How to Invest in Equity through ULIPs
Updated On Oct 15, 2021
Table of Contents
Unit Linked Insurance Plans, or ULIPs, are a type of insurance plan that is linked to the stock market. It's a type of investment that combines the characteristics of life insurance with investing. Confused? Don't worry; here's a quick rundown of the ULIP concept.
In order to invest in a ULIP, policyholders must pay premiums on a regular basis. This is similar to any other type of insurance policy. These premiums are used to give life insurance coverage to the policyholder and are also invested in funds chosen by the ULIP holder.
If the ULIP holder lives to the end of the investment term, they will be able to reap the benefits of the fund investments made by the ULIP. The insurance element of the ULIP, on the other hand, would kick in and offer a death benefit to the beneficiaries if the ULIP holder died prematurely within the plan's term. That's not all, though. The ULIP's returns from the fund investments would likewise be distributed to the beneficiaries. Doesn't that sound like a win-win situation?
Another significant benefit of Unit Linked Insurance Plans is the wide range of funds available. You can invest in a number of funds, such as equity funds, debt funds, or a combination of both.
How to Invest in Equity through ULIPs?
Investing in equity funds via ULIP is a straightforward procedure. The following sections provide you with an overview of the procedure.
1. Motive Of Investment
To get started, make sure you understand why you're investing. Investing in equities through ULIPs exposes you to market risks while generating long-term profit. It is important to be aware of your risk appetite before investing.
Because the premiums are split into two streams, the policyholder has the option of customizing the fund distribution to numerous funds. This allows you to direct the allocation of your funds among your preferred funds.
2. Various Fund Options
The various fund options on the show are a terrific way to extend your options when it comes to premium investment.
After submitting the required paperwork, the process continues, and a corpus is developed over time with a set premium that can be utilized in the future and can also be used as an insurance cover if needed.
The Advantages of Investing in Equities Through ULIPs
The perks listed below are just a handful of the many that attract investors' attention:
1. Simple to Operate
A portion of premiums that go towards investing in funds is overseen by specialists on market and company conditions, making it easier to manage. Working with topic experts makes it easier for you to function and distribute your assets, resulting in a higher payoff.
2. Production Of Wealth
Profits from equity funds are linked to market exposure. It is employed by investors as a pre-processed technique to avoid succumbing to inflation exhaustion.
Over time, the money accumulated will align with market conditions, resulting in significant rewards.
3. Benefits From The Tax System
Investors can reap tax benefits to a degree by investing in equity funds, thereby lowering their tax liability.
It is popular among investors since the profit generated from the investment is not taxed, allowing for a higher profit margin.
Conclusion
The premiums you pay for ULIP equity investments are invested in the stock markets, which can be turbulent at times. As a result, it is critical to be aware of and comprehend the dangers before investing your money. Long-term investment in a Unit Linked Insurance Plan is one of the finest methods to weather market volatility and boost the likelihood of consistent profits in the future. Now that you know how to invest in equity through ULIPs, you can take the first step toward building wealth by making an educated decision.
Also read - Unit Linked Insurance Plan Explained
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.
