Investment is a must because of its significant benefits in conserving and increasing current cash. Investment may also be used to ensure your security, such as via insurance coverage.
Insurance has evolved into a current necessity. However, most individuals do not purchase insurance because they believe it just offers life insurance and has no investment benefit. However, insurance plans such as ULIP, or Unit Linked Insurance Plan, attempt to provide the policyholder with the combined benefits of life insurance and wealth growth. ULIP investment provides insurance coverage while also assisting you in achieving your life objectives by using the potential of market-linked returns.
Unit Linked Insurance Plans (ULIPs) have recently developed as a prevalent investment tool due to their ability to accomplish both. Continue reading to understand how ULIP works and the several benefits of ULIP investment that will be highly beneficial to you.
Table of Contents
What are ULIPs?
Unit Linked Insurance Plans have emerged as one of the most popular investment plans on the market since they provide the combined benefits of insurance and investing for your life objectives. You may tailor the ULIP plan to your specific needs and risk tolerance.
As a result, you may select the Unit Linked Insurance Plan funds in which you want to invest, such as debt, equity, or a combination of the two. If you choose a mixed option, you may also choose how much of it will be invested in either instrument, based on your risk tolerance.
How does ULIP Works?
The procedure of obtaining a Unit Linked Insurance Plan and investing in it is straightforward. Continue reading to learn about the processes required.
- When choosing ULIP insurance, you must select how much you want to spend as a premium and how frequently you want to pay. You can pay the premium in one flat sum or at monthly, quarterly, semi-annual, or annual intervals.
- Units of the premium you pay will be allocated to several funds. These funds can be either stock- or debt-based, or they can be a hybrid fund that invests in both equity and debt assets.
- If your risk profile or life goals change, you may also swap between Unit Linked Insurance Plan funds. Depending on market performance, you can also transfer funds if you feel that investing in a different fund would provide you with higher returns.
- The lock-in time is the first thing you need to understand about ULIPs. You will be unable to withdraw any funds during the lock-in period. All ULIPs have a 5-year lock-in duration.
- When the Unit Linked Insurance Plan matures, you will get the fund value, which may be redeemed using the units granted to the funds.
Benefits of ULIP
There are various reasons why ULIPs are becoming one of the most popular investment vehicles today. The benefits of Unit Linked Insurance Plans are numerous, and some of them are given here.–
1. Flexibility
In terms of what you want to do with your money, ULIPs provide considerable freedom. Aside from the money you set aside for ULIP insurance, you have various options for how you want to invest.
Even after you’ve invested, you may always swap between the funds you’ve chosen. For example, if you have invested in equities funds during a time when the markets are booming, you have made a wise financial move. However, if a crisis occurs that causes the market to fall, you may always opt to change your investment to a less hazardous fund, such as debt securities, which give guaranteed returns.
You can also exercise flexibility if your risk profile shifts. A younger professional, for example, may afford to make a riskier investment than someone nearing retirement and with a more significant amount of monetary responsibility.
2. Liquidity
ULIPs provide liquidity to investors by allowing them to withdraw partial sums in the event of a financial emergency. It is often possible to face situations when you demand cash immediately. In such scenarios, having liquid funds that can be taken from your ULIP is always a brilliant idea. However, you may only make partial withdrawals from your ULIP once the 5-year lock-in period has expired.
3. Taxation Benefits
Most investors search for tax advantages when investing. Under Section 80C of the Income Tax Act of 1961, premiums paid for ULIP insurance are tax-free up to Rs. 1.5 lakh.
Furthermore, Section 10(D) of the same statute allows for tax deductions on pay-outs regardless of whether they are premature or made to the policyholder or their nominee. The above-mentioned tax benefits are subject to the restrictions of the Income Tax Act of 1961, as modified from time to time.
4. Life-Goal Based Investment
Your ULIP insurance and investment are perfectly connected with your life objectives. This means you may choose your ULIP based on the life objective you want to attain, such as saving for your child’s education, marriage, or even your retirement.
You may also purchase a Unit Linked Insurance Plan to help you save for a family holiday. Aligning your ULIP to a life goal allows you to save for that specific objective and guarantees that you achieve it without sacrificing any of the vital components.
5. A dual advantage in a single offering
ULIPs provide the ideal blend of insurance and investing in a single package. It meets two demands at once, allowing you to be more comfortable. On the one hand, you get low-cost insurance coverage, and on the other, you may invest in funds of your choosing. A ULIP investment provides assured security for your family, as well as the Unit Linked Insurance Plan advantage of market-linked investments.
6. Maturity Benefits
A ULIP plan also includes maturity rewards if the policyholder survives the plan’s maturity period. Typically, maturity benefits are paid to the insured as the total of the fund’s value. Nonetheless, depending on the terms and conditions, certain insurance providers may provide add-on benefits.
Wrapping It Up
It is best to start investing in a Unit Linked Insurance Plan when you are young to get the most advantages of the investment and attain your life objectives. ULIP strategies best serve long-term aspirations. If you understand how ULIPs function, make your investment as soon as possible.
Because of these ULIP features, ULIPs are an excellent investment alternative for you. You might think about Canara HSBC’s ULIP plan features to preserve and financially secure your future and that of your family.
