Reasons Why ULIPs Can Help You Save For The Long Term

Updated On Apr 26, 2021

ULIPs as Long Term Investment
Conclusion

An ULIP is an Unit Linked Insurance Plan which serves the benefit of both an investment plan and a life insurance under a single policy. It provides life cover while providing benefits of the stock market, debt instruments or both. ULIPs are the most efficient when your premium is allocated in the investment for a long period of time. There are various aspects and features of ULIP which help you to save for the long term, the savings can be for education or marriage of your child, for retirement, and so on. Some of the reasons why ULIPs can help you save for the long term are as follows.

Also Read: Things You Should Know About ULIPs

ULIPs as Long Term Investment

The following are the reasons why the ULIPs can be help in saving for the longer period of time-

1. Lock-in Period

ULIPs usually come with a lock-in period of 5 years which can help you to get a glimpse of disciplined investing . Since ULIP is a long-term insurance commitment, investing in a single ULIP helps in achieving future goals, the policy is purchased once however the tax benefits can be availed every year until the end of the premium payment term (PPT).

2. Potentially Higher Returns

ULIPs have the potential to yield better returns than any other insurance product available in the market because of the presence of equity related returns. Under ULIPs, the insurance company invests the premium paid by the policyholder in various asset classes such as equity, debt or money markets through different fund options. The high returns from the equity can help you achieve huge fund related expenses while the debt options can provide you secured returns without involving any risk.

3. Flexibility

ULIPs have a feature where the policyholder is allowed to switch the fund options during the policy term. You can opt for growth, equity, balanced, income fund options as per your risk appetite and financial goals. Most of the ULIPs allow 4 switches in a policy term whereas some of the ULIPs also provide unlimited switch options.

4. Dual Benefits

As we all know, term insurance plans provide life cover along with tax benefits, but they do not provide any returns. ULIP aims at providing tax advantage of up to INR 1.5 Lakh under Section 80C of the Income Tax Act, 1961 while assisting the life assured in achieving the life goals. Moreover, it offers a minimum sum assured equivalent to 10 times the annualised premium for policyholders below the age of 45.

5. Investment Option for Beginners

Those who are planning to get engaged in investment activities and desire market related information and experience, ULIPs are a great way to start. ULIPs have emerged to become more suitable to investors as extra costs like premium allocation charges, administration charges, fund management charges, and surrender charges have reduced as compared to before.

Conclusion

ULIPs are a great investment opportunity for the individuals who require tax benefits, life insurance benefits, market related returns, long term returns,and flexible fund options. The commitment made in investing in ULIPs is long term but provides equally worth benefits.