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Why ULIP Should Be a Part of Your Investment Portfolio?

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  • 15th Apr 2022
  • 3,485

Why ULIP Should Be a Part of Your Investment Portfolio?

Creating wealth and building assets is an important component of financial planning in your life. Designing a financial investment portfolio that delivers considerable returns to you over time in sync with your preferred timeline and goals is one of the most practical and successful methods to go about the whole process. When it comes to setting up your financial portfolio, it is no secret that mutual funds, insurance policies, and other financial instruments are popular choices. However, what if you had the opportunity to invest in an instrument that provides both investment and market related returns in one?

Introducing ULIP

In recent years, ULIPs have been one of the popular investment alternatives for many people. In this article, we’ll explain what ULIP is and why it is a must-have for diversifying and enhancing your investing strategy.

The Basics of ULIP Plan

A ULIP portfolio is unique in itself. It is an investment that is split into two halves and involves a five-year lock-in period. The first portion is used to secure life insurance coverage by paying a premium. The remaining money is invested in either equities or debt funds in order to gain financial rewards. You can increase or reduce the percentage of your ULIP assets in favor of your insurance cover or into your investment portfolio depending on your future financial goals. In either case, you will undoubtedly reap substantial financial gains.

Reasons to Add ULIP In Your Financial Portfolio

One Plan Dual Benefits

In India, ULIP is the only unique financial product that provides a dual advantage of investment and life insurance coverage through a single investment. As a result, you won’t need to purchase separate insurance and investment plans to protect your future.

Ease of Purchase and Renewal

Purchasing a new ULIP plan and renewing the old one takes very little time. In most occasions, you may buy your preferred plan online from the convenience of your own home. All you have to do is go to the insurance agency’s website, pick a plan, send in your KYC papers, and make the purchase. It is a really quick process.

Fund Switching and Flexibility

Depending on your risk tolerance, you can move your money between different funds such as equities, debt, and balanced funds. You can raise your investment part in equity funds if you wish to adopt a high-risk approach to your investing. You may, however, convert your assets into debt or balanced funds at any time if you wish to reduce your risks.

Top Up with Ease

As your life progresses and you make more money, you may redirect a portion of it to your investments. You can top up your investment at any moment with a premium top-up option making ULIPs an excellent addition to your portfolio.

The Magic of Compounding

The power of compounding is used by all effective ULIP plans to help you enhance your net worth. When you put your money in the stock market, it grows and provides rewards that can help you overcome inflation. In reality, the longer you invest, the higher your returns will be.

Tax Benefits

ULIPs come bearing tax benefits as well. Premiums paid for ULIP are exempted from tax under section 80C of the Income Tax Act, 1961, including the maturity benefit that is also tax free as per Section 10 (10D). To summarise, after looking over the reasons why you should include ULIPs in your portfolio in detail, there is no doubt that this scheme has nothing but benefits to offer. ULIPs are incredibly distinctive and valuable aside from being a great complement to your existing investing instruments.

- A Consumer Education Initiative series by Kotak Life

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