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What is ULIP and Its Benefits?

View Plans
  • 2nd Mar 2022
  • 219

What is ULIP and Its Benefits?

You live in a world where everything undergoes constant evolution. In this dynamic, ever-changing environment, your financial requirements fluctuate regularly, making it challenging to achieve the set goals. However, there are two crucial financial components to remember when things are constantly changing: savings and timely protection.

When planning your finances, you may find a lot of choices on the market that focus on these two parts of your finances separately. Fortunately, there’s a savings opportunity that comes with the added benefit of life insurance protection as well as capital growth: ULIP.

Read on to know what is ULIP and find answers to questions like why is ULIP insurance plan so popular and what makes ULIP investment profitable.

What is ULIP?

ULIP is a life insurance plan that invests your money over a longer period to build wealth for the future. High-grade market securities, both stock and debt, are used to fund the investment. As a result, the ULIP plan is a valuable complement to your investment portfolio.

ULIP plans are becoming increasingly popular due to fund options that allow consistent returns, considerably low levels of risks, or both. Promising insurance providers, banks, and financial institutions in India offer these plans, giving policy buyers a range of options to choose from. As a result, your money is guaranteed to earn good returns during the entire vesting time, along with life insurance protection for your near and dear ones.

In essence, a unit-linked insurance plan is a life insurance policy with market-linked investment growth. When you purchase this policy, a portion of your investment goes toward the policy premium. The remainder is invested in high-quality securities.

What are the benefits of investing in ULIP?

ULIP plan is a one-time investment plan with tax benefits. But, in addition to ULIP tax benefits, you also get a long list of advantages of ULIP plans.

Following are some major benefits of purchasing a ULIP plan.

1. Flexible options

ULIPs provide varying levels of high, medium, and low-risk investing possibilities through various funds within the same plan. They allow you to choose the sum assured or premium based on your needs and add to your portfolio with top-ups to take advantage of investment prospects that emerge from shifts in the external circumstances or your income flows.

2. Transparency

Before acquiring a plan, you are informed about the charges involved, investment value, and the expected rate of return over the policy term. The yearly account statement, quarterly investment portfolio, and daily NAV reporting will keep you informed about the status of your portfolio any time at your convenience.

3. Liquidity

ULIPs allow you to make a partial withdrawal in unanticipated future circumstances.

4. Regular and disciplined savings

ULIPs encourage you to save regularly, which helps you create a corpus for future requirements.

. Tax advantages

Section 80C of the Income Tax Act, 1961 exempts the premiums paid towards the policy from taxation.

6. Risk dispersion

With ULIPs, you can profit from market-linked gains without having to invest in the stock market, as well as the added benefit of life insurance.

Investment in ULIPs does not only allow you to diversify your portfolio but also empower you by offering a stable and dependable opportunity to fulfil all your financial goals. With a proper understanding of the market and well-planned investments, you can make the most of your ULIP plan.

- A Consumer Education Initiative series by Kotak Life

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