Business

All You Need to Know About ULIPs

Everyone wants a sizeable amount of money that could be utilised to live the life they desire. In this world of technology as well as competition, you have only two options of making money; work either for someone else or start your own business. Furthermore, earning money isn’t even sufficient. The inflation burns a big hole to your pocket, where savings and investment become crucial in order to survive the financial catastrophe.

Investing your hard-earned money helps you build wealth. However, it is always essential to invest in something that helps you secure your family’s financial future, even if you are not there. Here, life insurance policies with investment provision help you in financial goal planning, and ultimately receiving a considerable amount at the end. Though traditional life insurance investment plans have limited advantages, you also have a better option of Unit Linked Insurance Plans that help you avail a wide range of benefits.

What is ULIP Insurance Plan?

A ULIP or Unit Linked Insurance Plan is a type of life insurance that offers you a life coverage along with some qualified investment tools such as stocks, bonds, etc. Unlike traditional investment insurance plans like an endowment policy, here you can manage your life coverage and the investment part separately, basis your financial needs.

Benefits of ULIPs

ULIP, as a product, offers you not just one or two, but three benefits- savings, investment and insurance. Let’s see what the other benefits of a ULIP investment plan are:

Life Cover

ULIP insurance plans offer you an adequate amount that takes care of your family’s financial needs behind you. Usually, death benefits provided under a Unit Linked Insurance Plan are maximum of the fund value that has been accrued, or sum assured, or 105% of total premiums paid till the event of demise.

Maturity Benefits

If you survive the policy tenure, you can avail maturity benefits in the form of a lump sum or instalments. In most of the cases, you can also set a frequency of pay-out and the settlement term up to 5 years.

Returns from Market-Linked Investments

Usually, in a regular life insurance policy, the premiums you pay are utilised for the life coverage. Whereas, under a ULIP scheme, a part of the premiums is invested in market-linked products such as debts and equities. Here, you can control the proportion of investment in different products or even a blend of multiple products. This is why financial goals with ULIP suit your needs best.

Flexibility

By opting for a ULIP scheme, you have a flexibility of choosing the fund that aptly suits your financial planning. If you notice volatility in the market and a particular fund doesn’t perform well, you always have a choice of switching to another one.

Transparency

In traditional investments plans, you don’t get any clue of where your money is being invested. Well, ULIP as a product helps you stay updated with all the charges levied along with the Net Asset Value of each fund that you are investing in.

Partial Withdrawals

If you come across financial crunch during the policy tenure, you can withdraw some amount partially from the funds accrued. Here, the insurer may levy particular charges for the same. You cannot make any partial withdrawal during the lock-in period or settlement term.

Tax Benefits

You can avail tax benefits under ULIP insurance plans. The maximum of Rs. 1.5 Lakh can be exempted towards the premiums you pay under Section 80C, and for the maturity benefits under Section 10(10D) of the Income Tax Act.

How to Get the Best ULIP Investment Plan

  • Identify your goals and analyse financial needs that you seek after a certain period. Remember that the financial goals you set must be long-term goals.
  • Don’t ignore life insurance benefits while going for investments. If you are young, make sure that your current, as well as future financial planning, is made properly. Here, a number of dependents, personal financial desires, education of your children and so many such aspects need to be considered.
  • Your investment goals may differ basis the financial planning you do. E.g., if you are planning to get sizeable corpus for your children’s higher education or their marriages, the planning has to be done accordingly. Similar to be considered for post-retirement provisions, foreign tours, or even buying a new property.
  • Risk appetite plays a vital role in choosing the right ULIP scheme. Equity investments are best suitable for the people with high-risk appetite, whereas, debts come with lesser risk when returns are concerned. You can also choose a blend of both if you have a moderate-risk appetite.
  • Always compare multiple plans, analyse which plan is best suitable for your needs and then go for it. Comparison certainly helps you get a better idea of which plan be more beneficial. The comparison can be made basis on several aspects such as sum assured, choice of funds, flexibility, systematic withdrawal provisions, and so on.

Conclusion

Investing in ULIP investment plans is always suitable if you are chasing a long-term financial goal. Proper planning by analysing the needs gives you higher returns, along with the flexibility of multiple investment options to choose from. Last but not least, when it comes to transparency, Unit Linked Insurance Plans are anytime better than traditional investment plans. Now that you have read this article carefully; be sure that you will be able to get the best ULIP that you are looking for.