“I'd like to invest my money, but I don't want to take any unnecessary risks since markets are unpredictable.”
"Stocks are too hazardous for me; bank accounts are ok for me."
These are some of the most typical queries we all have in our mind when we think of equity investments. Yes, the stock market is volatile, and it is not for those afraid of taking risks. But conversely, debt choices are on the other end of the scale, and thankfully there are plans available in between these two extremes. So, if you are reluctant in taking big risks and still want a good investment plan that can help you invest your money in equity and debt, then ULIP is one of the most suitable option for you.
A unit linked insurance plan (ULIP) blends savings and protection into a single policy. It combines life insurance with market-linked wealth accumulation into one product in which the policyholder has the option of paying a monthly or annual premium.
Now questions that are likely to cross one’s minds are- how to invest in ULIPs? Why should I invest in ULIPs and not in other policies? Well, to answer all your questions, we have gathered some crucial information that might benefit you while you plan to invest in ULIP.
Why Should you Invest in ULIP
There are various reasons that answer your question – ‘Why should I invest in ULIP?’ Here you go!
- Finance Long Term Goals : For individuals with long-term goals in mind, such as purchasing a home, a new automobile, or getting married, ULIPs are a smart investment option as the money is compounded. As a result, total net returns are higher. This is true even if you choose to quit after the five-year lock-in period compared to not investing and keeping the money in a savings account or an FD. However, the idea is to maintain the policy actively for a longer period to get the most out of it when it comes to unit linked insurance plan.
- Income tax benefit : Few people know that the premium paid for a ULIP currently qualifies for a tax deduction under Section 80C of the Income Tax Act, 1961.
- Life cover : ULIP provides life coverage as well as investment opportunities. It provides security to a taxpayer's family in an emergency, such as his/her untimely demise.
- The flexibility of a portfolio switch : Unit linked insurance plan are often meant to move your portfolio between debt and equity depending on your risk appetite and market information. Insurance providers, however, only allow a limited number of free swaps.
Benefits Unit Linked Insurance Plan
Flexible Investment Options
ULIP provides various high, medium, & low-risk investing possibilities through various funds within the same plan. You can select a suitable plan based on your risk tolerance.
Regular and Disciplined Savings
Unit linked insurance plan encourage you to save regularly, which help you create a corpus for future requirements.
Before purchasing a product, the charge structure, investment value, and predicted return rate for the policy's entire lifetime are discussed. It's usually a great way to learn about the product you'll be investing your cash in.
Liquidity when Required
ULIP also allow for partial withdrawal of the amount; that means after the lock-in period of five years, you can take some portion of money out of your unit linked insurance plan.
Currently, under section 80C of the Income Tax Act of 1961 exempts the premiums paid toward the policy from taxation.
With a unit linked insurance plan, you can avail profit from market-linked growth without investing directly in the stock market, and benefit from the added bonus of life insurance.
How to Invest in ULIP?
Step 1: Explore the unit linked insurance plans available in the market and make a list of the various vendors' offerings.
Step 2: Study the benefits of each ULIP product's life insurance and investment profile.
Step 3: Select a product that meets your investing and insurance objectives.
Step 4: Inquire about the product in detail with the relevant insurer, either online or in-person, at the insurance office.
Step 5: If you're convinced, go ahead and buy the unit linked insurance plan from the provider.
In a nutshell, if you are looking to invest in a ULIP, you can avail multiple benefits such as life cover, tax benefits, regular savings, and much more. In addition, fund choices such as asset allocation or wheel of life portfolio options can be used to delegate this decision to the insurer's fund managers for those who don't have the knowledge or time to watch the markets. So, go ahead and enjoy your long-term savings with a ULIP.