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How ULIPs can help you achieve your financial goals

The ULIP premium is invested in the funds you choose, providing you with the chance to earn market-linked returns over time as the ULIP plan returns to achieve your financial goals.

  • 2,539 Views | Updated on: Jan 10, 2024

​Making a plan for your life goals is empowering; it is a part of life that drives us to keep working hard and taking steps toward our dreams.

Since we place such a high value on personal objectives, it’s natural to wonder about meeting financial goals in your life. Your wealth goals must alter as you go in life, whether you are just starting or an experienced investor.

Keeping up to speed with financial instruments can be the first step in meeting your financial goals. ULIP can be one of the versatile instruments that can help you achieve your financial goals over long-term.

ULIP Plan Meaning

ULIP stands for Unit Linked Insurance Plan, a type of investment that offers two main advantages. The first is the benefit of investing in market-related funds such as equities and debt funds connected to the stock market. The second advantage is the protection provided by the insurance component.

The premium is invested in the funds you choose, providing you with the chance to earn market-linked returns over time as the ULIP plan returns.

4 Ways ULIPs Can Help Achieve Your Wealth Goals

  • Build the Virtue of Saving

ULIPs assist in fostering the habit of saving, which is critical in promoting wealth building. ULIP funds have a mandatory five-year lock-in period, even for short-term investments. This instils the habit of saving money from a young age. You will be charged specific ULIP plan fees if you remove the money before the timeframe.

  • Market Fund Allocation

Depending on your risk profile and wealth goals, you may choose to go with equities, debt, and balanced funds. If you want to develop a substantial portfolio, you can invest entirely in equity funds through ULIPs, which are known to provide high long-term returns. This will smooth out the effect of short market fluctuations on ULIP plan returns. When the market goes down, your investment will yield more units, and when the market is up, the same investment will yield fewer fund units. The cost levels out over time, giving you steady profits.

  • Compounding Advantages

Compounding refers to generating a return on an original investment that is more than the interest rate, in this case, on ULIP plan returns. Long-term investments are required to reap its rewards. It’s because, as the returns pile up and become the principal, the overall returns in subsequent years of investing grow exponentially. Therefore, if you seek a long-term investment opportunity, go no further and begin your search for the best ULIP funds in India.

  • ULIP Tax Benefits

ULIP investments might help you save taxes. Under Section 80C and Section 10 (10D) of the Indian Income Tax Act, 1961, the premiums and the ULIP plan returns are tax-free owing to ULIP tax benefits. However, with the announcement of the Budget 2021, the maturity profits of ULIPs will be taxed in certain circumstances. The maturity benefit will be classified as Long Term Capital Gains (LTCG) and taxed appropriately if the total premium paid throughout the year exceeds ₹2.5 lakhs.

To summaries, it is no secret that ULIPs sounds like a great option when it comes to selecting a financial tool to assist you with your wealth goals; therefore, it is recommended that you carefully consider your goals and choose from the best ULIP funds in India that prove to be the most beneficial for you.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

In this policy, the investment risk in the investment portfolio is borne by the policyholder.

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