Why it's a Good Time to Explore ULIPs as an Investment?

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Here's Why it's a Good Time to Explore ULIPs as an Investment

ULIP helps you choose the right life insurance plan, premium amount, payment method, and policy term to match your savings goals. Know why it is a good time to explore ULIP as an Investment plan.

  • Dec 05, 2022

Investments and insurance are two important factors of financial growth and stability. Savings in the form of mutual funds, stocks, fixed deposits and real estate investments are some of the options for financial security. ULIP, or Unit Linked Insurance Plan, is a specific type of investment policy that offers life insurance protection. It is a unique combination of investment and insurance. ULIPs enable you to build money for your long-term goals, including your dream home, education, retirement, and more. ULIP insurance guarantees you meet your objectives through a life cover.

Depending on your risk tolerance, you can invest in a variety of debt or equity funds using ULIPs. Additionally, Section 10(10D) of the Income Tax Act of 1961 exempts the returns from taxation. ULIP investments are a treasure trove of financial security for family security, tax savings and investment.

How ULIPs Operate?

ULIP helps you choose the right life insurance plan, premium amount, payment method, and policy term to match your goals for financial security and savings goals. Your choice of an upfront, lump sum payment or recurring payments on an annual, half-yearly, or monthly basis, as well as the frequency of the premium instalments, can be made at your convenience. ULIP insurance provides a portion of your premium with a life insurance policy. Then, depending on your selections, the remainder of your premium is invested in the stock market using equity, debt, or hybrid funds.

Characteristics of ULIP Policy

Affordable ULIP charges and tax benefits are certain features of ULIP investment which make it unique and beneficial for investors:

  • Allocation of the Investment

In ULIPs, investment can be adjusted as per the risk tolerance of the investor. While in equity funds, you can choose to be adventurous, debt funds allow you to be prudent. On the other hand, with balanced funds, you can have the best of both worlds.

  • Multiple Premium Payment Options

This feature of ULIPs allows you to pay your premiums as per your convenience. You have the option of paying monthly, semi-annually, or yearly. If you don’t want to make recurring payments, you may alternatively choose the one-time premium payment option.

  • Changeable Fund Type

Observing the market and as per the requirements of the risk investment, funds can be changed or switched. You can convert from one fund type to another if you anticipate a shift in the market or if your needs for your investment change. ULIPs provide you with the flexibility to change your investment by your needs.

  • Money Withdrawal

One of the most essential aspects of ULIPs is the ability to withdraw money from your plan. After the five-year lock-in period, you can take out money from your funds in case of an emergency. The number of withdrawals allowed and the maximum amount of withdrawals are determined by the plan you select.

Benefits of Investing in ULIPs

  • Tax Benefits

Under Section 80C of the Income Tax Act of 1961, ULIPs offer a plethora of benefits. One of the most sought after benefits include tax-free payable premiums. Additionally, a tax deduction of up to a maximum of ₹1.5 Lakh is available on the due premiums for a ULIP under this section.

  • Choosing Life Cover

ULIP policy provides the choice of life cover amount required by the investor. It can go as high as 40 times of annual premium amount invested in the policy.

  • Liberty of Choosing Investment Type

ULIPs are designed to provide the choice of investment type to the investor. Equity funds, Debt funds and Balanced funds or any other.

  • Objective Financial Planning

ULIPs are designed to assist you in achieving your main objectives, such as the potential for wealth growth, retirement preparation, or education savings for your children. You have the additional advantage of knowing that your premium goes toward ensuring your future objectives with ULIPs.

  • Affordable Charges

High ULIP charges are common myths that may stop you from investing in ULIP insurance. You can set your premium amount for ULIPs based on your needs and convenience. You might also begin with a modest sum and gradually grow your investment.

ULIPs are excellent tools for investment and insurance if done through proper channels. An extended investment period is advantageous, and market volatility’s effects are long-term compensated for. ULIPs enable you to build money for your long-term goals, including your dream home, your child’s education, retirement, and more, through systematic investing and market-linked returns.

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

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- A Consumer Education Initiative series by Kotak Life

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