Benefits of ULIPs
Investing in ULIPs has its share of advantages because it provides protection and helps individuals to plan for future savings.
Let's understand the advantages of investing in ULIPs.
Flexible Investment Options
Investing in ULIPs offers its investors with low, medium and high-risk investment options and each one may be available under an equivalent policy. All you have to do is to select a policy considering your risk-taking ability. The policy will provide the user to modify the fund options without charging any additional expenses (differs from each insurer) during a year.
ULIP’s provides you with the option to either choose a premium amount or sum assured, and this may entirely depend on your financial needs and requirements.
You’ll also get an option for top-ups to extend the options of your investment portfolio and to form the simplest and most of the investment opportunities amidst uncertain external environmental factors or depending upon fluctuation in your income flows.
ULIPs offers partial withdrawal option for investors after a lock-in period of 5 years. Just in case of any financial emergency, the investor can choose partial withdrawal only, if the policyholder has paid premiums on time till date.
With ULIPs one will get a life cover along with investment. It offers security to the holder’s family as they will depend upon it when emergencies knock the door (death of the taxpayer, major health issue, so on).
Investing in ULIPs offers rebate under Section 80C of the tax Act of 1961. Additionally to the present, returns on the matured policy of ULIP are exempt from tax under Section 10(10D) of the tax Act. This dual benefit drives the investor to go for ULIPs.
Choice of Funds
The ULIP offers a spread of market-linked investment to its investors which suits their risk appetite and financial needs. Hence it gives an option for people to take a position in their choice of funds be it in stocks or balanced funds or fixed-income security. The subsequent factors will help us to work out whether investing in ULIPs is best for achieving future financial goals?
Investors will get higher returns from ULIPs compared to the other insurance product thanks to its equity advantage. The premium amount paid by you’ll be invested in various asset classes through different funds. So far, the tax savings funds have given double-digit returns, but the catch here is one has got to look out for a replacement fund per annum if it’s a one-time investment.
Maturity amount usually depends on the performance of the stock markets during the tenure of the policy and additionally to the present endowment plans are designed in such how that you simply are going to be receiving your payment amount after the completion of specific tenure.
When it involves tax efficiency, the whole maturity amount arising from ULIPs is tax-free and this makes it the best option amongst the opposite sorts of investment options. Though 5-year tax savings fixed deposits even have a five-year lock-in period, the interest amount earned thereon is taxable.
Dual Advantage ULIPs offer insurance and wealth creation for investors during a single product. On one hand, you’ll invest funds as per your choice be it available markets or balanced growth funds or debt funds and on the opposite hand, you’ll get life assurance protection on the premium amount.
ULIPs provides a good choice of investment options for its investor supported risk appetite. For example: If you’re a high-risk taker then you’ll choose equity funds and if you’re a moderate gambler then you’ll choose balanced funds, if you’re a low-risk taker then you’ll choose debt-based funds.
Flexibility During the tenure of the policy, the holder has a choice to switch funds. You’ll either pick growth, income, equity, balanced funds supported your financial goals and risk-taking capability. Usually, four switches are allowed per annum freed from cost.
Unlike investing in equities, you would like not to track their performance available markets daily. All you’ve got to try to do is to settle on the policy and you’ll change the fund allocation anytime during the tenure of the policy and run it till maturity to earn benefits in the future.
Lock-in Period The unit-linked insurance plans have a lock-in period of 5 years and this may induce a disciplined savings habit amongst the investors. As ULIP may be a future insurance contract, the lock-in are going to be calculated from the date of the difficulty of policy. Investors pay the premium amount either monthly or annually or as payment as per their preference