5 Ways ULIPs Benefit You
Updated On Sep 05, 2021
Unit linked insurance policies or ULIPs are a life insurance policy type. This policy type can help you build wealth while staying secure under a life cover. In ULIPs, a portion of the premium paid by the policyholder is dedicated towards the life cover, while the rest is assigned to a fund, which invests in debt, equity, or their combination. It must be noted that the returns on your investments vary based on the performance of the funds chosen by the policyholder.
5 Ways ULIPs Benefit You
- Freedom of Selecting Life Cover: In ULIPs, the policyholder can opt for the life cover amount of their choice. In most unit-linked insurance plans, the minimum life cover provided is 10 times the annual premium amount. Nonetheless, a policyholder can select the amount as much as 40 times of their annual premium or even a higher amount based on their plan and an insurance company.
- Freedom of Investment Choice: A policyholder can either choose to invest in equity funds, debt funds and a combination of both, referred to as Balanced Funds. While equity funds involve investments like buying company shares, debt funds invest in debt instruments. Talking about balanced funds, these are funds that invest equal proportions in equity as well as debt funds. The best thing about ULIPs is that this life insurance policy type allows you to invest in different funds completely on the basis of your investment goals and risk appetite.
- Liquidity: Unit linked insurance plans come with the superior benefit of liquidity. In other words, a policyholder can partially withdraw a part of the money invested in the policy. This key benefit helps one handle their immediate expenses like a family vacation, study fees, emergency situations and more.
- Goal-Based Planning: ULIPs or unit-linked insurance plans are specifically structured to help a policyholder secure their major goals like the potential for wealth creation, saving for child’s education, retirement planning and more. Note that ULIPs also come with the additional benefit of knowledge of the premium working towards attaining the future goals.
- Tax Benefits: ULIPs are also a great choice to invest in due to their tax benefits. It must be noted that ULIPs allow tax benefits under the Income Tax Act, 1961. A policyholder can get a tax advantage at various stages of their life insurance plan. The stages can be the entry stage, exclusive switching and exit.
Unit linked insurance plans or ULIPs are not like traditional insurance products. ULIPs are subject to market risks. Therefore, it is highly advised that you buy ULIPs only if you have an appetite for risk. You can choose to go with other options like ELSS and more if you are a risk-averse investor. Nonetheless, it is advised to read the policy document carefully so that you are aware of your investment in a thorough manner.
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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.