ULIP(Unit Linked Insurance Plan); Benefits of ULIP Plan

 

ULIP: What is it? There are following main reasons why it is a better investment choice are as follows:

Through ULIPs, you are able to bring diversification in your portfolio by investing in numerous areas.

Reasons to consider ULIPs for wealth accumulation

You can invest in addition to receiving insurance protection through a ULIP.

ULIP:

The main components of sound financial planning are believed to be

(i)                  Emergency savings

(ii)                Emergency investments and

(iii)               Insurance.

Customers are typically advised to keep these three components separate so that each one can be properly focused. Nevertheless, not everyone has the time or the knowledge necessary to manage their financial portfolio well. Unit Linked Insurance Plan (ULIP) can be a preferable choice for such customers. An efficient way to manage life's uncertainties and take part in the market through insurance coverage is provided by ULIPs. Let us examine the definition of a unit-linked insurance plan.

 

On the one hand, there are term plans that offer life insurance. This plan provides the beneficiary with a lump sum payment in the event that the policyholder passes away during the policy period. However, there is no investment in this idea. In contrast, ULIPs allow you to both invest and receive insurance coverage. This is a specific form of plan, in which insurance firms give you insurance as well as give you an investment opportunity. In other words, there are two advantages to investing through this plan. In addition to receiving life insurance similar to a term insurance plan, you also have the option to invest.

Here are some of the finest methods for providing both life insurance and savings for the future.

Can bring in portfolio Diversification:

Having a diversified portfolio is like a risk management strategy. By making investments in various locations, you can use this to diversify your portfolio. Over time, diversification in your portfolio will increase returns while lowering the risk associated with any one holding or security. Similar to ULIPs, term plans serve different needs, so you should not favour one over the other. Combining both in your financial portfolio will not only help you secure the financial future of your family but will also build a savings for your retirement and other future needs.

ULIP plans offer policyholders the ability to switch between a variety of fund options, including equity, bond, and hybrid funds. You can do this anytime and it does not cost any money. Policyholders can choose to allocate future premiums among different ULIP funds depending on the prevailing situation. One can also change the allocation of future premiums from equities to bonds or vice versa to take advantage of market volatility. With a wise choice of funds, ULIPs can provide you with substantial returns from the market provided you stay patient and invest for the long term. Under this, you get a lot of flexibility.

Tax-Efficient:

ULIPs are considered tax-efficient as compared to mutual funds as it allows policyholders to save tax at all stages. In ULIPs, switching between funds is allowed without any expense, however in mutual funds, switching between plans carries tax. Apart from the tax-benefit while moving funds in a ULIP, there is also a tax exemption of up to Rs.1.5 lakh under section 80C of the Income Tax Act, 1961. The maturity amount of ULIP is tax-free under section 10(10D).

You can invest in ULIPs as a means of achieving your various financial demands and objectives. Along with being able to save, you can also benefit from life insurance.

Increase your returns

Let us inform you that investing in a ULIP entitles the investor to better returns. The duration of an investment in this plan is five years. In accordance with this strategy, the sum received at maturity is not subject to tax. Additionally, it offers you higher returns than many other products, including the Post Office Small Scheme and the National Savings Scheme. Additionally, if a person passes away before to the policy's maturity, neither the nominee nor the heir is subject to tax on the money they withdraw.