After the introduction of a ULIP plan in the market, there have been many debates about the worth of the product. While many of you might prefer a ULIP plan over other investment products such as Mutual Funds, Equity Linked Savings Scheme (ELSS), and so forth, the rest of you might stay away from a ULIP investment because of the market risks. However, a ULIP plan can help you walk down the investment road irrespective of market volatility.
A ULIP plan is a mix of investment and life insurance that can ensure you get to make the most of it. Apart from this, you can invest in a ULIP plan for a secure future. Therefore, let’s take a look below to understand how ULIPs are a secured form of investment:
1. You can receive dual benefits
A ULIP plan is a dual-benefit financial product, which can combine investment and insurance in a single integrated plan. While ULIP insurance can offer financial security to your loved ones, the ULIP investment can allow your active participation in the capital markets. The dual benefits under a ULIP policy can ensure that your participation in the capital markets does not affect your family’s financial well-being.
2. You can stay invested for a longer duration
A ULIP policy has a lock-in period of five years, unlike other investment products. Due to the longer lock-in period, you can accumulate a substantial corpus to reach your life goals such as buying a new house or a car, planning your child’s dream wedding, and so forth. However, you should ensure that you invest in a ULIP plan at a young age if you want to build a larger corpus for you and your family.
3. You can earn better returns
Many of you might invest in a ULIP plan solely to earn better returns. However, your ULIP returns can depend on your selection of funds and investment goals. Therefore, you should select the right type of funds to ensure you have substantial returns in your hands. Typically, your returns can depend on the following types of funds:
- Equity funds
Equity funds can be risky funds. As a policyholder, you should invest in equity funds only if you have a high-risk appetite to bear the risks of the market.
- Debt funds
Unlike equity funds, debt funds can be less-risky. However, debt funds can generate low returns based on your low-risk appetite.
4. You can ensure flexibility
A ULIP plan can be a flexible option for investment. When you invest in a ULIP plan, your insurer can give you the liberty to choose between the following based on your convenience:
- Premium payment frequency
As a policyholder, you can decide to make the premium payment quarterly, monthly, half-yearly, or annually. If you are unable to make the payment within the selected time frame, your insurer can offer a grace period of 30 days. Failure to pay the premium amount within the grace period can lead to the lapse of the ULIP policy.
- Types of funds
Under a ULIP plan, you can choose between equity funds and debt funds based on your risk tolerance and investment goals.
- Switching feature
Although a ULIP policy is a market-linked product, you can secure your invested capital by availing the switching feature. For instance, you can switch to debt funds when the market is down and opt for equity funds when the market bounces back.
5. You can receive tax benefits
One of the major advantages of a ULIP investment can be its dual tax benefits. A ULIP plan can allow you to save taxes in accordance with the tax rules, as mentioned below:
- Section 80C of the Income Tax Act, 1961
You can claim a deduction up to Rs. 1,50,000 on your taxable income.
- Section 10(10D) of the Income Tax Act, 1961
The amount received on the maturity date can be tax-free.
To conclude, a ULIP policy has re-emerged into a worthy investment product after the introduction of the Insurance Regulatory and Development Authority (IRDA). Although it can provide you with many ULIP benefits, you should select the right plan based on your risks appetite, investment goals, and financial requirements. Compare different options in the market and determine the premium of a ULIP policy before you choose the right ULIP policy for you.