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In this policy, the investment risk in the investment portfolio is borne by the policyholder.
Kotak e-Invest
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Ref. No. KLI/22-23/E-BB/492
A Unit Linked Insurance Plan (ULIP) is a dual-benefit investment tool that combines life insurance with market-linked wealth creation.
When it comes to building wealth, everyone wants an investment plan that not only grows their money but also provides some security along the way. That’s where Unit Linked Insurance Plans (ULIPs) come in. ULIPs are a unique combination of life insurance and market-linked investments, offering protection and wealth creation. Whether you’re looking to save for long-term goals like retirement or build a solid financial foundation, a ULIP can be a versatile tool to help you achieve those milestones. So, how exactly does a ULIP for wealth creation work, and why should you consider it? Let’s dive in and explore!
ULIPs offer flexibility in investment choices along with the potential for higher returns, making them a preferred option for wealth creation. Understand the various types of ULIP plans designed for wealth creation so you can make an informed choice that aligns with your financial goals.
Equity-focused ULIPs are ideal for investors who are looking to maximize returns by tapping into the stock market. These plans allocate a significant portion of the investment to equity funds, which invest in stocks of companies across various sectors. Since equities have the potential to generate high returns, this type of ULIP plan is well-suited for long-term ULIP for wealth creation, particularly for individuals with a higher risk tolerance.
Balanced ULIPs aim to strike a balance between risk and reward by diversifying the investment across both equity and debt funds. These plans are designed for moderate-risk investors who want to benefit from the growth potential of equities while maintaining the stability offered by debt instruments.
ULIPs, designed as child plans, are meant to secure the financial future of your children. These plans typically invest in a combination of equity and debt funds, ensuring both growth and stability. Child plans offer financial security for education, marriage, or other important milestones in your child’s life.
Retirement ULIPs are specifically designed to help you build a retirement corpus over time. These plans focus on long-term ULIP for wealth creation, ensuring you have enough financial resources during retirement. Retirement ULIPs often allocate funds to a mix of equity and debt investments, balancing growth and security.
It is time to get to the interesting part—how exactly do ULIPs help create wealth? There are several ways ULIPs set you up for financial growth, and each one plays a crucial role in building a solid wealth foundation.
The standout feature of ULIPs is that they are market-linked. This means your money is invested in equity, debt, or balanced funds, giving it the chance to grow based on market performance. If you have a higher risk appetite, you can opt for equity funds, which have the potential for high returns over time. For those who prefer a safer approach, debt funds offer stability with moderate returns.
Ever heard the phrase, “money makes money”? That’s the magic of compounding, and it’s one of the most powerful wealth-building tools in ULIPs. Essentially, when you earn returns on your investment, that amount is reinvested, allowing you to earn returns on your returns. Over time, this snowball effect can lead to exponential growth of your investment.
Here’s where ULIPs stand out from many other investment options—the flexibility to switch between funds. Let’s say you start your investment with a focus on equity funds to maximize returns. Over time, if you feel the market is too volatile or you want to be more conservative with your investments, ULIPs give you the option to switch to debt funds.
Who does not love tax savings? With ULIP, you get double the joy! Firstly, Section 80C provides deductions on premium payments up to ₹1.5 lakh. Further, under Section 10(10D) of the Income Tax Act, the insurance payout received by the nominee is tax-exempt in the event of the policyholder’s death. Thus, the premiums, as well as maturity proceeds, are tax-free.
The beauty of a ULIP lies in its flexibility—you can choose how your premium is invested based on your financial goals and risk appetite. Plus, with options to switch funds, tax benefits, and the potential for higher returns, ULIPs offer a well-rounded package for anyone looking to build wealth while securing their financial future.
Most people end up buying separate insurance and investment plans. With ULIPs, you get the best of both worlds in one product. A portion of your premium goes toward life insurance coverage, ensuring that your loved ones are financially secure in case something happens to you. The remaining portion is invested in the market to help grow your wealth.
ULIPs give you the flexibility to choose how your money is invested based on your risk profile. Are you someone who likes to take risks for potentially higher rewards? You can allocate more of your funds into equity. Prefer a safer route with steady returns? You can go for debt funds or a mix of both with balanced funds.
The earlier you start investing, the more you can benefit from the power of compounding. ULIPs are particularly effective in taking advantage of compounding because they encourage long-term investment. Compounding essentially means earning returns on your returns, which accelerates your wealth creation over time.
How do you pick the perfect ULIP that aligns with your financial goals and helps you grow your wealth over time? Let’s break it down step by step in a way that makes it easier for you to choose the best ULIP for your needs.
The first step in choosing the right ULIP is understanding your financial goals. What do you want to achieve with your investment? Are you looking to create a retirement corpus, save for your child’s education, or build wealth for future milestones like buying a house? Defining your goals will help you determine the kind of returns you need and the time horizon for your investment.
Everyone’s comfort level with risk is different, and ULIPs allow you to customize your investment based on how much risk you’re willing to take. The funds in a ULIP can be invested in equity, debt, or a combination of both, depending on your risk tolerance.
One of the biggest factors in wealth creation through ULIPs is how well the underlying funds perform. When selecting a ULIP, it’s important to review the historical performance of the funds it offers. While past performance isn’t a guarantee of future returns, it provides valuable insights into how well a fund can manage market risks and deliver on its potential.
1
To choose the right fund for wealth creation in a ULIP, assess your financial goals and risk appetite. If you prefer high growth with more risk, go for equity funds. If you want more stable returns, debt or balanced funds are a better fit.
2
The potential returns from a ULIP depend on the performance of the underlying funds, which can include equity, debt, or balanced funds. Equity funds may offer higher returns but with more risk, while debt funds offer more stability with moderate returns.
3
You can track your ULIP investments through your insurer’s online portal or mobile app, where you can monitor fund performance, net asset value (NAV), and other relevant details. Regular updates are also available through statements.
4
Yes, ULIPs allow you to switch between equity, debt, and balanced funds based on market conditions or your changing financial goals. Most insurers offer a certain number of free fund switches each year.
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.
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.
Kotak e-Invest
Features
Ref. No. KLI/22-23/E-BB/521
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
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