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How To Benefit From Unit-Linked Insurance Plans?

Published On Sep 04, 2021 12:00 PM By InsuranceDekho

ULIPs are investment vehicles that combine the advantages of both investing and protection. A ULIP's premium is separated into two sections: one is used to get life insurance, and another is used to engage in money market products. A ULIP holder might choose to invest in equity, debt, or a combination of both. It is important to note that the policyholder, not the insurance provider, bears the investment risks with ULIPs. Investors are issued shares by the insurance provider, and the NAV (net asset value) is disclosed daily, compared to mutual funds.

How To Benefit From Unit-Linked Insurance Plans?

Here are a few factors why, if you haven't already, you should carefully consider investing in ULIPs.

  • Flexibility

ULIPs allow you to choose where you want to invest your money and make it simple for policyholders to switch from one investment choice to the next depending on market conditions, such as equities, debt, or balanced fund alternatives.

ULIPs also give you the option of choosing between the sum assured and the premium, depending on your needs. You can even grow your investment portfolio with top-ups to take advantage of investing possibilities that arise as a result of market changes. This allows you to keep a close eye on your investments and maximize your profits.

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  • Benefits Of Long-term Investing 

For individuals seeking the maximum potential profits on their protracted investments, a ULIP program is among the most prominent financial products. It's vital to understand that economic uncertainty and swings might affect returns in the short term. Investing for the long term, on the other hand, allows investors to better deal with market volatility even while generating a high rate of return. A unit-linked insurance plan can be used to make long-term investments, making it easier for investors and get the most out of their funds.

  • Withdrawal Benefits

A unit-linked insurance plan comes in helpful in such situations. In the case of an emergency, ULIP plan participants can take a portion of their money after meeting a stipulated deadline. These withdrawals are often tax-free.

  • Benefits Of Tax Deductions

ULIPs allow taxation to be withheld from one's earnings, minimizing the level of tax owed to the state.

  • Liquidity

ULIPs allow you to partially withdraw money from your Unit Linked account in the event of an emergency or unanticipated future event, but only after a 5-year period from the commencement date. The best aspect is that these withdrawals are fully tax-free. Furthermore, if you need a loan against security, you can utilize ULIPs to acquire a loan for a set proportion of the fund's worth, usually not more than 50%.

Conclusion

A unit-linked insurance plan (ULIP) is a policy that incorporates business and insurance into one package. This plan allows policyholders to pay their payments either annually or monthly. A component of the money is used for life insurance, while the remainder is invested. These programs’ investments are subject to the risks that come with the capital market. The policyholder bears the investment risk in his or her equity investment. As a result, it's best to base your investment decisions on your needs and also your tolerance for risk.

Also Read: How To Choose The Right Life Insurance Riders?

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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