In addition to traditional plans like endowment and money back life insurance policies, you may consider buying a Unit Linked Insurance Plan (ULIP). Owing to the balance of investment and protection that a ULIP investment offers, these plans have now become one of the most popular options that policy buyers look out for.
It ULIP is a type of life insurance product that includes a life cover as well as an investment option. A portion of the premium is invested in various products such as mutual funds, shares, or bonds etc, whereas the remaining portion of the premium is paid for a life insurance policy. You may choose between risk cover and investment as per your needs and preferences. There are numerous advantages of ULIP that can help the policyholder bear not only the fruits of their ULIP investment but also enjoy the tax benefits. This is because under Section 80C unit linked investment plan allows the policyholder to avail themselves of tax exemptions.
Continue reading this detailed guide on unit linked investment plans, the different advantages uses of ULIP and how this plan is useful., and how to invest in ULIP plans.
Uses of ULIPs
When you invest in plans like the Kotak ULIP fund, you can plan and achieve various life goals like the one mentioned below:
Retirement planning
Fortunately, more people today understand the importance of planning their retirement. Scientific developments have increased life expectancy, which makes it necessary to ensure you have sufficient funds to last you through your retirement. Increasing healthcare expenses due to rising inflation also makes it important to build a sizeable retirement corpus. A good ULIP plan will help you build a retirement corpus in the long run.
Some portion of the premium may be invested in shares. Historically, stock markets have delivered higher returns in a longer duration, making ULIP an excellent product. It is recommended that you invest early to assume higher exposure in the equity market. As you age and get closer to your retirement age, you may move your investment to safer products like bonds. Further, when you retire, you may choose immediate or deferred annuity at your convenience.
Secure the future of your children
Education expenses are constantly rising. The cost of pursuing higher education in the future will be significantly more than the current expenses due to inflation. Therefore, you must invest in a way that not only delivers returns but also provides inflation-beating profits. Unit-linked child plans invest your money in the stock markets, which has the potential to deliver higher returns, which in turn is beneficial to secure the future of your children.
Meet critical milestones
You may require funds to meet certain milestones such as children’s higher education, wedding, or a business venture. ULIPs allow you to withdraw money partially to meet fund requirements at various stages in your life. This ensures you have funds when the need arises and do not face any financial difficulties to meet these critical milestones.
Understand your investment horizon
If you want to accumulate funds to meet goals such as children’s education or your retirement, you may invest for the long term. When you have a longer investment horizon, you can assume equity exposure, thereby enabling you to earn higher returns.
Assess your risk level
Online calculators can help you assess your risk appetite and make the right choice. If you are unwilling to assume higher risks, you may invest in safer products like bonds.
On the other hand, if you are a high-risk taker, you may invest in shares.
If you find the concept of ULIP a bit more confusing than others, you always have the option to use online calculators. These calculators will help you understand everything you need based on the inputs you give.
