Whilst considering the vast range of investment options available on the market, before committing, you should speak to your local financial advisor. Everyone has certain life goals they want to achieve with these investments and thus, getting lucrative returns is crucial. So, is Unit-Linked Insurance Plan a secure option? With its dual benefit of providing you with a risk cover and an investment component, many investors prefer ULIPs. So, understand how ULIPs are a safe option for investment with the below pointers.
- Lucrative for first time investors
Unit-Linked Insurance Plan can be a beneficial market-linked investment as it is a simple product. When compared to other such investment tools, ULIP offers you a selected number of fund options to contribute your money. Instead of demanding the investor to be savvy regarding equity or debt funds, ULIPs make investment easy for individuals. As a first time investor, you do not have to worry about the risk of making a wrong investment when it comes to market-linked products. Hence, such a financial tool can be lucrative in case you aren’t very well-versed with the fluctuations of the market.
- Provides flexibility & transparency
When it comes to ULIPs, there are charges involved for managing the funds, allocating the premium, etc. But this type of investment option is transparent, and you shall know about every expense that is being deducted from the premium. Apart from this, you have the option to switch between equity and debt funds based on your risk appetite. In case you are unsure of the market performance, you can simply switch to debt funds and reduce the risks involved. ULIPs offer you such flexibility to suit your requirements without much hassle.
- Enables fund selection based on risk appetite
Not all investors like taking high risks with market-linked instruments. Some would prefer investing in equity funds when they are younger and later switch to debt funds to reduce the risks. With ULIPs, you can do exactly this and switch between funds based on your risk appetite. If the market seems volatile and you cannot afford to take the risk, ULIPs allow you to switch to debt funds. Hence, Unit-Linked Insurance Plan enables you to personalise your investments based on the risk you can take, making it a safe option for many.
- Allows long-term investment
You can fulfil your long-term goals of purchasing a house, higher education for your child or planning for retirement by investing in ULIPs for the long term. You can choose to exit the policy after the lock-in period of five years. However, staying invested in the insurance plan for a longer tenure can help earn better returns. Thus, the money invested shall compound overtime to give you a lucrative sum and make your investment worth it. To understand your long-term returns better, you can use the online ULIP plan calculator.
- Offers tax benefits
You can enjoy ULIP tax benefits on the premium paid as well as on the maturity benefit. Hence, such an investment tool promotes tax saving along with the dual advantage of life cover and investment. Under Section 80C of the Income Tax Act, you can claim the premium paid towards the plan up to a limit of INR 1.5 Lakh. The maturity or death benefit received from the policy can also be claimed under Section 10(10D) as tax-free. But you should know that you can enjoy ULIP tax benefits on maturity benefit only if the premiums are lower than INR 2.5 Lakh. If it isn’t, then the corpus received shall be treated as capital gains.
On considering the above-mentioned aspects of the policy, you can conclude that ULIPs are a safe and lucrative investment option. Now that you are well aware of the ULIP plan meaning and its benefits, ensure to check out the ULIP plan calculator to map out your returns.