Are ULIPs Safe?
Published On Dec 06, 2021 11:00 AM By InsuranceDekho
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The term ULIP is typically linked with equity, with debt being completely ignored. Equity and Debt funds are available in ULIPs. However, when consumers think of ULIPs, they think of equities funds, leaving debt and money market funds out. So, if you think now isn't the time to invest in stocks, don't! Invest in a debt fund instead of ULIPs because the stock market is at an all-time high.
The maximum equity exposure of an equity fund is 100%, whereas the minimum equity exposure is 40-60%. In a bearish market, when fund managers feel the market will continue to fall rather than increase, they keep only a small portion of their assets in equity and park the rest in debt or money market funds, where the market correction will have a less significant impact on the NAV. They carefully and methodically move funds out of debt and money market funds and into equity products only when the market turns bullish again and they feel they will profit from the equity market's growth.
How Safe Are ULIPs?
Below are a few reasons why ULIPs are secure:
1. Changing Between Debt And Equity Funds On A Regular Basis
You can choose the accounts into which you wish to put your capital when you engage in ULIPs. You can, for example, invest in private equity funds if you have got a significant risk appetite. This provides large profits at a higher risk. When people have children and have a long life ahead of them, they usually choose this option. Debt funds, on the other hand, are a good option if you prefer low risk. When you're close to your target, these lower your stock's risk quotient and are favored.
The ULIP fund switch feature can be used numerous times over the term of the policy, allowing you to take advantage of changing market conditions. This enhances your financial returns.
Must Read: What Are The Different ULIP Charges That You Must Know About?
2. Easy-To-Use Cash-Out Choices
Following your ULIP's lock-in period has expired, you can transfer your cash whenever you want. If you take money out before the maturity date, the insurance company will charge you some surrender fees and then return the balance of your money to you. This improves adaptability. ULIPs also include systematic withdrawal options, such as monthly, quarterly, semi-annually, or annually. A ULIP is an excellent retirement strategy since it allows you to take advantage of an easy withdrawal mechanism while also providing a stable income in retirement.
3. Allow You To Invest In A Systematic Manner
You have the option of making regular premium payments or investing in a single sum. ULIPs are a cost-effective way to get a high-quality product. This makes it safe to invest in these programs because the risk is spread out over a lengthy period of time. Furthermore, ULIPs are appropriate for people of various economic levels. A ULIP allows you to invest as little or as much as you like.
4. Offer Good Returns
Additional profits are provided by ULIPs in the shape of affinity bonuses, wealth enhancers, assured additions, and so on. These are bonuses that are gradually added to your account. Insurance firms like to reward their investors for sticking with a plan for a long time. These benefits can significantly boost the value of your investment. They also help you make more money.
5. Provide ULIP Tax Benefits
ULIPs provide numerous tax advantages. The premiums for the ULIP are tax-deductible under Section 80(C), and the death benefit is tax-free under Section 10. (10D). Furthermore, the earnings are subject to long-term capital gains taxes. The tax on maturity benefits, on the other hand, applies only if the total yearly premiums exceed 2.5 lakhs and the policy was purchased after February 1, 2021.
6. Keep Your Loved Ones Safe
The monies spent not only provide financial progress and help you achieve your own objectives, but they also guarantee that your household is taken care of when you are away. A ULIP protects you and your loved ones. The sum assured provides them with a cash cushion in their time of need, allowing them to live a life of dignity and luxury.
Unit Linked Insurance Policies provide a partial withdrawal option, which allows you to remove a portion of the money invested in your policy. This option enables you to cover immediate expenses such as your child's 10th, 12th, or graduation fees, a family vacation, and more. In most cases, partial withdrawals are free of charge.
ULIPs are completely secure tools that can provide you with lifelong peace of mind and security. With a variety of fund options and low rates, they protect your family while also allowing you to grow your financial worth. They also enable you to manage your risk in response to changes in your income, demands, and requirements. If you're seeking a safe investment, a ULIP may be the way to go!
Also Read: How Does ULIP Helps In Long-Term Wealth Creation?
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.