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How Can ULIP Help In Long-Term Wealth Creation?

Updated On Dec 14, 2021

The ULIP is an amazing investment vehicle that effortlessly integrates the advantages of an insurance policy with the benefits of a market-linked investment. They are, in essence, a wealth-building tool that can assist you in achieving your financial objectives over the medium to long term. The premium paid for a ULIP is split into two parts: one for life insurance and the other for investing in equities and bonds (in accordance with the stated mandate). As a result, ULIPs are recognized to give both safety and consistent savings, as well as the freedom to invest in either equity or a debt-based fund portfolio, depending on your risk tolerance. Customers can also choose their asset allocation between stock and debt in ULIPs, based on their risk tolerance. In reality, a consumer can select whether to invest in 100% equity or debt. Furthermore, many insurance providers do not impose fees for moving funds. After five years, the customer has the option of partially or totally withdrawing their funds.

How Can ULIP Help In Long-Term Wealth Creation?

Below are a few reasons why ULIP help in long-term wealth creation:

  • Flexibility

When it comes to funding selections, changing life cover, and adding riders, ULIPs provide a great deal of freedom.

You can also add to your investment portfolio top-ups to take advantage of investing possibilities that arise as a result of market fluctuations. You can keep a close eye on your investments and increase your profits this way.

  • Investing With A Plan

ULIPs are meant to help you achieve long-term financial goals like buying a home, supporting your child's school, purchasing a new car, and so on, by allowing you to develop a significant corpus in a systematic manner. ULIPs offer substantially higher rates of return thanks to the power of compounding. Furthermore, long-term investing allows you to absorb market risks while still growing your money faster over a longer time horizon.

  • Liquidity

ULIPs certainly take a portion of money from your Unit Linked account in case of emergency or an unforeseeable likelihood of an event, and only after a 5-year period from the start date. The best part about such transactions is that they offer tax benefits.

  • Tax Benefits

ULIPs not only provide life insurance and high profits, but they also have two tax advantages. Under section 80C of the Income Tax Act, 1961, ULIP premiums are tax-deductible up to Rs. 1,50,000. Furthermore, under Section 10(10D) of the Income Tax Act of 1961*, all distributions received at the time of maturity are tax-free. Taxes are subject to vary in accordance with applicable tax rules.

  • Types

There is a range of ULIPs to choose from depending on the investor's financial objectives, risk appetite, and investment horizon. Some ULIPs play it safe by investing a bigger amount of their invested cash in debt instruments, whereas others invest exclusively in inequities. All of this, once again, is entirely dependent on the sort of ULIP chosen for investment, as well as the investor's risk appetite and preferences.


A ULIP is a form of contract that also serves as an investment product. A portion of the payment is used to offer insurance coverage to the policyholder, while the rest is invested in various equity and debt schemes. The money received by the insurance company is used to create a pool of funds, which are then used to invest in various market instruments (debt and equity) in varying proportions, just like mutual funds.

Also read: 

What Are The Differences Between ULIPs And SIPs?

How Can I Buy ULIPs Plans Online 2021?

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.

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