As a result of the country’s growing financial literacy, many young individuals are exploring investment options to invest their hard-earned money. An ideal investment is the one that provides high returns with low risk. You must evaluate your risk appetite carefully before starting any investment. For the youth in the initial years of their career and are looking to make a goal-based investment, a Unit-Linked Insurance Plan (ULIP) can prove an ideal investment option. Let us look at some of the important details of a Unit-Linked Insurance Plan (ULIP).
What is ULIP Plan?
A ULIP is a modern investment option that has gained immense popularity due to the high returns. The ULIP returns can be utilized to meet long-term goals such as buying a house, managing wedding expenses, etc. Insurance companies offer a ULIP, and it provides the investors with both insurance and investment under a single integrated plan. It is a long-term systematic investment plan that allows you to invest your money in a disciplined manner. In addition to that, you can also calculate the probable returns beforehand with an online ULIP calculator.
Now that you have a fair idea of what is ULIP, let us have a quick look at some of the primary benefits of investing in ULIPs:
- A ULIP investment offers you the flexibility to invest your money as per your financial requirements and risk appetite. Moreover, it also allows you to switch between fund options without any added cost for up to 12 switches in a year. According to the fund you choose in ULIP, the insurer invests a portion of your premium in either equity or debt market or both. Each fund has a specific value associated with it, known as Net Asset Value (NAV). The ULIP NAV changes daily and is calculated once every business day.
- If you happen to invest in ULIP, you also get the flexibility of increasing your investment portfolio through top-ups. This can help you make the most of investment opportunities.
- Since ULIP plans also provide insurance coverage, it offers you the flexibility to choose your sum assured at the beginning of your policy.
Another major advantage of ULIP is liquidity. You can choose for partial withdrawal of funds in case of any unforeseen events.
ULIPs are considered a long term investment plan. The returns provided by ULIPS are better than those of traditional fixed deposits. Moreover, considering the market’s volatility, the low risk associated with ULIPs makes them an ideal investment option. Therefore, the youth looking to enter the world of equity to meet their long term investment objectives can rely on ULIP investment.
Investing in ULIP also makes you eligible for various tax benefits. Under section 80(C) of the Income Tax Act, the investments made in ULIPs are eligible for tax deductions. You can also receive a tax-free Maturity Benefit under Section 10 (10D).
Before you start with your ULIP investment, make sure that you meet the entry age criteria given in the policy document. Now that you fair understand various details of a ULIP plan ensure that you invest wisely and make the most of it. However, it is advisable that you must compare various plans offered to you by different insurance providers before making the final decision. This will allow you to settle for a ULIP plan that best suits your needs.