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The earnings from a debt fund in ULIP is tax-free for investors, setting it apart from all other market-related investments. Read more to know about why should you invest in ULIP?
Investment options have gotten people’s attention like never before in this day and age of financial planning. While some people choose to adhere to traditional investing instruments, others appear eager to try newer schemes. One such popular plan is ULIP. It stands for Unit-Linked Insurance Plans.
Depending on your risk tolerance, ULIPs provide you with the option to invest your money in a variety of equities or debt funds. The returns are tax-free under Section 10(10D) of the Income Tax Act, 1961 even though the premiums you pay are deductible from your taxable income under Section 80C#. This is how ULIP functions.
ULIP is a scheme that provides both insurance and ULIP benefits. In this plan, the payment is split into two parts:
One is used to provide life insurance. The other is used to invest money in market assets.
The earnings from even a debt fund in ULIP are tax-free in the hands of the investor, setting it apart from all other market-related investments. While everyone appears to be on the hunt for the best ULIP plan, it begs the issue of why one should invest in it. If you’re unsure whether or not you should put your hard-earned money into a ULIP plan, we’ve put up a list of advantages to help you make an informed decision.
Investors can choose from several sources in ULIPs, such as debt funds, equity investments, and balanced funds. Depending on your risk tolerance, you can pick one of these options.
If you are a risk-taker, you can ensure higher returns by investing in equity funds. You can also invest in debt funds if you are risk-averse. Choosing between several funds depending on market conditions is a key advantage of ULIPs. As a consequence, you may be able to earn a higher return on your investment.
ULIP allow you to optimize your returns, and it is unlike any other investment plan where you can not only get insured but also optimize your returns based on market conditions.
When compared to other investment options, ULIP investment returns offer a high potential for maximum financial benefits. These high results may be achieved due to the clear flexibility of equity and debt funds. Similarly, investing in ULIPs qualify you for certain prizes and incentives. Insurance firms give bonuses in the form of revenue multipliers or loyalty bonuses.
ULIPs is subject to tax deductions under Section 80C of the Income Tax Act. Annually, an investor can receive up to ₹1,50,000 on ULIP investments. Likewise, under Section 10D of the Income Tax Act, the profits you get at the maturity of your ULIP insurance are tax-free. Furthermore, under Section 10 (10D) of the Income Tax Act, the sum received by the nominee upon the insured’s death is tax-free.
ULIPs are one of the most effective market-linked investment solutions since they allow you to buy supplementary life insurance for your loved ones through rider options such as critical illness, accidental death, disability, etc., thereby ensuring that they are taken care of even after you are no longer there.
Several things should be considered when purchasing a unit-linked insurance plan. Some of them are as follows.
Long-term investments, or ULIPs, are a wise choice. Determining whether the insurance provider can offer sufficient protection in the event of future threats or obligations is crucial. Additionally, the insurance provider will make market investments on your behalf. Therefore, before investing in a ULIP, look into the insurance company’s track record and customer testimonials.
A sum guaranteed is a lump-sum payment given to the policyholder’s nominee if the policyholder passes away unexpectedly during the ULIP’s validity period. When a ULIP is purchased, the sum insured is determined. You must select a maximum sum covered because this money will be utilised to support your family and loved ones after your passing. The insurance expert can provide you an example of the prospective premium payment and the fund value that has grown as a result of your ULIP investment. You can also calculate your refunds using an online ULIP calculator.
A ULIP’s price varies depending on the insurance provider. The following are some of the most typical expenses related to ULIPs:
When you are working toward your objectives, whatever they may be, and have a reliable income and few responsibilities, it is an excellent time to invest in ULIPs. You aren’t required to invest the same amount each year, and you can even change your premium allocation each year. You could select from a range of funds with different equity exposures based on your risk profile. Selecting a fund with a bigger equity exposure may be necessary if you want to achieve higher returns. You can also make use of the tax-saving options for ULIP premiums and maturity amounts under Sections 80 C and 10D of the IT Act if you are a salaried professional and even a mid-level executive at that.
Investors who formerly preferred to invest in FDs are gradually switching to mutual funds and insurance. A greater number of people are choosing ULIPs as a result of changes in investment patterns and the availability of tools that are linked to the market, such ULIPs. Every earner must typically have coverage for at least 10 years of income. Ten times the annual premium is offered as life insurance by ULIPs. The policyholder becomes immune to market volatility as a result. They provide transparency, appropriateness, safety, returns, liquidity, and safety. Choosing to invest in ULIPs is a prudent move.
In this policy, the investment risk in the investment portfolio is borne by the policyholder.
What Happens If I Stop Paying My ULIP Policy Premium After Paying the First Premium? Will I Still Get The Return?