Are you thinking about buying a unit-linked insurance plan? Here Are Some Things You Should Be Aware Of!
Published On Feb 25, 2022
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A unit-linked insurance plan (ULIP) is an insurance product that combines investing and insurance into a single package. A Unit Linked Insurance Plan, or ULIP, is a type of insurance that combines the benefits of wealth building with the security of your family's future. ULIPs allow you to invest in standard wealth-building tactics while also providing comprehensive life insurance protection. As a result, buying a ULIP may be the greatest way to protect yourself against life's ups and downs. ULIPs enable you to invest in stocks or debt funds, with investment returns determined by the performance of the funds, depending on your risk tolerance. While the maturity benefit is subject to market risks, the insurance coverage provided by a ULIP is not. A Unit Linked Insurance Plan (ULIP) is a form of Life Insurance policy that combines the advantages of both investment and insurance. ULIPs are a type of life insurance that allows you to save money while also providing coverage. ULIPs are investment vehicles that allow you to put your money to work (equity, debt, or a combination of both). The performance of the funds you choose determines your investment returns.
Unit Linked Insurance Plan: What You Should Know
When you buy a ULIP online or offline, you get insurance as well as an investing opportunity. This will provide not just security for your family throughout the policy term, but also significant returns on investment when the policy matures. You may choose from a variety of funds that are a combination of equity and debt to help you achieve your long-term financial objectives. The following are some factors to keep in mind with ULIPs:
1. Value Addition
ULIPs provide life insurance as well as the possibility to build wealth. You may obtain market-linked returns by investing in ULIPs. ULIPs are employed as a full financial instrument because of this dual advantage.
2. Choosing Your Own Investment Strategy is also Available
- You may invest your money in a variety of ways, depending on your risk tolerance.
- Equity funds are a fantastic choice for risk-averse investors.
- A balanced method might be used by moderate risk-takers.
- Debt funds are an excellent option for individuals seeking a low-risk investment.
- Investors can make changes to their portfolios depending on market conditions.
3. The Benefits of Taxation
Premiums paid towards a ULIP are eligible for a tax deduction of up to Rs 1,50,000 under section 80C. The policy's returns are also eligible for an income tax maturity benefit if certain conditions are met under Section 10(10D) of the Internal Revenue Code. Note that under Section 10 of the Act, ULIPs with annual premiums above Rs. 2.5 lakh issued on or after February 1, 2021, would not be exempt.
The process of shifting money from one mutual fund to another is known as switching. You can utilize the switching option to change your investment funds for free up to a set amount in one policy year if your investment strategy changes throughout the plan's duration.
5. Partially Withdrawals
A feature of ULIPs that is not accessible in other insurance plans is the ability to make partial withdrawals. After the first five years of the plan, this withdrawal can be made at any time, and a limited number of withdrawals are also free.
India has progressed from trading bonds beneath a tree to offering a diverse range of financial instruments that allow individuals to invest their earnings according to their needs, constraints, risk appetite, and financial goals. ULIPs, on the other hand, are investments that serve both as insurance and as a source of profit.
Also Read: In ULIPs, How Is Premium Utilized?
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.