If we talk about smart financial planning and remunerative options of investment then one can consider investing in ULIP plans. As a profitable option of investment ULIP plans is the best way to start investing in the equity market. Moreover, along with the benefit of investment returns, the ULIP plan also provides insurance coverage to the individuals.
In simple term, if we talk about what is ULIP. Then it can be described as the market-linked investment option which also provides the benefit of life protection. With a wide range of fund options to invest in ULIPs works as a great long-term investment instrument to achieve the financial objective of life.
Let’s take a look at the top 5 reasons why one should consider investing in ULIP.
- Risk Appetite
The ULIP plan offers an opportunity to the investors to invest as per their risk appetite. In case, the individuals have a low-risk appetite then they can consider investing in debt funds. Whereas, if the investors is a moderate or high-risk player then they can choose to invest in balanced funds or equity funds in order to gain profitable returns on investment. Moreover, according to one’s own risk appetite, the investors can switch between equity and debt funds to minimize the risk and gain high investment returns.
ULIP plans are comprehensive insurance plans which offer flexibility. In ULIP plans the policyholder has the flexibility to choose the sum assured amount at the time of policy inception. Moreover, there are many ULIP plans which also offer an option to increase the limit of sum assured amount during the tenure of the plan.
Besides this, the Ulip Plans also offer the flexibility to change the premium rate of the policy. After the completion of the lock-in period, the insured has the liberty to invest more in order to maximize their investment returns. Moreover, the plan also provides the flexibility to choose the fund options and offers the option of free switches between funds. According to one’s own suitability, the policyholder has the option to choose between aggressive funds, conservative funds or a combination of two.
- Long term investment
ULIP plans are considered as one of the best long-term investment options for individuals. As compared to other investment options ULIP plans come with a lock-in period of 5 years. Moreover, the investment made towards ULIP plan offers a higher return over a long-term period. In case, the policyholder decides to exit the policy after the completion of the lock-in period then he/she can
surrender the policy. However, it is advised that the insured should invest in ULIP plan over a long-term period in order to maximize the profit and create corpus in the long-term. With the benefit of the power of compounding the investment made towards ULIP reaps higher returns over long term period.
- Benefits Illustration
The insurance provider is obliged to provide the customers with all the information including what portion of their premium is deducted for different charges, how their premium amount is utilized and how the plan chosen by them will grow to pay out the chosen sum assured. Usually, the insurance providers use a minimum of two scenarios viz 6 percent & 10 percent return rate.
Along with that, the policyholders also receive the policy documents which include all the information related to the policy.
- Disciplined Savings Mechanism
Investing in ULIPs inculcated the habit of disciplined savings among investors. Moreover, it helps the investors to work towards their long-term and short-term financial goals of life by saving a particular amount in a disciplined manner. With the help of disciplined saving mechanism, the investors can create a financial cushion for future so that they can deal with any type of eventuality and live a financially secured life.
- Tax Benefits
When an investor invests in ULIP, they get to enjoy the following tax benefits as per Section 80C of the Income Tax Act.
- Life cover
Apart from the investment benefit, ULIP offers protection to the family of the insured. ULIP fulfills investment as well as the protection needs of an individual. Having said that, the life cover offered by a ULIP plan is not as high as that of the pure protection plan. Still, investment benefit combined with protection benefits makes ULIP stand out among various investment and insurance plans.
Over to You
ULIP investment enables an individual to accomplish the goal of wealth generation. Additionally, the protection element offered by ULIP helps to lower down the risk exposure. Typically, ULIP providers provide an update on the performance of the funds opted by the individual. In case the opted fund is not performing well, the individual can always switch to the funds that are performing well. Keeping a track of the performance of the opted fund is the sure-fire way of earning a high return on investment.