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Reasons And Benefits To Invest In A ULIP

Financial planning is something that everyone should know about. You can help your family members financially and develop a secure financial future if you have a good financial plan in place.

There are numerous financial tools on the market that can assist you in accomplishing this goal. Choosing the appropriate ones to assist you to reach your financial objective, on the other hand, can be a daunting task. However, knowing your aims and ultimate financial goal makes selecting an instrument that will benefit you much easier.

The ULIP is one such financial vehicle that offers both investment and insurance options. Over a traditional savings plan, ULIPs provide a number of advantages. One of the most appealing features of ULIP investments is that they allow you to choose the type of funds in which you wish to invest, which is something that most regular savings plans do not offer. ULIP returns are also inflation-adjusted, making them a safe investment option.

Reasons And Benefits To Invest In A ULIP

Below are a few reasons and benefits to invest in a ULIP:

  • A Single Package With Dual Benefits

In India, the ULIP is the only financial product that provides both investment and life insurance coverage in one package. As a result, you won't have to purchase separate insurance and investment plans to protect your future. This saves you a lot of money on your premiums and allows you to better manage your money.

  • Exemptions From Tax

Under Section 80 C of the Internal Revenue Code, ULIP investments are tax-deductible. On his ULIP investments, an investor can claim up to INR.1,50,000 each year. Similarly, Section 10D of the Income Tax Act exempts the returns you receive at the maturity of your ULIP from taxation. Furthermore, under Section 10 (10D) of the Income Tax Act, the sum received by the nominee upon the policyholder's death is tax-free.

  • Investing Options With Flexibility

In terms of investment alternatives, ULIPs provide a lot of freedom. This adaptability manifests itself as- 

Fund Switch: Depending on your risk tolerance, you can switch your investment between various funds such as equity, debt, and balanced funds. You can boost your equity fund investment allocation if you want to adopt a high-risk approach to your investments. You can, however, convert your assets into debt or balanced funds at any time if you feel you wish to reduce your risks.

Top-Up Options: Top-up options allow you to add to your current funds.

Premium redirection: Premium redirection allows you to divert future premiums to various funds.

  • Guaranteed Payment

When you buy a ULIP, the insurance coverage guarantees a certain amount to the nominee in the event of the policyholder's untimely death within the policy term. The guaranteed payment is a predetermined amount that is tax-free. 

  • Withdrawal Facility For Lock-In Periods

Generally, you are not permitted to make partial withdrawals during the lock-in period when you make any investments. You will be able to make withdrawals from your ULIP during the lock-in period, though. When you make such withdrawals during the lock-in period, however, certain fees and deductions are deducted from the total amount.

  • Potential For Higher Profits

ULIP earnings, when compared to other investment options, have a great potential for maximizing financial rewards. Because of the flexibility provided by both equity and loan funds, very high results are possible. Similarly, by ‘staying invested' in ULIPs, you might get various benefits and bonuses. Bonuses are offered by insurance companies in the form of wealth boosters or loyalty bonuses.


ULIPs offer long-term benefits. A ULIP typically has a 5- to 7-year lock-in period. This is enough time for money put into equity or debt funds to grow significantly. As a result, you should get started with ULIPs right now.

For those just starting out in their careers, a balanced fund is a good place to start. ULIPs give employees the option to switch to somewhat riskier equity funds as their careers grow.

Also read: 

Are ULIPs A Good Investment Option For Long Term Wealth Creation

5 ULIP Charges You Must Know About

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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