investment part while getting insurance.
7 Reasons Why you Should Invest in ULIP
1. Dual Benefits in A Single Package
ULIP is the only financial tool in India that offers a dual benefit of investment, while simultaneously providing life insurance coverage via a single investment. Thus, you need not buy separate insurance and investment plans to secure your future. This saves a lot on the respective premium amounts and helps you manage your finances better.
2. Tax Exemptions
Investments made in ULIPs are eligible for tax deductions under Section 80 C of the Income Tax Act. An investor can claim up to ₹1,50,000 every year on his ULIP investments. Similarly, the returns that you get at the time of maturity of your ULIP policy is exempted from tax under Section 10D of the Income Tax Act. Not only that, but the amount received by the nominee upon the death of the policyholder is also exempted under Section 10 (10D) of the Income Tax Act.
3. Flexible Investment Options
ULIPs offer flexibility in terms of investment options. This flexibility is in the form of-
- Fund Switch: You can move your investment between different funds such as equity, debt or balanced funds, depending on your risk appetite. In case you want to take high-risk on your investments, you can increase the investment portion in equity funds. However, at any point, if you feel you want to decrease your risks, you can switch your investments into debt or balanced funds.
- Top-Up Options: Top-up options allow you to invest more money in your existing savings.
- Premium redirection: Premium redirection offers flexibility to redirect your future premiums into different funds.
4. Sum Assured
When you invest in a ULIP, the insurance coverage guarantees a fixed sum of amount to the nominee in case of the untimely demise of the policyholder during the insurance term. This fixed amount is the ‘sum assured’ and is exempted from tax deductions.
5. Lock-In Period Withdrawal Facility
Usually, when you make any investments, you are not allowed to make partial withdrawals during the lock-in period. However, ULIP benefits will enable you to make withdrawals during the lock-in period. Nevertheless, certain fees and deductions are subtracted from the amount when you make such withdrawals during the lock-in period.
6. Higher Returns Potential
Compared to other investment options, the potential to gain maximum financial rewards is high in the case of ULIP returns. These high results can be achieved because of the flexibility offered between equity and debt funds. Similarly, with ULIPs, you become eligible for certain rewards and bonuses for ‘staying invested’. Insurance providers offer bonuses in the form of wealth boosters or loyalty additions.
7. Long Term Growth Benefits
You can pay ULIP premiums for a long tenor and enjoy long term benefits. If you do so, your money is invested in the market for a long period of time thus giving you higher returns. You can use this money from the long term benefits of ULIP for specific purposes like children’s education, down payment of a home loan, etc., by planning it accordingly.
Conclusion
ULIPs are also a lucrative option for people who are planning to start their families or for those who are nearing their retirement. ULIP provides umbrella coverage for family members in the long term. In case of the sudden or untimely death of a policyholder during the ULIP tenure, a ‘sum assured’ is provided to the policyholder's nominee as a form of future financial security.
Also read- Importance And Benefits Of Life Insurance
