Today, it is necessary to make the right investments to grow your wealth and secure your future. For this purpose, it is advisable to invest your money in a Unit-linked Insurance Plan (ULIP). A ULIP plan offers significant returns in the long run. Besides investment, you will have to think about your family’s monetary security in case of your untimely absence. Therefore, you need to invest in life insurance. ULIPs can prove handy in this aspect as well. If you wish to know in detail that what is ULIP plan, then read on.
ULIP is a type of life insurance plan that also offers an investment component. So, besides insuring your life, it allows you to invest your savings in equity, debt, or a mixture of both funds. You can select the type of fund where you want to invest money based on your risk-bearing appetite. If you have a high risk-taking capability, you can consider investing in equity funds. However, if you are a risk-averse investor, it is recommended to protect your money by investing it in debt funds. Remember that equity funds offer much higher returns, while debt funds are low-risk, low-return instruments.
Here, we have listed some important features of ULIP. These include:
- Death benefits
If the policyholder dies, the beneficiary of the policy is entitled to get the death benefits from the insurance company. The beneficiary will receive the sum assured or the fund’s value, which is higher, or 105% of the total premium paid until the time of claim.
- Maturity benefits
If you outlive the ULIP’s tenure, the insurer will provide you with maturity benefits. They will either pay a lump sum or you can choose the frequency of payment. You can opt to receive the maturity benefits between one to five years. You have the option to accept the amount in monthly, quarterly, semi-annually, or yearly installments.
- Partial withdrawal
In a ULIP investment plan, the insurer allows you to partially withdraw funds for any monetary emergency. However, you can avail of this facility only after completing the mandatory lock-in tenure of five years.
- Transparency
While investing your money in ULIP, you get a chance to pick a type of fund. Conversely, when it comes to traditional investment instruments, you do not know where your money is invested. With ULIPs, you can constantly monitor your investment and have better control over it.
- Tax exemptions
ULIP offers multiple tax benefits. Here, you can claim a maximum deduction of INR 1.5 lakh per year under Section 80C of the Income Tax Act, 1961 on the premium paid for the plan. Additionally, the death or maturity benefits are tax-free as per Section 10 (10D) of the Act.
- Fund switching
ULIPs allows switching from one fund to another. Here, you can move your investment from a debt fund to an equity fund if the market is booming. On the other hand, you can shift your money from an equity fund to a debt fund when the market is bearish. Therefore, you can maximize your investment returns and create a significant corpus in the end.
We hope that your question on “why should I invest in ULIP” is answered now. So, what are you waiting for? Invest in ULIP and accomplish your aspirations like buying a new house or car, financing your children’s education and their wedding, and building sufficient wealth to live comfortably during retirement. Consider your financial objectives and risk tolerance before finalizing and investing in ULIP.