Why do you hustle at your 9-5 jobs every single day? You put in extra effort to make money to live a comfortable lifestyle in the future. But do you think your life savings would suffice in the long run? While savings are crucial, we should not ignore the benefits of several investment plans in the market. With the right investment option, you can not only earn more returns but also accomplish your life goals.
Being a popular investment option, a Unit Linked Insurance Plan (ULIP) is usually purchased by many investors. Since it helps you to save money for the long term, let’s take a closer look at these ten ways mentioned below to do so:
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It is a dual financial product
ULIP insurance is a unique financial product, which offers dual benefits. It is an amalgamation of investment and insurance in a single plan. While the insurance element can protect your loved ones financially, the investment aspect of a ULIP policy lets your diversify your portfolio.
It is affordable
As a policyholder, you can either purchase a ULIP policy directly from the insurance agent (offline) or from your insurer’s website (online). If you purchase a ULIP policy offline, you would have to complete the application and filling process at your insurer’s office, which might take a lot of time. With an online purchase, you can purchase as well as renew the ULIP policy in a single click on your mobile phones.
It has a longer lock-in period
Under a ULIP policy, the lock-in period is for five years. The longer lock-in period ensures that you can develop a disciplined investment habit as well as grow your corpus over the due course. In other words, the longer the lock-in period, the higher the growth of funds.
It is a flexible investment option
When you invest in ULIPs, you have the flexibility to select between the different types of funds options. A ULIP policy offers you with two main types of funds: equity funds and debt funds. As a policyholder, you can choose from these funds based on your financial goals, preferences, and risk appetite.
It offers tax benefits
One of the biggest advantage offered by these plans is the ULIP tax benefits. According to 80C of the Income Tax Act, 1961, you can claim a deduction up to Rs. 1,50,000 on taxable income. Additionally, the pay out that your family would receive in your absence is tax-free as stated in Section 10(10D) of the Income Tax Act, 1961.
It provides high returns
The returns of a ULIP policy are based on your fund choice and risk appetite. For instance, if you choose debt fund, you would receive low returns and vice versa. Therefore, you should see to it that you select the fund wisely.
It allows switching between funds
Now, if you have a low risk appetite, you would select debt funds. However, if you aren’t satisfied with the low returns, you can shift to equity funds. With the switching feature, you can easily secure your funds against any changes in the market.
It has low charges
Previously, ULIPs were particularly known for its high charges that are deducted from the premium value. If the ULIP charges are adjusted in the Net Asset Value (NAV) or units, it would be deducted from your account. Post the new changes by the Insurance Regulatory and Development Authority of India (IRDAI), ULIPs have significantly become cheaper than before.
It makes provisions for riders
Riders are also known as add-on covers, which are utilized to enhance the base ULIP Policy. Many insurance companies offer riders like accidental death cover and critical illness cover. You can purchase these riders along with a ULIP Plan.
It provides loyalty additions
Loyalty additions are usually provided to stay invested for a longer time. For instance, your insurer might include loyalty additions to your sum assured value.
In a nutshell, a ULIP policy is a long-term investment. Therefore, see to it that you stick to a ULIP Policy for a long-term duration since it grows your funds throughout the tenure of the policy. In simple terms, the longer the policy tenure, the higher the fund accumulation.