Are ULIPs a Good Investment Option For Retirement Planning?
Updated On Jul 13, 2022
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When a person doesn't have a reliable source of income to cover their needs, a well-planned retirement lowers the need for borrowing money at a vulnerable time in their life. To prevent having to repeat investment choices, people should make sure that financial policies are thoroughly understood and that any misunderstanding has been handled. A ULIP (Unit Linked Insurance Plan) is a type of insurance that offers protection and the chance to save money for the future. A ULIP is a great alternative to a retirement plan since it is an investment for the long term. Similar to a term insurance policy, a ULIP requires ongoing contributions from the insured in the form of premiums paid to the insurance company. Continue reading to learn more about why ULIPs are a wise alternative for retirement savings.
Why Would Someone Want To Invest In ULIPs?
The cited benefits of investing in ULIPs are as follows:
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Investment Income
The two most important factors to think about while investing are security and rewards. A person gets both of these benefits when they buy a ULIP. Compared to ULIPs, other investment options, such as pension endowment plans, provide a greater average return. The fact that ULIP premiums are based on market-linked returns is one of the reasons they are so well-liked.
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Investment Prospect
ULIPs are distinct from those other investing options in that they consider each individual's particular financial needs and risk tolerance. A potential buyer can invest in stock, bond, or hybrid products depending on their financial objectives and available resources.
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Dual Advantage
In India, there is just one financial product that combines the advantages of life insurance with investing: the ULIP. As a result, a person won't need to purchase separate investment and insurance plans to secure their future. As a consequence, people may significantly reduce their premium costs and manage their money more effectively.
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Insurance
Every investing strategy needs security. A percentage of the ULIP subscription is utilized to pay for it. This safeguards a person's family's financial stability while they are away.
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Flexibility
With ULIPs, investors have the option to switch between funds if their current investment isn't generating the desired returns. Typically, people start their investing process with equities funds because they offer large returns, but they change to debt funds or a mix of debt and equity funds as they get closer to their financial goals to provide more security. The same reasoning holds true whenever the economy is very turbulent.
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Sum Assured
When a person purchases a ULIP, the insurance policy ensures that the nominee will get a set sum of money in the event of the person's untimely death within the policy term. The sum guaranteed, as it is known, is a set sum that is exempt from taxes.
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Removals During the Lock-In Period
People are normally not compelled to make partial withdrawals during the lock-in period when making any form of investment. Contrarily, withdrawals from ULIP benefits are permitted at any moment throughout the lock-in period. However, when such withdrawals are made within the lock-in period, extra fees and deductions are applied from the amount.
Take Away
Since they invest in corporate stocks, equity funds offer the biggest potential for profit but also the most risk. Therefore, debt investments are the safest because premium was put in government assets, but the returns aren't as good as equity investments. Finally, as the name suggests, combination funds provide investors the option to select the amount of equity and debt they wish to invest in, based on their level of risk tolerance. Poor retirement planning might cause someone to give up on their goals in their later years. Saving money for a pension fund that would enable a person to maintain their current standard of life after retirement is a wise move.
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