How can I Generate Returns on Investment through Unit-Linked Insurance Plans?

While term insurance policies provide pure insurance protection and the whole life insurance policies offer assured lump-sum death benefit payouts at maturity, the unit-linked insurance policies combine insurance with market returns. Hence, investors who want to invest for the long term and benefit from market fluctuations typically opt for ULIPs to invest in and build wealth. Moreover, thanks to low multiple charges, ULIPs have become one of the best choices for long-term wealth generation. The following article elaborates on how you can generate returns on investment through unit-linked insurance plans. So, continue reading to learn about some tips.

How can I Generate Returns on Investment through Unit-Linked Insurance Plans?

Here are some options that help in generating good returns through unit-linked insurance policies.

1. Long Time Investments

Although ULIP products have a five-year lock-in term, it is advised to invest for extended periods. When you invest for 10 to 15 years, compounding is at its most powerful, i.e., the interest is reinvested as a portion of the principal to assist you in maximising your profits.

2. Fund Switching Option

One of the most appealing features of ULIPs is that they enable policyholders to switch from one plan to another. You can start by investing in debt, equities, or balanced funds and then use fund switching to rebalance your portfolio in accordance with changes in your risk appetite and investment objectives. After considering the performance of ULIP funds, you can also choose to switch funds.

3. Tax Savings

Section 10 D of the Income Tax Act of 1961 exempts the amount you received on the maturity of unit-linked insurance policies from taxation. You can potentially get tax benefits on premiums in addition to this tax relief. Premium payments, up to a maximum of Rs 1.5 lakh in a given financial year, are tax-free under section 80 C of the act. Tax-free partial withdrawals are also possible without abandoning the entire policy.

4. Financial Safety

Returns are not always measured in monetary terms; here, the financial protection and security provided to the policyholder's family can also be counted as returns of a unit-linked insurance policy. The finest ULIP can provide you with fast, market-linked profits while also ensuring your family's financial security in the future. ULIPs, like life insurance policies, can give financial assistance to your family in an emergency. Furthermore, the five-year minimum lock-in period instils the habit of saving, which is critical for wealth creation.

Endnotes

The investment strategy determines the future return rates. Hence, it is essential to plan your investments according to your risk appetite, market fluctuations and research to make a sound financial decision. 

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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.