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Why ULIP Should Be a Part of Your Investment Portfolio?

A ULIP provides insurance coverage while also offering profits through investment fields. Read this blog to understand why ULIP is a good investment.

  • 5,499 Views | Updated on: Feb 01, 2024

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 is one of the most practical and successful methods to secure your financial future and achieve long-term financial goals.

Key takeaways

  • ULIPs offer a unique blend of insurance and investment, making them a compelling addition to your financial portfolio.
  • Purchasing a new ULIP and renewing the old one takes very little time.
  • All effective ULIP uses the power of compounding plans to help you enhance your net worth.
  • Starting your investments in ULIPs early is highly advisable. ULIPs can offer significant growth potential, depending on your choice of funds.

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

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 To Your Financial Portfolio

ULIPs offer a unique blend of insurance and investment, making them a compelling addition to your financial portfolio. It is now time to understand the reasons why you should consider adding ULIPs to your investment mix.

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 and renewing the old one takes very little time. On most occasions, you can buy your preferred plan online from the convenience of your own home. All you have to do is go to the insurance company’s website, pick a plan, send in your KYC papers, and make the purchase.

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 can also 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 can redirect some 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

All effective ULIP uses the power of compounding 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).

When Should You Invest in ULIPs?

Starting your investments in ULIPs early is highly advisable. ULIPs can offer significant growth potential, depending on your choice of funds. Given that ULIPs typically have a lock-in period of up to 5 years, this time frame allows your money to accumulate returns and appreciate in value. Extending your investment beyond five years can further boost the likelihood of substantial growth.

It is crucial to note that ULIPs double as life insurance products, and commencing your investment journey at a young age can lead to lower premiums. Beginning early also provides you with a more extended investment horizon, affording your money ample time to mature.

Last Words

Unit Linked Insurance Plans have come a long way, emerging as a versatile financial product that combines insurance protection with investment opportunities. With their dual benefits, flexibility, transparency, tax advantages, and long-term wealth creation potential, ULIPs can be a valuable addition to your investment portfolio.

However, it is essential to carefully assess your financial goals, risk tolerance, and investment horizon before investing in ULIPs, ensuring that they align with your overall financial strategy. Consulting a financial advisor is advisable to make informed decisions and maximize the benefits of ULIPs in your investment journey.

- 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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